When George Bush battled unsuccessfully for the Republican presidential nomination eight years ago, he was a severe critic of opponent Ronald Reagan’s proposal to build an economic program around tax cuts. He described the proposal as “voodoo economics” and “pie in the sky.” Now, although Vice-President Bush has distanced himself from Reagan in the current campaign on some issues, he has firmly adopted the economic program he once scorned. Said Bush: “Eight years ago, this economy was flat on its back. We came in and gave it emergency treatment.
Pretty soon the patient was up, back on his feet and stronger than ever.”
The economy is, indeed, in a boom period. But the durability of the recovery is a hotly debated issue. Democratic presidential candidate Michael Dukakis, for one, predicts that slow growth and rising inflation are approaching. Declared the Democrat: “To add insult to injury, Bush wants to cut taxes for the wealthy again. If this were a movie, we’d call it Son of Voodoo.”
Neither Bush nor Dukakis will likely provide a fully reliable view of the economy during the campaign. Said Gary Burtless, a senior fellow at the Brookings Institution, a liberal Washington " thinktank: “There’s an old expression, ‘Figures don’t lie, but liars sure can figure.’ I don’t want to say that people here are liars. But I think different people are trying to make different partisan points.”
Already, Bush’s enthusiasm has led him to exaggerate. During his acceptance speech at the Republican convention in New Orleans last month, he undertook to improve on the Reagan administration’s creation of 17 million jobs in the past five years by creating 30 million new jobs in eight years. But that pledge did not withstand closer examination. According to the Bureau of Labor, the U.S. workforce will increase by 11 million during that period. Even if all new prospective workers were given jobs, along with the six million to seven million people currently unemployed, 12 million people would have to take a second job to meet Bush’s quota. Clearly
embarrassed, Robert Zoellick, Bush’s senior economic adviser, said that the undertaking—which Bush called “my mission”—was really “an aspiration or goal.” He added, “A goal is something you try to achieve and even if you don’t, you are at least moving in the right direction.”
Despite that setback, many observers—including supporters of Dukakis— say that Bush has, for now, taken the lead
on economic issues. Although Reaganomics accelerated the plunge into a severe recession, the crash was followed by 69 straight months of growth with low inflation and relatively low unemployment. While many states, particularly those dependent on agriculture and natural resources, have not felt the full effects of the expansion, its effects are especially evident in the big coastal states essential to any election victory. Said Jim Mahoney, Philadelphia co-ordinator of the AFL-CIO labor group, which supported Dukakis: “When you have a prosperous economy, it’s hard to say things are bad.”
A generally healthy economy also makes it possible for Bush to ignore
warning signals of a future downturn. His convention speech, for example, avoided mention of the budget deficit, which has more than doubled to $191.7 billion from $89.05 billion under Reagan. The deficit has relatively little direct impact on voters, but it helps to fuel fears of a new round of inflation. Last month, consumer prices rose 0.4 per cent more than a year earlier. As well, the economy grew at a rate of 3.4 per cent in the first half of this year—well above the maximum target of three per cent set by the Federal Reserve Board, the United States’ central bank. Clearly fearing inflation, the Fed has recently
been raising its key lending rate.
For American consumers, already carrying record levels of personal debt, higher interest rates have led to higher payments on loans and mortgages. The prime rate of many U.S. banks—their lending charge to their best customers—has reached 10 per cent. In July, new house sales fell almost five per cent, and most economists blame the drop entirely on interest rate increases. With little agreement about whether inflation or recession is on the horizon, it is difficult to predict the Fed’s future direction. But for Bush, the best change would be no change at all.
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