Since 2000, the U.S. economy has stubbornly refused to be knocked off its blocks by war, terror and a stock market plunge. But it has just as stubbornly refused to resume the robust growth that Americans enjoyed only three years ago.
Despite recent predictions that a quick U.S. victory in Iraq would finally spark a full-scale revival, a growing number of executives and analysts are concluding that win, lose or draw, the economy is not going to snap back anytime soon.
Indeed, they say, a nascent recovery that was underway last summer and fall has faltered -- the victim of geopolitical risk, an investment-shy corporate sector and a potentially tapped-out consumer. The economy may actually have shrunk slightly in the last two months.
"I thought we were finally coming back," said veteran New York economist Maureen F. Allyn. "But the bits of bad news kept piling up.
"The U.S. economy has more to worry about than war. It seems to be stuck between recession and recovery."
Signs are showing up in ways big and small. Railroads are a reliable economic barometer. In good times, the backlog of cars, clothes and consumer appliances awaiting shipment is large.
But now, said James Young, chief financial officer of rail giant Union Pacific Corp., "a lot of our customers are seeing softness" in their sales.
"They are taking it day by day," he added.
Real estate and home furnishings have been among the economy's hot spots until recently. But those sectors have begun to cool as war, continued stock market worries and fear of job losses take their toll on consumers.
"My bedrooms are $4,000 to $8,000, and people are going to have to have a lot more confidence before they start spending that kind of money on the inside of their house," said Larry Parnell, president of Lanpar Inc., whose Oakwood Interiors in Ontario manufactures upscale bedroom sets.
Parnell said consumers were still "six months to a year away from regaining their confidence" and returning to furniture showrooms in droves, no matter how the war goes.
Behind such sober assessments are growing doubts that a U.S. military victory abroad can translate swiftly and easily into a full-blown recovery at home.
To be sure, the beginning of the invasion by American-led troops quickly trimmed oil prices from their nearly $40-a- barrel peak, and that's been an economic help.
What's more, as market euphoria about the war's early U.S. battlefield successes demonstrated, a decisive win can drive up stock prices, which also would help.
The problem is that the economy already has imbibed substantially more powerful tonics than lower oil prices and somewhat higher stock prices without regaining its former glow.
It has been operating with four-decade-low interest rates for at least eight months. And it has received what's arguably the largest jolt of fiscal stimulus in the nation's history relative to the size of the downturn. But still no strong recovery has emerged.
Federal Reserve Chairman Alan Greenspan has said that a war victory's most important effect would not be on oil or stock prices but on removing the uncertainty over the conflict in Iraq that is weighing on the economy.
But even Greenspan appears to have doubts about how much of a boost an end to the war would give the economy. In its latest report to Congress, the Fed lowered its growth forecast and raised its unemployment forecast for this year, even though most of the year presumably will be spent out from under worries about the war's outcome.
Some independent analysts dismiss the Fed chairman's views about victory's beneficial effects on the economy as grasping at straws.
"Greenspan is wrong" about the link between war and recovery, said John H. Makin, an influential economist with the conservative American Enterprise Institute in Washington. "It's total nonsense and a distraction."
But if Americans can't depend on a war win to kick the economy into high gear, they will have to rely on one of two other options -- neither of which, many analysts say, is appealing.
They could hope for another blast of interest rate reductions, tax cuts or government spending hikes to return the economy to full health. Or they could wait -- perhaps another year or more -- for individuals and businesses to finish working through the problems of the stock market and tech bubbles of the last decade.
"It's not a very pretty picture, especially compared with what we got used to in the 1990s," said John W. Mitchell, a senior economist with U.S. Bancorp in Portland, Ore.
Policymakers say they are ready to act if the economy doesn't bolt forward after the war, but Washington is running short of monetary and fiscal policy weapons to use.
The Senate voted last week to slice in half the $725-billion tax cut that Bush had proposed to spur the economy. Although administration officials talked bravely of restoring the lost cuts and winning passage of the entire package, analysts said that seemed unlikely.
