Political potshots over the economy

Mortgage Banking, April, 1996 by Skip Kaltenheuser

"The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man." George Bernard Shaw was probably not imagining the Federal Reserve Bank, but his musing is loose enough to encompass that institution and the political smoke curling up around it in election years. Depending on shifting points of view, the quote quite nicely accommodates the Fed's role, variously defined as reacting to the market and as leading it.

While the Fed fortress holds up well under the slings and arrows of outrageous political barbs, this year its most important role in election rhetoric may be as a stepping-off point for what may prove to be the central question in the political debate - how best to grow a strong economy? The precise way that question will be framed remains elusive, in part because current readings on the economy remain sufficiently mixed to keep the eyes of political seers dilated.

As this goes to press, a stock market hiccup stimulates a flood of words on the disconnect between Wall Street and Main Street. The surprise good news of a dip in unemployment triggered a Nervous Nellie sell-off that, until the next-day rebound with the third-largest one-day gain in history, echoed a discomforting notion that what is good for Wall Street is at cross purposes with what benefits the general public. The rise in stock prices of companies discarding employees, most exemplified by AT&T's layoff of 40,000, has an alienating quality, particularly when the companies are profitable and the top managers garner bonuses beyond the dreams of most.

Suddenly, "economic anxiety" is a buzz phrase rivaling "at the end of the day" in its rapid rise to omnipresence. There's no doubt about it that economic angst has become the gold standard for staking out an election- year message with payback potential. But playing the message with the wrong spin can transmute the ore of political digs to fool's gold. Where will Republicans and Democrats stake their claims? The following sampling of diverse perspectives reflects the message confusion that comes with election-year politics. What you see depends on which party you belong to and how it turns to your advantage.

Experimental spins

"It's the paycheck, stupid," says Ed Goeas, a Republican pollster and strategist in the Tarrance Group of Alexandria, Virginia. "We find 69 percent of people say their personal financial situation is the same or worse than four years ago, with 80 percent saying the nation's finances are the same or worse than four years ago - 51 percent saying they're worse. There is a values squeeze, typified by a second job, two-income earners, and more work hours. That means less time with children and turning children over to others, interfering with the parents instilling their values. At the same time, real income drops every year. Whether [or not] paychecks have declined, more is taken out for health care and taxes."

It is in the nexus between the values squeeze and the paycheck squeeze that Goeas sees glitter, accompanied by the country lyric "sick and tired of being sick and tired."

"What Clinton didn't understand in the '92 campaign, [and] what is important is the self-perception of the middle class, not the economic definition of it - 87 percent of people think they're middle class," observes Goeas. "Clinton couldn't figure out why he didn't get credit for economic gains in 1994. Of all the economic measurements, the only one that matters is whether people are taking home less money or more money; that's how they view their economic situation. This is all about economic squeeze, not the overall economy."

Goeas is banking heavily on diminishing credibility because of Clinton's failure to deliver a significant tax cut to the ever-widening group calling itself middle class, and on voters focusing on past tax increases. As to whether the voters might blame Congress primarily for economic declines (affecting the presumed nominee, Senate Majority Leader Bob Dole), Goeas insists the gravity of economic blame is always strongest near the president.

Returning more of government's role to the states is also a big part of the message, according to Goeas. He says people now believe 48 to 52 cents of each dollar is wasted at the federal level, but only 25 to 30 cents at the state level, and the waste keeps getting lower as you go more local. This is the reverse of what people used to think, in part because the local level has become more visible in problem solving.

What would Goeas do if he were President Clinton? "I'd say 'we've done a lot but there's a lot more to do.' Bush tried to do this, but he left out the second part, sticking with trying to convince people everything was great. Clinton started to sound this out in the State of the Union message, but he's keeping the specifics loose, as there aren't many he can provide; he can just blame the Republicans for attempts to balance the budget. Democrats are talking a lot about preparing people for the world economy, but ultimately that fails because voter focus is where they stand today."