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Holiday Cheer

The economic forecast looks bright for the Christmas season.

11:00 PM, Nov 27, 2006 • By IRWIN M. STELZER
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That would do a great deal to make the White House forecast of 2.9 percent growth prove a bit too pessimistic. With Fed chairman Ben Bernanke apparently satisfied that the economy has slowed sufficiently to make further interest rate increases unnecessary, and a softening dollar spurring exports, the table is set for Goldilocks to experience an economy that is not too cold, not too hot, but just right.

There is more good news. Rob Portman, the former U.S. Trade representative who was promoted by the president to run the important Office of Management and Budget, was so eager to get the administration's story out that he had me around for a lunch of fruit salad, data, and charts. The charts show that the nation's fiscal position is rather stronger than most analysts realize: the federal budget deficit will fall below 2 percent in 2006, and decline after a 2007 blip to under 1 percent. Portman is also optimistic that the president will be able to head off the new protectionist pressures likely to come from a Democratic Congress and that Bush's growth-inducing tax cuts, which Portman emphasizes have increased the portion of total individual income taxes paid by the top 5 percent of earners, will survive the new Congress.

No sunny economic outlook is ever entirely free of clouds, of course. Higher spending for Iraq will put pressure on the budget and deficit; OPEC might decide to cut output enough to drive crude prices back closer to $70 if the U.S. economy, and with it oil demand, start to grow rapidly; a dollar collapse might force the Fed to raise interest rates.

But for the moment, 'tis the season to be jolly.

Irwin M. Stelzer is director of economic policy studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.