The nation's political leaders, squirming at the prospect of facing the voters in a recession year, are forging ahead with proposals to fire up the U.S. economy through tax breaks and other rescue plans.
But the growing consensus to do something worries many economists, who warn that the fervor for action today could prove harmful to the economy's health tomorrow. "You don't win votes with long-term fixes for the economy," asserts Edward E. Yardeni, chief economist at the C. J. Lawrence investment firm in New York. "You win votes by giving money away."
The real problem, these analysts maintain, is not today's slump, despite all the unhappiness it is causing voters and politicians. Rather, they say, there is a long-term threat: Even when the downturn ends, the United States will confront a future of stagnant living standards and meager wage gains unless it reverses years of insufficient saving and investment.
Does anyone have the answers? Increasingly, Congress, the White House, conservatives and liberals are competing to provide them. Following are several frequently mentioned prescriptions for economic revival. Some may be included in the growth package President Bush unveils later this month in his State of the Union address, igniting the Economic Rescue Debate of 1992:
* Tax relief for the middle class. There are various approaches to giving households a cash boost, some permanent, some temporary, some targeted to families with children or first-time home buyers. The political benefits are obvious, but many say the economic gains would be short-lived.
* Capital gains tax cut. A favorite of the President, this measure would promote the sale of various assets, such as shares of stock or real estate. Economists differ widely on its long-term value.
* Investment tax credit. This tax break would stimulate business investment in equipment, with long-term benefits. To hasten new investment, it could be offered on a temporary basis.
* Broader eligibility for individual retirement accounts. Also, the White House may propose easing restrictions that now limit withdrawals of cash from IRAs.
* Public works spending. Investment in highways, schools, training centers and other elements of the U.S. infrastructure is needed for gains in productivity and, ultimately, living standards. As a starting point, some suggest speeding up federal transportation projects scheduled for the next several years.
* Emergency revenue sharing. A one-shot infusion of federal cash could help states put laid-off public employees back to work and ripple quickly through the economy. But it could be expensive and doesn't have much federal support.
A troubling reality looms above most attempts by policy makers to find a swift economic cure-all: Overall increases in spending or broad tax cuts could expand a federal budget deficit now ballooning toward $400 billion. Yet it may be impossible to give the economy a quick kick without expanding the deficit, deepening the nation's debt and risking higher interest rates.
"You can't stimulate the economy unless somebody spends more money," declares Jeff Faux, president of the Economic Policy Institute in Washington.
Moreover, the quest for an economic Rx is complicated by the fact that the patient is suffering from several ailments.
The recession, which may be lingering, has brought rising layoffs and a pullback in consumer purchases of homes, cars and other big-ticket items. It has also eroded the value of many assets. Yet apart from the slump, other deep-seated flaws remain in the nation's economic fiber and are likely to keep the recovery a meager one.
The steadily rising prosperity of the post-World War II period has been slowing for years, reflecting insufficient gains in productivity and America's competitive struggles. The debt burdens of households, corporations and government remain troubling and make it harder to invest in the future. Such problems aren't likely to vanish in a modest upturn.
"I think what's really upsetting Americans is a growing realization that tomorrow is not going to be better than today," declares Barry P. Bosworth, an economist at the Brookings Institution in Washington.
In contrast to an election-year fix, the nation's future well-being may demand more overall investment in education, research and technology and relatively less consumer spending--"almost the opposite of what you'd do to jump-start the economy in the short term," says Lyle E. Gramley, chief economist at the Mortgage Bankers Assn. in Washington.
As recently as last summer, the sorts of tax-and-spend measures--"fiscal" strategies--used to cushion past bouts with hard times seemed off limits because of the federal budget deficit and spending controls Congress had adopted to fight it.