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Economy poses risk for Bush

Posted: Tuesday, August 10, 2004

WASHINGTON Soaring fuel prices and slowing job growth are presenting President Bush with a difficult choice: He can concede there are problems with his economic policies or insist the recovery is progressing and risk looking out of touch.

The first President Bush lost re-election in 1992 in part because of a perception by voters that he was isolated from the concerns of average workers.

The younger Bush has worked hard to show his engagement, traveling extensively to promote his tax cuts and other economic incentives.

But the recent spate of bad economic news threatens to undermine his message that the economy has ''turned the corner'' on jobs. Instead of turning a corner ''our economy may be taking a U-turn instead,'' asserts rival John Kerry.

With polls showing Kerry holding a clear advantage over Bush on the issue of creating new jobs, Democrats announced Monday that party leaders were heading for cities where Bush spoke last week in Michigan, Ohio, New Hampshire and Iowa to ask people whether they agreed America has turned a corner.

''If George Bush doesn't drop this new campaign slogan, he's in danger of becoming the new P.T. Barnum of American politics,'' Democratic National Chair Terry McAuliffe said in a conference call with reporters.

Bush, meanwhile, is trying to hedge his bets insisting that the recovery is on track while his aides weigh a series of possible new economic campaign themes and initiatives for a second term, including tax code simplification.

''The economy is strong and it's getting better,'' Bush told reporters Monday in the Oval Office. ''This campaign is going to be talking about visions, about how to keep the economic recovery going.''

Part of Bush's dilemma is that economists are mixed on whether the recent spate of bad economic news is still the ''soft patch'' Fed Chair Alan Greenspan identified in June or a harbinger of truly bleaker times ahead.

Recent reports have shown four months in a row of declining job growth, ever higher oil prices and a drop in consumer spending.

''The economy clearly has weakened. It's not clear why, and therefore it is particularly uncertain how the economy is going to perform between now and Election Day,'' said Mark Zandi, chief economist at Economy.com. ''So Bush is taking a risk. But I don't know that he has a choice. The die has been cast.''

The stimulative impact of Bush's policies may be wearing off after three years of tax cuts, low inflation and low interest rates. Skittish corporations are curtailing or putting off new hiring and investment. Possible terror attacks, conditions in Iraq and the close presidential race itself are adding to the economic uncertainty.

Even Greenspan's Fed, which pushed down interest rates to 40-year lows and held them there for months, can no longer help. It appeared poised to raise a key short term rate a quarter of a point today, following a similar hike the first in four years in June.

''There are no policy tools left for Bush to use. He's taken his best shot,'' said Thomas Mann, a scholar at the Brookings Institution.

Bush remains on track to be the first president since Herbert Hoover to preside over a net loss of jobs. The nation has about 1.2 million fewer jobs than when Bush took office, despite the creation of more than a million jobs over the past 12 months.

According to an AP-Ipsos poll, fewer than half 46 percent of those surveyed last week said they approve of Bush's handling of the economy. Kerry's advantage over Bush on the question of who would do better at creating jobs was 55 percent to 39 percent.

The issue takes on larger political significance because states that have suffered the biggest job losses are also likely to be key fall battlegrounds.

''A number of these states are Rust Belt states and their economies took a huge hit,'' said Stephen J. Cimbala, a political science professor at Penn State University. ''The economic issue will be the most important one in these states, barring a catastrophic reversal in Iraq or a major terror attack.''

Bush stands by his claim that the economy has ''turned the corner'' on jobs, aides said, even though he hasn't used that phrase in the past few days.

''You have to look at the overall picture. The economy is moving forward, and we're not turning back,'' said White House spokesperson Scott McClellan.

Tom Raum has covered national and international affairs for The Associated Press since 1973.



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