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A Hot Issue Beyond Anyone's Control

March 27, 2004|Janet Hook | Times Staff Writer

WASHINGTON — With less than eight months to go before election day, the most important weapon in President Bush's economic policy arsenal may be a rabbit's foot.

Between now and November, there is not much Bush or anyone else can do to improve the economic climate on the day voters go to the polls, due to the lag time between fiscal or monetary policy decisions and their real-world impact.

As a result, luck or acts of God may have as much to do with the state of the economy on election day as would acts of Congress or the White House.

The big levers that move the economy have all been employed: Taxes have already been slashed three years in a row. The Federal Reserve has already cut interest rates to a 46-year low. And the dollar's value has already fallen so far that U.S. allies are complaining about the resulting lower prices of American exports.

Despite all these spurs, the economic picture is mixed, with businesses bustling in many parts of the country but job growth lagging. And now the Bush economic team faces a new challenge: Consumers are being socked with inflation at the gas pump. Oil prices hit a 13-year high on March 17, though they have retreated since then.

Amid these challenges, Bush faces a quandary: There are only a few, small-bore things he can do to move the economy. But even some of those ideas -- a bigger highway construction bill, extended unemployment benefits and efforts to curb gas price hikes -- are unacceptable to him, because they run afoul of conservative supporters who favor free markets and fiscal restraint.

"Given the realities, there's not much [Bush] can do anymore," said David Wyss, senior economist at Standard & Poor's. "He has to hope that what he did is enough to get employment moving."

The mixed economic picture and the limits on what he can do underscore how tricky it is for Bush to take control of one of the central issues of the 2004 campaign -- the same issue that contributed to his father's failure to win reelection to the White House in 1992.

On one hand, Bush is trying to take credit for recent improvements in the economy. As he did during appearances in Arizona and New Mexico on Friday, he repeatedly voices confidence that the policies in place are doing the trick.

But in exercising his bragging rights, Bush risks his father's political mistake of seeming callous toward the regions and sectors of the economy where recovery has been slow.

Some Republicans want Bush to do more to acknowledge that amid plentiful signs of recovery, the economy still has a dark side.

"The administration could be taking a more proactive approach," said a senior House Republican aide. "There is concern about what's happening on the ground in places like Ohio and Michigan."

Concern is not limited to those hard-hit states. A recent survey of 1,898 people around the country by the Pew Research Center for the People and the Press found that only 20% of swing voters -- people who are committed to neither Bush nor his presumptive Democratic opponent, Sen. John F. Kerry of Massachusetts -- rated the nation's economy as good or excellent. Only 29% said they expected the economy to improve over the next year. About 68% of swing voters said Bush could be doing more to improve economic conditions.

Such findings infuriate Republicans, who believe Bush is not getting credit for an economy that is clearly on the rebound on many fronts. Inflation and interest rates are low. Productivity and homeownership rates are high. The unemployment rate has dropped to 5.6%.

"We're getting the short end of the stick on 5.6% unemployment," said Stuart Roy, spokesman for House Majority Leader Tom DeLay (R-Texas). "That's a ... good unemployment number."

The jobless rate is down from a Bush-era high of 6.3% in June. But part of the reason it has dropped, analysts say, is because many discouraged job-seekers have dropped out of the workforce and are no longer counted in unemployment numbers.

At 5.6%, the current unemployment rate remains higher than the 4.2% rate Bush inherited in 2001.

The most vexing part of the economy for Bush is the rate of job creation. In February, the nation's payrolls grew by only 21,000 jobs -- one-sixth of what had been predicted.

Bush acknowledged the downside of the economy in a March 10 speech in Ohio. He declared his economic policies a success, but acknowledged that prospects were not so bright to his Ohio audience.

House Speaker J. Dennis Hastert (R-Ill.) sounded a similarly ambivalent note recently when he hailed a report showing that unemployment claims had dropped to their lowest level in three years.

"It is good news to hear that the people are going back to work at the highest rate in three years," Hastert said. "But we must not get complacent. There are storm clouds on the horizon."

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