ONE of the anomalies I have mentioned several times is the gap between the American economy’s performance and the public’s perception of the quality of President George Bush’s economic management. The first thing to keep in mind is that the American economy is a huge, sprawling, diversified beast, driven in the long run by the entrepreneurial energy that Gordon Brown so admires and is hoping will take root in Britain despite the high tax rates that usually sap it.

That said, economic policy decisions taken by a president can affect economic performance. Lyndon Johnson set the stage for an inflationary spurt by trying to wring both guns and butter from the economy during the Vietnam war. Jimmy Carter came close to wrecking the economy with a set of programmes that created that least desirable of conditions, stagflation — high inflation and negative growth. Ronald Reagan agreed to take the blame for the recession that the Federal Reserve Board was forced to induce in order to wring Carter-created inflation out of the system.

So what of Bush? There is little doubt that he deserves credit for helping to reverse the recession that greeted him as he moved into the White House. The tax cuts worked out for him by Larry Lindsey, his adviser at the time, have helped to stimulate growth, and turn the negative job figures of the early Bush years into large positives. Data compiled for me by Xiuyue Zhu, a colleague at the Hudson Institute, show how Bush’s three major tax cuts worked their magic.

In the years before the tax cuts made themselves fully felt, the economy grew at the puny rates of 0.8% and 1.6% respectively. Then things picked up — to 2.7% in 2003, 4.2% in 2004, 3.5% in 2005, and a torrid 5.6% in the first quarter of this year, before cooling to an estimated 3% in the second quarter.

The accelerated growth did not immediately affect the jobs market. From the time Bush took office until the haemorrhaging finally stopped in the autumn of 2003, some 2.7m jobs were lost. But as consumers found themselves with more money to spend, and business confidence rose as the taxes on corporate dividends and profits fell, the jobs market picked up. Between August 2003 and the end of last month, more than 5.4m new jobs were created. That drove down the unemployment rate from its June 2003 peak of 6.3% to its present 4.6%.

The tax cuts also proved to be partially self-financing. Treasury receipts, which initially fell, recovered sharply as strong corporate profits and taxes on the capital gains of high earners contributed to Treasury revenues. Harvard’s Martin Feldstein guesses that the supply-side effects of tax cuts produce one third of the revenue otherwise lost.

The latest reports from the Office of Management and Budget show that the incoming flood of cash is topping last year’s record by 11%. The budget deficit for this fiscal year is projected to drop to 2.3% of gross domestic product (GDP). That compares with 2.8% for Britain and far higher figures for many EU countries. Such good news is “no accident”, says the president.

True. But neither is some of the bad news, for which he must carry some blame. In a booming economy, when the nation’s budget should be in surplus, Bush continues to preside over substantial deficits. The reason: he has never used his veto to reduce what he calls “the wasteful spending” of a wildly profligate Congress. In fact, he himself has pushed expensive prescription-drug and other programmes through the legislature. Nor has he attempted to make the major overhaul that is required if the Medicare and Medicaid programmes are not to reduce the nation to penury in years to come.

Bush concedes that by 2007 the spurt in tax receipts will abate, and knows that outlays are headed up as we fund the war on terror (costing an estimated $300m a day), and have to pay for the costs associated with the ageing of the baby-boomer generation.

The president could not help noticing the latter problem: he recently reached his 60th birthday, and will join the ranks of the retired only a few years from now.

Still, the rapid growth in the economy, the reduced tax burden, the healthy jobs market, and a business community that is benefiting from what Jim Awad, of the eponymous asset-management company described to a television audience as “lots of profits, lots of cash, lots of deals”, should be producing the “feel-good factor” to which all politicians aspire.

Nobody is quite sure why the president’s party cannot count on such a factor in the coming November congressional elections. It might be that house prices are cooling, or that petrol prices are not. Or that interest rates, although still low at present, are rising, dampening growth.

The elderly worry about the rising cost of drugs. Middle-income folks feel that they have not shared fully in the economy’s growth, which has favoured high earners, including chief executives whose widely publicised compensation is not always related to the performance of their companies.

But most of all, there is an unsettling sense that things are out of control, and not only in Iraq. Arab terrorists backed by Iran have opened a two-front war against Israel. Globalisation frightens those who see their jobs disappearing to China, a potential adversary that is accumulating a worrying pile of America’s IOUs. Some 11m illegal immigrants are in the country, and thousands more sneak in every week. President Vladimir Putin tells Bush that his repression of dissent in Russia is none of America’s business, North Korea tests long-range missiles in a programme the president describes lamely as “unacceptable”, Al-Qaeda seems to be regaining control of Afghanistan, and Iran cocks a snook at an impotent America.

All this is not likely to produce a contented electorate, even if it is a generally prosperous one.

Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute

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