Global Recession

October 29, 1992

Michael von Clemm, chairman of Merrill Lynch Capital Markets, has some gratuitous advice for George Bush, Bill Clinton and Ross Perot: "Don't win the election." Anticipating a continuing global recession marked by falling asset values and excess production capacity, he sees the next four years as burdensome for government leaders in all the industrial democracies.

Their eyes on the White House, all three candidates are paying Mr. von Clemm no heed. Mr. Clinton and Mr. Perot have no hesitation in trashing the economic situation they hope to inherit from President Bush, but they have faith in their proposed remedies even if these remedies contradict one another. Mr. Bush, knowing that voter pessimism may doom him to defeat, keeps insisting there is no recession -- just a damnably slow recovery that is ever on the verge of takeoff.

The president, fighting doggedly, has a few optimists in his corner. Noting the surprising 2.7 percent jump in gross domestic product for the third quarter, Charles Renfro of Alpha Metrix Corp. said, "The next president is going to get a windfall." Pessimists are still in the ascendancy, however. They point to the fourth monthly drop in consumer confidence and lagging orders for durable goods as evidence of an impending triple-dip downturn.

The view from London, as reported by the Daily Telegraph, sees the U.S. economy in terms Americans will hardly recognize. It describes the United States as "one of the few bright spots" in a world where Europe is plagued with double-digit unemployment much worse than in this country and Japan is wallowing in a burst bubble that has dumped stock prices 60 percent below their 1989 peak and cut production 7.6 percent.

Such comparisons will bring scant comfort to Mr. Bush. While the president plainly feels he is the victim of a global recession that his government has handled as well as his foreign counterparts, he also knows that weak demand overseas has crimped a recovery that had been export-driven. If he loses the Nov. 3 election, it will not be because of Iraqgate, or the abortion issue or his retreat from his 1988 no-new-taxes pledge; it will be because of a recession that turned into a recovery so pallid most citizens thought it was still a recession.

Voters waiting their turn at the ballot box now have the choice of Mr. Perot's Draconian austerity, Mr. Clinton's call for more government investment (read that spending) in infrastructure and Mr. Bush's plea for various tax cuts to jump-start the economy. If there is one issue on which the candidates seem to agree, it is a return to the permanent investment tax credits that proved so invigorating during the Kennedy administration. These tax breaks would help, but the next president will find it a long haul to drag the United States out of debt and spur economic growth so long as other key countries are stuck in much deeper recessions.

Somebody is going to win the election.

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