Lagging US Economy Dims Bush Prospects
INTENT on stamping out support for presidential contender Bill Clinton, the White House issued a stinging attack on the Democrat's economic plan this week. "More new taxes, more new spending, giving up on ever attempting to balance the budget," is how Charles Black, senior campaign adviser to President Bush, characterizes the plan.
If Governor Clinton's proposals - including the laying off of 100,000 federal workers to cut down government waste, and regulations designed to reduce pollution - were adopted, Mr. Black said at a Monitor breakfast this week, "it would cost jobs rather than create jobs ... and the environmental extremism ... would literally shut down the US auto industry."
But the savvy Republican adviser concedes that while the president is keenly aware that voters perceive that the economy is worsening, the Bush administration can do little in the near term to effect positive change. "My guess," says Black, "is that a majority of voters will go to the polls Nov. 3 without thinking that the economy is getting better, which puts us in a tough position."
Sharply criticized for ignoring the country's troubled businesses, high unemployment, and wary consumers, Bush has sunk lower and lower in the national polls. His standing sank even more in the wake of last week's Democratic National Convention in New York, at which Governor Clinton put the spotlight on failed Republican domestic policies and quickly assumed a 30-point lead over Bush in the polls.
Black says Clinton's call to hike taxes on the rich and step up federal spending to stimulate the economy will do nothing to redress the nation's chief economic problem: the federal deficit.
The Bush administration's budgets have incurred the highest federal deficits in history. Soon, the president will likely freshen up his proposed economic growth package that has been parked on Capitol Hill for over six months, Black says, with "some other kind of initiative aimed at cutting spending and getting some kind of deficit reduction."
But none of that will include raising taxes or cutting Social Security benefits for the elderly - a group whose favor Bush is careful to curry.
While Black charges that "Clinton's economic plan is his biggest political vulnerability come November," Democratic advisers say their strongest suit is Bush's poor record in combating the country's economic problems. Most troubling is the nation's nagging unemployment, now at 7.8 percent. America's 10 million jobless are the most visible reminders of United States economic problems, especially during this election year. Bipartisan conventional wisdom says the worse the economy looks come November, the tougher the challenge for the incumbent.
Testifying before Congress this week with his mid-year assessment of the country's economic outlook, Federal Reserve Board chairman Alan Greenspan offered little comfort to the Bush camp this week. Highly indebted individuals and businesses must first pay off much of what they owe before they regain their appetite for borrowing and spending, he cautions. There is little that the cash-strapped government can do to reignite the economy, he says, but it must not jeopardize recovery. The Fed chairman continu es to rebuke suggestions for more government spending and sizable tax cuts as a way to stimulate economic growth. Instead, he says, the most crucial job for government is to reduce the federal budget deficit.
The Bush White House has looked upon the nation's central bank - whose board ultimately controls interest rates - as the only effective economic policy lever. Bush has constantly pressured chairman Greenspan to ease interest rates in order to make borrowing more attractive and consumer spending more lively.
But despite 23 separate steps lowering interest rates during the past three years, the economic recovery "has been hobbled, in part, by the continued restraint on spending by still-overleveraged, and hence cautious, debtors," Greenspan says. The economy's production of goods and services will increase by a very modest 2.75 this year, he says, hardly enough to register a perceptible improvement in the unemployment numbers.
United States Chamber of Commerce chief economist Lawrence Hunter says, "Greenspan's assessment is overly optimistic."
Like many private economists, Mr. Hunter projects a very sluggish 2 percent growth rate for this year.
Hunter says present conditions and the Clinton proposal inhibit the business activity needed to lead the country out of recession. "There aren't many good investment prospects," he says. "We need to dramatically cut taxes on investment and savings, slash spending, and legislate a moratorium on all new regulations that impose economic burdens on business, until the economy is on its feet again."