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."
One increasingly ominous cloud is gathering over the
nation's gas pumps, as fuel prices have surged in recent months. Since
January, gas has increased about 25 cents to an average of $1.74 a
gallon as of Thursday. Price rises have been steepest in the West, with
gas running over $2 a gallon recently in California.
Groping
for some tool to cut gas prices, the Senate recently passed an
amendment calling for a suspension of oil purchases for the Strategic
Petroleum Reserve to keep more on the open market. But the measure was
nonbinding and was opposed by the Bush administration.
Some
Republicans in Congress are pushing the White House to support a bigger
highway construction bill. They see it as a visible commitment to
creating new jobs as well as to paving home-state roads. But Bush has
threatened to veto the bills moving through Congress because he
believes they cost too much.
Some Republicans have warned that his veto threat will do him political damage in job-strapped states.
"Fight Congress on the highway bill?" said a senior Senate Republican aide. "How can that help?"
Bush has not used his political muscle to push for one measure that
would have an immediate impact on the unemployed: additional benefits
for the long-term jobless. The federal government had been offering
three additional months of unemployment benefits to people who had been
without work for long periods, but the program lapsed early this year
despite a push by Democrats and some Republicans from states with high
unemployment.
Other elements of Bush's agenda for strengthening
the economy amount to repackaging longstanding proposals that have
stalled in Congress, such as legislation to rein in costly litigation,
rewrite energy policy and reduce regulations.
Bush also calls
for making permanent the tax cuts enacted each year since 2001. But a
deficit-burdened Congress is not likely to do that this year.
In recent months, Bush has taken some steps aimed at helping the
troubled manufacturing sector, which is crucial to several of the most
important battleground states in the fall election.
"President
Bush understands that many American manufacturing workers across the
country need assistance," Secretary of Commerce Don Evans said
recently. "We want them to know that help is on the way."
Bush
last fall announced he would appoint a "manufacturing czar" — a new
assistant secretary of commerce to coordinate policies affecting that
sector. But the idea languished for months.
Finally, earlier
this month, the Commerce Department was poised to announce Bush's
nominee. But the appointment was scuttled after unexpected opposition
arose from his home-state Republican senator, and after Democrats
charged that the nominee had outsourced U.S. jobs to China.
Evans announced earlier this year that some $45 million budgeted for
economic assistance would be made available to a popular program to
help small and medium-sized factories become more competitive.
That marked a partial reversal from the administration's previous
efforts to slash funding for the program, the Manufacturing Extension
Partnership, which was cut from $106 million to $39 million this year.
None of the measures being considered by Bush or Congress would have
any chance of affecting the economy as broadly as the major tools of
tax and interest rate policy.
Even if the administration's
policies do produce a spurt of job growth in the coming months, some
analysts question whether there is enough time to change people's
attitudes toward the economy.
"It's going to take many months
before people have a different sense of their vulnerability to job
loss," said Lawrence Maishel, president of the Economic Policy
Institute, a liberal think tank. "The economic context for the election
is mostly written."