News: Analysis & Commentary: THE ECONOMY: ELECTION '96
ARE YOU BETTER OFF NOW...
The White House fears voters may not think so
Four years of steady economic growth. Four years of low inflation. Eight million new jobs. All great news for a President running for reelection. So why is Bill Clinton suddenly challenging the Federal Reserve "to see whether or not this economy can grow a little faster"? The frustration the President let slip at a New York fund-raiser on Feb. 15 reflects Democrats' growing fears: The economy may be sound, but it's not strong enough to assure a renewed lease on the White House.
The question is far from academic. Important as politicking is, it's a strong economy that tends to carry a sitting President to reelection. Most forecasters predict the current economy will shake off recent blahs and stay healthy through Election Day. The danger for the Dems is that many voters don't give Clinton credit for the economy's gains--and they don't feel enough progress to overcome anxiety caused by widespread layoffs and wage stagnation. "I was doing very well with my wages--then I got laid off," says Joe Moffett, an unemployed carpenter in Rochester, N.H. "Everybody moved toward Clinton [in 1992], but he hasn't given us anything."
Take note, Clintonites: Moffett voted for Patrick J. Buchanan in New Hampshire's Feb. 20 Republican primary. The populist commentator tapped into a deep vein of economic insecurity and resentment of foreigners to win an upset victory over Senator Bob Dole (R-Kan.). Buchanan's surge, and Dole's belated recognition of voters' economic fears, ensures a rough debate in the GOP over the growing wage gap--and a strong appeal to disaffected middle-class voters.
Democrats will try to take the high ground. "Protectionism and nativism will take us backwards," says Labor Secretary Robert B. Reich. Clintonites will stump for even faster growth, urging Fed Chairman Alan Greenspan, who is likely to be reappointed, to cut interest rates. And they'll trumpet policies that address voters' anxieties by bolstering workers' skills and training and by pushing Corporate America to shrink the wage gap. "That's what the 1996 election is all about--whether wages will grow or stagnate," Vice-President Al Gore told the AFL-CIO Executive Committee on Feb. 19 during its annual meeting in Bal Harbour, Fla.
SHORT LIST. On the face of it, Clinton has some advantages. He's the first President since Lyndon B. Johnson in 1964 to run without a recession on his record. Most economists--from Greenspan to the 52 forecasters polled for the Blue Chip Economic Consensus--see steady, if unspectacular, growth of 2% to 2.3% for the year, measured by the new chain-weighted method. Exports have risen a full 25% in the past three years. The "misery index," summing the 5.8% unemployment rate and the 2.6% inflation rate, is at a 30-year low. "The economy is going to look really good come November," says Allen L. Sinai, chief economist at Lehman Brothers Inc.
Those numbers, though, may not translate into votes. Worried Clintonites need look no further than George Bush, who lost to Clinton despite 3.1% growth in inflation-adjusted aftertax income in 1992. That's higher than the 2.2% gain that DRI/McGraw-Hill predicts for this year.
Plugging 1996's anticipated growth and inflation rates into his election-forecasting model, Yale University economist Ray C. Fair concludes that Clinton is likely to come up short, with 49% of the popular vote in a two-way race. The President's problem: The steady plodding of the past four years--roughly 2.4% a year--doesn't grab voters' attention as well as would quarters with gains of 4% or more.
Clinton aides scoff at such economic determinism--but they can't ignore the warning signs. So they're polishing the statistics of what Deputy Treasury Secretary Lawrence H. Summers calls "the first investment-led, low-inflation recovery since John F. Kennedy was President." And to placate nervous financial markets, the White House now favors two moderate economists for open Fed seats: White House budget director Alice M. Rivlin for Fed vice-chair, and St. Louis economic consultant Laurence H. Meyer for the Fed's board of governors.
So far, Clinton has only a short list of proposals for attacking the wage gap: increasing the minimum wage, defending the earned-income tax credit for the working poor, and improving education and job training. The President also is planning a White House meeting with CEOs to discuss the wage gap and what corporations can do about it.
But that's not enough for other Democrats. They're seizing on the theme of "corporate citizenship" to appeal to workers caught in the maelstrom of downsizing. That includes middle managers who normally vote Republican. But the big electoral prize is white men who never went to college. Clinton interrupted a 20-year shift to the GOP when he won 57% of that bloc in 1992. But Democratic support among such men fell to 37% in 1994, largely because they didn't believe the good-news picture of the economy that Democrats painted.
DIVIDED HOUSE. Democrats think they can reach such voters with proposals to encourage companies to reward "stakeholders"--employees and communities--as well as shareholders. Senator Edward M. Kennedy (D-Mass.), with backing from Labor Secretary Reich, in February proposed tax breaks for companies that keep jobs in the U.S. and provide health care, training, and pensions for workers. Senator Jeff Bingaman (D-N.M.) proposes to grant tax breaks and regulatory relief to companies that limit the pay disparity between top executives and their lowest-paid employees.
Organized labor is pushing the wage issue hard. At Bal Harbour, the AFL-CIO unveiled a new campaign--"America Needs a Raise"--as the cornerstone of labor's organizing and political efforts. Starting on Mar. 15, labor plans to conduct about 30 "town hall" meetings across the country, to discuss income inequality. Still, White House aides say Clinton isn't likely to lead the charge. Treasury Secretary Robert E. Rubin and other top economic advisers dismiss the Kennedy-Reich plan as impractical and too likely to arouse corporate opposition to Clinton's reelection.
Inside the White House, aides are divided. They want Clinton to spotlight his economic achievements. But by describing the economy in glowing terms, the President risks seeming to ignore the economic pain of middle-class America. And if he doesn't see the danger in that, he should pick up the phone and call George Bush for a reminder.BY MIKE MCNAMEE IN WASHINGTON AND SUSAN B. GARLAND IN BAL HARBOUR, FLA., WITH RICHARD S. DUNHAM IN ROCHESTER, N.H.Return to top