1992 Ad

Nation's Business, Jan, 1992 by Roger Thompson

"If you elect me your president, you will be better off four years from now than you are today."

--Candidate George Bush, on the eve of the 1988 presidential election.

That promise has come back to haunt President Bush on the eve of another presidential election campaign. From Main Street to Wall Street, Americans are anxious about the economy.

"I'm tired and frightened," says Dan Walker, owner of Kimbell & Walker, a farm-equipment business in Clinton, Ky. "We have zero profit margins. I think we've got further to go down than we've been. We haven't seen the bottom of this recession."

Says Lee Pfoff, owner of the Allen Tire Service in Lima, Ohio: "The economy? It stinks. George Bush better get his act together. The only thing keeping us going right now is that new-car sales are down drastically, so people have to keep older cars running longer."

Agnes Davis, owner of Charisma, a Redondo Beach, Calif., company that markets pantyhouse nationwide, is on the phone constantly taking orders, and she's getting an earful about the economy. "People are angry at Bush for not coming out and saying we're in a hell of a mess, and it will be a while before it turns around," says Davis. Her own business is off sharply.

Davis says she recently got a call from a man in Georgia, an engineer for 27 years, who was laid off 18 months ago and can't find a job. "He wanted to sell Charisma [pantyhouse]. I'm hearing a lot of stories like that."

Business owners aren't the only ones pessimistic about the economy. Consumer confidence plunged to an 11-year low in November, according to the Conference Board, a business research organization in New York. "We're about as low historically as we've ever been," says Fabian Linden, executive director of the board's Consumer Research Center.

The national mood has soured in large part because unemployment remains high, hovering just below 7 percent, and because news stories about major corporations laying off employees appear almost daily. For many Americans, job security seems to have become a thing of the past.

After a buoyant year of record highs, Wall Street in late November began to reflect Main Street's unease about the economy. As investors began to doubt that the long-anticipated recovery had taken hold, the Dow Jones industrual average skidded downward more than 100 points from its all-time high of 3077 reached just weeks earlier.

Many Democrats in Congress are taking perverse pleasure in noting that the administration's record of economic growth is the worst since Herbert Hoover. Nonetheless, a recent Business Ballot poll by the U.S. Chamber of Commerce found that 83 percent of the business respondents believed Congress was most responsible for the lack of economic growth over the past two years.

For their part, most professional economists still maintain that the recession officially ended last May or June. In fact, the gross national product--the nation's output of goods and services--grew by a meager annual rate of 2.0 percent from July through September, down from earlier estimates of 2.4 percent. But by the time that figure came out in mid-October, an unexpected bombardment of bad economic news had shaken nearly everyone's faith in the struggling recovery.

What was supposed to be a sharp rebound from the midest recession in the years since World War II suddenly turned into the slump that won't go away.

By year's end, the economy had stalled, at best. That was the consensus of the 52 private economists surveyed monthly by Blue Chip Economic Indicators, a Sedona, Ariz., newsletter. At worst, the sputtering economy had slipped back into recession--the feared "double dip." The double dip was forecast by U.S. Chamber of Commerce economists, who are expecting slightly negative growth from November 1991 through March 1992. (See the chart on Page 14.) "We don't see sustainable growth starting until April," says William MacReynolds, director of forecasting for the U.S. Chamber.

But even that growth is expected to be anemic. Blue Chip says that for all of 1992, gross national product will expand by 2.4 percent, while the Chamber forecasts GNP growth of 1.6 percent. Those projections are far short of the 6 percent surge in GNP recorded in the first year following each of the seven previous postwar recessions.

For the remainder of the decade, Blue Chip foresees economic stagnation, with growth never exceeding 2.6 percent annually. By contrast, growth averaged 4 percent annually in the mid-1980s.

About the only forecast still calling for renewed economic strength comes from the ever-optimistic Bush administration. In August 1990, when the U.S. Chamber correctly noted that a recession had begun--it was the first business organization to recognize that fact--the administration clung to a projection of 2.8 percent growth for 1991. The actual figure is expected to be -0.4 percent. Now the administration forecasts election-year growth of 3.2 percent, more optimistic than all but two of the 52 economists who participate in the Blue Chip survey. (See Editor's Note, on Page 3.)