Sending a Signal
The fact that lawmakers, including some Republicans, rejected the president's chief domestic policy proposal when the pressure to stand with Bush is at its greatest because of the war suggests that the administration has a long fight ahead of it.
Even if the president were to get all the tax cuts he wants, analysts warned, the economic benefit could be canceled by the tax hikes and spending cuts that state and local governments are having to approve to close their biggest budget hole in half a century, a cumulative shortfall that now amounts to 0.5% of the nation's gross domestic product.
The political fight between the White House and Congress is being mirrored by a largely unnoticed policy clash between Greenspan and some members of the central bank's policymaking Federal Open Market Committee.
The tipoff that a dispute had broken out came two weeks ago, when the central bank issued a statement saying not only that policymakers would not cut rates but also that they had no idea where the economy was headed.
That was followed in quick succession by unusual speeches by New York Federal Reserve Bank President William J. McDonough and Fed Governor Ben S. Bernanke.
McDonough effectively rejected Greenspan's view that uncertainty about the war is the chief impediment to recovery. Bernanke hinted that the Fed might have to resort to "unconventional monetary policy tools" if it runs out of room to further cut its signal-sending federal funds rate -- now at a spectacularly low 1.25%.
"I think there is a fair amount of disagreement at the Fed right now," said Gerald D. Cohen, a former New York Fed official who now is a senior economist with Merrill Lynch.
"The Fed," he said, "is entering the twilight zone of operations" with interest rates so low and policymakers divided over what to do next.
In the end, American businesses and consumers appear to be left on their own to cope with the economy's troubles. Despite the passage of three years since the stock and tech busts, and 18 months since the apparent end of the recent recession, analysts say both are a long way from working out the problems that are restraining growth.
Corporate America still is running at about 75% of capacity, according to recent Fed statistics. That's down from almost 85% in the boom years of the late 1990s and is little improved since the recent recession.
Analysts say that until companies can more completely utilize what they already own, they are unlikely to make big, new growth-spurring investments in additional plants and equipment.
The problem of overcapacity is even worse in such once-hot-now-not industries as telecommunications, in which war worries pale next to companies' futile search for customers to use up their vast fiber-optic networks.
"The uncertainties over the war in Iraq and how long it may last will not affect the telecom industry as much as other segments of the economy," said Michael J. Birck, chairman and chief executive of Naperville, Ill.-based Tellabs Inc., a maker of telecommunications equipment.
"There are other issues, such as excess capacity, that the telecom industry must address," he said. In North America, only 5% of long-haul fiber-optic cable capacity is in use, according to a study due this week from Tele- geography Inc., a Washington communications research firm. In Europe, the figure is 3%.
Meanwhile, consumers, who have amazed economists with their willingness to keep buying through stock market reverses and economic disappointments, finally are showing signs of flagging.
On Friday, the University of Michigan announced that its gauge of consumer sentiment fell in March to its lowest level in nearly a decade.
Home sales in some of the nation's hottest markets have begun to cool. Car buyers, it seems, will close deals only when they get incentives such as no-interest financing. Even then, they are becoming less willing to buy.
"There's a lot of reluctance for people to make a major purchase like an automobile when there's a war on television," said Jeffrey Ornstein, a top executive with Van Nuys-based Superior Industries International Inc., a leading producer of car wheels.
"It's really difficult to predict" whether consumers will flock to auto showrooms once the shooting stops, he said.
Analysts had hoped that consumers would keep on buying until corporate America decided it was again safe to make major new investments -- a move that could set off a self-sustaining spiral of more jobs, more consumption, more production and finally a return of strong growth.
But many now worry that the odds of such a happy outcome are fading as businesses refuse to add workers (private payrolls have been declining year over year for 21 months), households juggle huge debt loads (personal bankruptcies hit record levels last year) and the economy stubbornly refuses to respond to the tax cuts and interest rate medicine it already has received.
"We should be dancing around the kitchen table celebrating a 5% or 6% growth rate by now," said David A. Rosenberg, chief North American economist for Merrill Lynch. "The fact we're arguing over which side of 2% we're going to come down on tells you how much trouble this economy is in."