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| February 7, 2005 |
| Bill Frist on Economics |
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| We were all proud of President Bush last Tuesday night -- what a night! More than anything, the spirit for those of us in the chamber that night was captured by the embrace of two women who had only just met yet whose lives were so connected by the cause of liberty. |
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| The President touched upon the steady progress of the economy -- and over the course of the week we've seen a stream of good news (I will share below). And the charge to us in the Senate, as I see it, is to "govern with meaningful solutions." You will hear me say these very words again and again and again. That is what the American people expect and that is what they deserve. So we will be off and running on initiative number ONE this week: class action lawsuits and legal reform. Talk it up back at home!! |
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| President's budget today will be the toughest in a decade, measured by the increase in discretionary spending. Non-defense, non-homeland security spending will actually decline by 0.7%, which is a nominal cut! In real terms, that is about a negative 3%. There will be plenty to upset people. I caution all to remain calm -- this is just the beginning of the process, not the final product. |
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| And now back to the economic news: |
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1. Personal income and spending are the best they have been in 4 years. Personal income grew in December an amazing 3.7%, in large part due to a one-time Microsoft dividend payment. But even correcting for this one-off event personal income increased 0.6% in December. For all of 2004, real disposable income grew 3.4 % the best since 2000 when it grew 4.7%.
2. Personal spending grew last year also, up 3.8% after correcting for inflation. Again the best growth in consumer spending since 2000.
3. Unemployment rate dropped to 5.2% in January and nonfarm payroll employment rose 146,000 to a new record -- 132.5 million. Employment, measured by this metric, now exceeds the peak reached in January 2001. In 2004 alone, over 2.2 million jobs were created -- Mr. Mankiw (Chairman of the Council of Economic Advisers) knew what he was talking about!
4. Personal savings worst on record since 1934. Personal savings, as a share of disposable personal income, averaged only 1.0% in 2004. The last time savings were this low was 1934. We do have a savings problem, which links directly to retirement planning. Thus the need to look at saving and strengthening social security as a major retirement issue.
5. Business productivity -- a slight slow down, but no reason for alarm. Business productivity slowed in the last quarter to 2.5%. This is to be expected at this stage of the economic cycle. One factor in the slowing process was the increasing compensation to workers, largely due to increased employee benefit packages.
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| The G-7 summit begins in London tonight. Expect Europe and Japan to ask the U.S. to reduce our fiscal deficit, and us to ask them to boost their economic growth. We will have an opportunity to accommodate our economic partners when the President submits his budget for FY 2006 to us on Monday. |
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| I spent yesterday at the Super Bowl with Karyn and the boys and am now back to start a busy week in the Senate. -- let's get rid of the frivolous lawsuits. I'll drop you an update on our progress in the next couple of weeks. |
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| Bill Frist |
| Reprinted from Senate Majority Leader Bill Frist's Email Update |
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