Advertisement
YOU ARE HERE: LAT HomeCollectionsConsumers

COLUMN ONE : Recession: Case of Bad Attitude? : President Bush says people should be more confident--and that would restore economic vigor. But consumers cite layoffs and lost wages.

November 09, 1991|KAREN TUMULTY | TIMES STAFF WRITER

WASHINGTON — To President Bush, the trouble with the nation's lagging economy sometimes seems to boil down to a case of bad attitude--consumers getting the jitters from listening to media doomsayers and the Democrats. "There ought to be, in my view, given the economic place where we stand now, more confidence," the President says.

"It's a good time to buy a house," he exhorts. "It's a good time to buy a car. Interest rates are substantially lower."

George Bush, meet Chuck Fiegle.

To Fiegle, of Chuck's Auto & Diesel in Smyrna, Ga., Bush has it all wrong: People are frightened, all right, but they have good reason to be. Buy a car? Out back of Fiegle's shop, there are six cars waiting for their owners to come up with money to put down as deposits for needed repairs.

"There are more people doing without health insurance, without car insurance, without house insurance, without any insurance at all," says Fiegle. "They are flat scared."

Judy W. Semper of Orange, N.J., agrees.

The 33-year-old mother of two works as an accountant for New Jersey Transit, but she gave up her part-time job as a real estate agent because it seemed no one could buy houses any more. Feeling an economic squeeze, Semper is trying to put a little more of her income into savings against the possibility of even rougher times ahead. Credit cards are now for emergencies only.

"Consumers are not paranoid," she says. "It could only get better if the government stops lying and stops blaming it on consumer confidence."

Economists say Semper and Fiegle have a point. "Confidence alone is not holding the economy down. It's lack of income, lack of jobs, lack of profit," says Allen Sinai, chief economist of Boston Co. "No one in their heart of hearts is going to feel good about spending if the economic fundamentals are negative."

"I do not believe there is any evidence at all that consumer pessimism is responsible for the weakness of the economic recovery," adds Barry P. Bosworth, who directed the Council on Wage and Price Stability under President Jimmy Carter. "People are pessimistic, but they are pessimistic for good reason. . . . Today, most economists discount psychological factors as a cause of recession."

By some measures, times are not so terrible; indeed, economists say this has been one of the mildest downturns since World War II.

October unemployment stood at 6.8%, more than three percentage points lower than at the depths of the 1982 recession. Gross national product in the third quarter rose 2.4%, showing its first gain since the current recession began in mid-1990. And personal income in September edged up.

But other, more recent signs are ominous. First-time jobless claims this week were up by 14,000. Sales of both new and existing homes were down in September. Other indicators of economic vigor--factory orders, auto sales and durable goods purchases--have fallen as well.

With such mixed signals, analysts are having trouble even finding a label that explains what is happening to the economy now.

Noting the third-quarter increase in GNP, Bush told reporters Friday: "It is not recession. It is not--does not fit the definition of recession. And yet you have plenty of people around saying we are in recession."

At the same time, that 2.4% rise in GNP was only half the percentage economists generally see in a recovery.

"I use words like 'punky, crummy recovery,' " Sinai says. Some are warning that the economy is in danger of toppling into a second downturn, or "double-dip" recession.

Bush is far from the first politician to see consumer malaise as the root of economic troubles.

As the Great Depression gripped the country in the early 1930s, historian Arthur M. Schlesinger Jr. wrote, President Herbert Hoover tried pep talks, and even asked Will Rogers to come up with a joke that would discourage people from hoarding. Hoover told singer Rudy Vallee: "If you can sing a song that would make people forget their troubles and the Depression, I'll give you a medal." And of poet Christopher Morley, he requested "a great poem. . . . Sometimes a poem can do more than legislation."

Even Franklin D. Roosevelt declared that the only thing to fear was fear itself. But economists note that there is a big difference between the dire situation that F.D.R. faced almost 60 years ago and the jam that Bush is in now.

"A lot of people forget that when Roosevelt said that, he had a lot of things in motion," said Donald Ratajczak of Georgia State University in Atlanta. Roosevelt established new social safety nets to cushion the economic pain, and put 8.5 million of the unemployed to work on government projects.

Bush's hands are tied by the record $350-billion deficit projected for this fiscal year, which began Oct. 1. The national debt is so high that interest payments alone will sap more than $200 billion from the public coffers--more than eight times as much as this country will spend on education, and more than 16 times the amount spent fighting the war on drugs.

Advertisement
Los Angeles Times Articles
|
|
|