Special Report: America's Run-Down Economy Aiming for Bush's Soft Spot

By Hays Gorey/Washington

As the U.S. recession began last year, George Bush's attitude about it was rather like Macbeth's unpleasant regard for murdering King Duncan: " 'Twere well it were done quickly." That is, better to get it over with long before the election. Until lately, the Administration felt confident that by 1992 the recovery would be in full swing. But in recent weeks the President has twice convened special sessions of his Economic Policy Council. Reason: although Bush's advisers regularly declare the recession over, polls show that the vast majority of Americans don't buy it. The President was moved to remark last week, "Although I believe that the economy is on the right track, let me be the first to say all is not well."

With each month the recovery fails to ignite, Bush becomes less untouchable as a candidate. While he still scores high marks for his handling of foreign policy, his approval rating has fallen from 86% right after the gulf war to 65% in mid-September, according to a TIME/CNN poll. Bush's rating on his handling of the economy has declined from 56% in October 1989 to 36% in late summer. And a swelling field of Democratic presidential candidates, aware that nitpicking Bush on foreign policy could be futile, are aiming straight at the economy in the hope that it will prove to be the President's soft underbelly.

Even so, Bush has vowed to veto a bill passed by Congress last week to help those for whom the times are toughest: an estimated 2.4 million unemployed workers who have exhausted their jobless benefits. Bush views the price tag as too high -- $6.4 billion to extend benefits for up to 20 weeks -- and contends the measure would bust the five-year budget agreement that the Administration and Congress reached last fall. The jobless-benefits bill has enough votes to override a veto in the House, but probably not in the Senate.

A principal Senate sponsor, Texas Democrat Lloyd Bentsen, believes his party will benefit from Bush's seeming intransigence. "People are going to be deeply concerned," says Bentsen, if the economy shambles feebly into 1992. "They're going to be worried about their pocketbooks and not be so concerned about 21-gun salutes." Bush has the advantage of starting with a large credit line of goodwill among voters. "The economy will have to take a real nose-dive for him to lose the election," says Larry Sabato, a professor of political science at the University of Virginia. But he also contends that if Bush vetoes the unemployment bill, "the Democrats will have a very powerful symbol for how they have been trying to depict Bush -- as friend of the rich, uncaring about ordinary people."

Bush shows every sign of wanting to take some strong action on the economy, but no surefire solution is at hand. He is unlikely to be helped by any Republican proposal that smacks too much of supply-side thinking. Last week Senator Phil Gramm of Texas revived a proposal for a cut in the capital-gains tax. Bush also touted the reduction, along with some other stimulants that he had proposed to Congress last year. The capital-gains cut, however, has become a symbol of Bush's supposed elitism. That won't fly in times like these, and Republicans know it. But because of budget restraints, neither will the classic recession remedies -- increased government spending and tax reductions.

After huddling with his economic advisers, Bush directed his lieutenants to come up with ways to compel the banking industry to ease credit to small and medium-size companies. But skeptics think that there is little more he can do. The paralysis of both parties arises from the same root cause, says Brookings Institution economist Charles Schultze: "Anything they do will be painful."

The Democratic chorus cannot seem to find the right pitch either. Of the candidates for President, only Paul Tsongas is offering specific economic proposals. But he does not seem to be getting his message across. The former Massachusetts Senator has been crisscrossing the U.S. for months, describing , himself as a "probusiness Democrat" and warning party members to stop bashing industry.

Among those paying no heed are the other Democratic candidates, most noisily Iowa Senator Tom Harkin, whose old-time Democratic religion is based on a "soak the rich" populism that may go down well in party primaries but isn't likely to prevail in a general election. In declaring his candidacy last week, Nebraska Senator Bob Kerrey spoke grandly of "investing in our nation, spurring its growth and corralling the deficit." Their reach seemed faintly reminiscent of Ronald Reagan's 1980 vow to lower taxes, boost defense and reduce the deficit -- all at the same time.

Unable to bankroll the domestic spending that helped them win past elections, Democrats hope that they can reopen the budget agreement and take money from the Pentagon to devote to social programs instead. But any attempt to use spending as a stimulant will be hobbled by the budget deficit, which is expected to reach a record $345 billion in the fiscal year that began last week. With handicaps like that, it will be hard for Bush or the Democrats to seize upon any quick fixes. If the recession drags on, the race is likely to be a closer one in which the Democrats borrow a question from the 1980 Republican campaign: Are you better off than you were four years ago?

CHART: NOT AVAILABLE

CREDIT: [TMFONT 1 d #666666 d {Source: TIME/CNN polls by Yankelovich Clancy Shulman}]CAPTION: Percent who think President Bush is doing a good job handling the economy

With reporting by Michael Duffy/Washington