Economy Still Drags Heels As Bush Hopes for Break

WITH nearly every economic indicator pointing toward continued sluggish growth, George Bush may have run out of time before the November election to show American voters that the country is on its way to economic repair.

The slow recovery from the two-year recession has left Americans uncertain and eager to see signs of economic renewal. Seemingly endless negative economic news makes the nagging problems of shrinking disposable incomes and increasing unemployment more profound.

President Bush's poor popularity ratings and the record-low indexes of consumer sentiment document widespread uneasiness across the country. The economy reflects that discomfort.

The government's chief gauge of future economic activity fell in June by 0.2 percent, a harbinger of weak growth during the coming months.

July's 7.7 percent unemployment rate, announced by the United States Department of Labor last Friday, edged down only slightly from June's 7.8 percent. Roughly a third of the new jobs were generated by a federally funded summer job program for youths; few of the remaining new jobs were in the troubled manufacturing sector. Economists lament the lack of creation of full-time, permanent jobs.

At best, the president can herald a future economic recovery. "We are poised for a strong recovery," he told reporters on Friday, referring to July's marginal job growth. Bush's chief economic adviser, Michael Boskin, budget director Richard Darman, and Treasury Secretary Nicholas Brady all point hopefully to consumer and business tendencies to reduce debts and, ultimately, to borrow and spend more.

Maria Ramirez, president of Ramirez Capital Consultants Inc. in New York, says that, while "consumer debt shows some reduction in the ratio of consumer debt to personal income from the peak of 1990, ... there is a long way to go before the debt becomes manageable. The lack of jobs, and slower growth, make this even more difficult."

She questions Federal Reserve Board chairman Alan Greenspan's assertion "that we are near a `turning point' in consumer debt." The numbers show "something totally different," she says.

Democrats see the current conditions as a means of earning political capital, and they offer apocalyptic assessments of the nation's economy. The Senate Democratic Policy Committee (DPC) issues a string of releases on "historic economic worsts" under Bush's stewardship. Monthly and quarterly indicators have provided the DPC with much grist for its mill.

Calling Bush the "recession president" the DPC reminds voters they are "worse off than when President Bush took office." A DPC report cites a broad range of economic indicators that show "the US economy - now in its 24th month of stagnation - has suffered significantly in the past 3-1/2 years."

Since Bush's inaugural in 1989, the report says, unemployment has climbed, manufacturing jobs have been lost, real hourly earnings have shrunk, home sales have slipped, and consumer confidence has plunged.

The Bush camp counters that the economy is "restructuring" to improve the US competitive position. Secretary Brady says industrial productivity is up, the cost of production is down, and businesses are keeping overhead and inventories low.

Ms. Ramirez contends that "restructuring will not be short-lived; it will take longer than many suspect before the conditions for long-term economic growth are in place."

The US business community - ranging from members of the United States Chamber of Commerce to the National Federation of Independent Business - is frustrated with Bush's economic leadership; but it has a mixed reaction to Arkansas Gov. Bill Clinton's populist "people first" message.

Jerry Jasinowski, president of the National Association of Manufacturers, says business agrees with Mr. Clinton's worker-training and education emphasis, but adds that the governer's proposed $150 billion aggregate tax increase and regulations would "dwarf" the growth impact of Clinton's investment incentives.

While most economists focus on the debt-distressed consumer sector or the business community's hard times, Maureen Steinbruner, a public-policy analyst at the nonpartisan, nonprofit Center for National Policy is studying the economic effects of what she calls "the people cycle."

Americans should expect continued slow economic growth, Ms. Steinbruner says, because fewer of them are forming families, creating households, and spending money. The "baby boom" has long given way to the baby bust, and the lack of strong housing demand has taken its toll, she says. The boom of 1970s and 1980s boom created a burst of households and families that provided "a major source of consumer energy for the US economy." Today, housing sales may be up, she says, but housing starts - a traditional ba rometer of growth - have been flat.