The secret to Mr Bush's popularity is the ever-booming American economy

Why is George Bush still so popular? To judge by the opinion polls, he has apparently avoided catching the flak for failing to react to the warnings before 11 September. Why are Americans in general so content with their government, in evident contrast to so many continental Europeans, who are throwing their governments out? I think I know the answer. Americans feel rich, are rich, and are still getting richer.

The easy prosperity is the most striking feature of the United States that hits any visitor. The figures say so, of course, but a brief visit to Washington DC has brought home to me the extraordinary resilience of the American economy, in a way no economic figures could ever do. This was supposed to be a recession, the worst period for the US for a decade – but the shops are bustling. Unemployment has doubled – but is still only two-thirds that of the eurozone average.

After the longest expansion since at least the Second World War there was supposed to be the reckoning, the price to be paid for the excesses of those fat years. Yet the US has managed to bounce back from recession with astonishing vigour, fight a war on the other side of the globe, increase living standards at home, generate huge increases in productivity and still carry on creating jobs, with no surge in inflation, and as yet no serious weakening of the dollar.

This very prosperity, plus the self-confidence that goes with it, raises a question for those of us in Europe. How can we compete more effectively against this giant? On paper the economies of the European Union are of broadly similar size to the US, but in terms of growth their performance since 1990 has been lamentable. Yes, Europeans told each other, but when the US boom ends, then we will all see that the burst of growth was something of a mirage, financed by borrowing from the rest of the world. The solid European way would, many people thought, ultimately lead to more sustainable generation of wealth as well as a more equal society.

Well maybe, for there certainly are real concerns about the shape of the US recovery, but it sure doesn't look like that right now. To see what Europe might do to compete more effectively, consider why the US has managed to confound its critics.

The success of America's rebound is owed to three main factors: cheap money, higher public spending and a rigorous drive for efficiency in its business sector.

The cheap money story is widely understood. The Fed cut short-term interest rates to the lowest for 40 years, helping to sustain the house-building and consumer booms. At some stage the Fed will start raising rates, but not until it is more confident that the recovery is secure.

The public spending story has attracted less attention, but the combination of higher defence spending and lower tax revenues is pushing the US rapidly from surplus into deficit. For the time being at least, though, it can afford it. Overall public spending is only 30 per cent of GDP, against typically the mid- or high 40s in the EU. Total debt is half the average for the EU, and whereas several large EU countries are bumping towards the 3 per cent of GDP deficit ceiling set by Europe, the US has only just moved into deficit. Meanwhile this gives a huge boost to the economy.

And then there is the productivity story. If you believe the figures, US productivity kept on rising right through the downturn. Output fell, but payrolls fell faster. Now that growth has begun again (at nearly 5 per cent annual rate in the first quarter) the productivity gains look enormous. What seems to have happened is that the pressure from the downturn has driven companies to rethink every aspect of their business, figuring out how to achieve more with fewer people. That is no fun for the people who lose their jobs, but at least there are other jobs on offer. And for the great majority who are still in work, living standards have continued to rise.

What should Europeans learn from all this – aside from the fact that disgruntled electorates are throwing out governments in Denmark, the Netherlands, France, and quite probably this autumn, in Germany too? That must have something to do with the slow rise in living standards. Note that British voters, who have seen living standards rise almost as fast as Americans, last year voted back their government. The Irish, who have enjoyed an even faster growth in incomes, have done the same.

The first lesson must be that denial of American success is no longer credible. Yes, there are flaws in the American system, in particular huge reliance on debt both by individuals and by the country as a whole. But to focus on the potential weaknesses, as we all have done, is to ignore something that is staring us in the face.

The second lesson is that the risks of deflation are probably greater than the risks of inflation. The Fed has taken risks with inflation, driving down rates last year to that 40-year low. The European Central Bank and the Bank of England were more cautious. In the case of Britain that caution seems justified and last year the UK grew faster than any other members of the Group of Seven.

In the case of the ECB, the position is complicated by the divergent inflation across the eurozone, but if the US policy is right, the ECB's has been wrong. Interest rates have been too high.

The third lesson is that governments should get themselves into surplus during a boom, paying back as much debt as possible, so that they have headroom to borrow out of trouble when demand falls. We seem to have learnt that, as have several smaller European countries. But France and in particular Germany failed to get their borrowing down enough in the good times and now are struggling to hold down debt in the not-so-good.

The fourth lesson that Europeans should ponder is whether there are other aspects of the US economic system that they should adopt. The UK is something of a halfway house between US practice and continental European: we have something similar to the US labour market but also something akin to European welfare provision. Continental Europeans understandably prize their extensive welfare systems and we to some extent envy them. But judge voters not by what they say but what they do. To judge by continental election results, voters are profoundly unhappy about the direction of their governments.

Could the impact of taxation on living standards have something to do with that? I cannot prove the link between the unpopularity of most European governments – or at least those that have not recently been thrown out – and the slow rise in living standards. Nor can I prove the link between the continuing popularity of this US administration and the great burst of prosperity in the US. But ask yourself why the voters of the Netherlands and France are so evidently unhappy, while those of the US are still so solidly behind their President. Just patriotism? There is a bit of that, to be sure. But walking the lush streets of Washington DC I get the feeling that retail therapy matters too.