Economy

August 16, 1992|By Gilbert A. Lewthwaite

The economy is President Bush's weakest electoral suit. He )) has presided over the longest, if not the deepest, economic downturn of any single presidency since the 1930s.

He seeks re-election after almost four years that have left the nation more economically distressed, more deeply in debt, and more socially divided.

The economic statistics for almost any sector are against him.

The annual economic growth rate, as measured by gross domestic product, was 2.5 percent when he took office in January, 1989. It is projected to be around 2 percent this year. During his administration, GDP growth has averaged just 2.5 percent a year, the lowest rate of any presidential term since World War II.

The budget deficit for fiscal 1989 was $161 billion. Despite all the talk of deficit reduction, it is projected to be $333.5 billion this fiscal year.

Unemployment was 5.4 percent in January, 1989. Last month it was 7.7 percent, down from 7.8 percent in June, the highest level in eight years. In 1988 Mr. Bush talked of creating 30 million jobs in eight years. In the past three and a half years, net employment has increased by just 841,000 -- 12,284,000 jobs behind his own original schedule.

In 1989 31,528,000 Americans, or 12.8 percent of the population, lived in poverty. The figure last year was 33,585,000, or 13.5 percent of the population. Poverty last year was defined by the Census Bureau as an income of $6,932 for an individual and $13,921 for a family of four.

In his first full year in office, 676,565 businesses incorporated, and 50,361 failed. Last year, incorporations were down to 628,580 businesses, and failures were up to 87,266, according to Dun and Bradstreet.

Among the brighter spots for Mr. Bush are:

* Inflation is down from a 1989 annual rate of 5.2 percent. It was 2.6 percent last year and is projected to be no more than 3.5 percent this year;

* Export sales have outpaced imports, shrinking the trade deficit from $109.4 million in 1989 to $66.3, reflecting the competitive edge of U.S. industry and confirming the United States as the world's leading exporter;

* Interest rates are currently at their lowest in more than two decades, pushing interest on home, auto and other consumer loans lower.

* The Dow Jones Industrial Average stood at 2235.36 on his inauguration on January 20, 1989. Last week, it closed at please fill in)

Mr. Bush's explanation for the economic difficulties that have dogged his days in office, is that the economy is going through inevitable and major restructuring as it adapts to a new world XTC order which lessens the need for defense spending and heightens the demand for technological advance. U.S. businesses must be leaner, meaner and more efficient if they are to succeed in an increasingly competitive world.

He blames the escalating costs of entitlement programs -- particularly Medicaid and Medicare -- for carrying the deficit deeper into the red, and lambastes Congress for failing to pass his growth package. That package includes a capital gains tax cut to boost investments and a tax break for first-time homebuyers.

He blames himself for reneging on his 1988 election pledge of "no new taxes." He has publicly regretted the 1990 agreement with Congress on a package of tax hikes that affected all income groups. The top income tax rate went up from 28 percent to 31 percent. And federal gasoline, tobacco and alcohol levies were all boosted.

According to the independent Tax Foundation, this left the average two-earner, two child family with a family income of $54,926 in 1992, with $571.00 less spending power, after inflation, than in 1989.

"I think there is a genuine recognition that the tax burden at all income levels has been increased significantly," said Paul G. Merski, the Foundation's director of fiscal affairs.

For Mr. Bush the widespread and enduring feeling among voters of being economically hard-pressed is the major threat to his re-election. Consumer-spending accounts for two-thirds of the country's economic activity. Consumers will not spend when they feel uncertain, and the economy will remain in the doldrums. Unless he can change the popular penny-conscious mood quickly, his attempt at a second term will be severely hampered by the pocketbook perceptions of his first.

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