Clinton Banks on Economy Boosting Ratings

Despite recovery, few in US feel its effect as middle-class incomes continue to shrink and more people edge toward poverty

WITH the congressional elections just a month away, President Clinton and his advisers have tried to make the nation's economic revival the centerpiece of campaigns across the country.

``If I were a Democrat running for Congress now, I would have a very powerful economic message,'' White House National Economic Council chairman Robert Rubin told reporters at a recent Monitor lunch.

But if the economy is doing so well, why do average Americans feel so uneasy about their prospects? The persistence of deeper problems - shrinking middle-class incomes and more Americans edging toward poverty - aggravated by unemployment fears, have eroded their confidence.

Like other Clinton advisers, Mr. Rubin concedes the long-term challenges, but echoing a familiar rallying cry, he urges voters to feel good about the short-term.

The nation shook off recession with renewed strength, he says. During the past 12 months, the economy expanded by 4 percent, business investment surged, personal incomes grew by 6 percent, and some 3 million jobs were created. The Clinton record compares favorably, he adds, to the Bush years of slow growth and high unemployment.

Political analyst Kevin Phillips, whose latest book, ``Arrogant Capital,'' was published this week, discounts the election-year rhetoric: ``Recessions and joblessness have been the Democrats' usual national political opportunity.... Blaming the Republican administrations in power from 1981 to 1992 for US economic slippage is an obvious Democratic approach.''

As a candidate in 1992, Clinton talked populism and blasted Wall Street, Mr. Phillips says, but as a president he has been driven by the big corporations and finance people from whom most American voters feel increasingly detached.

Former investment banker Rubin credits the White House for winning Wall Street's confidence by reaching a budget-cutting deal. The result, he says, has been the lower interest rates needed to spur consumers to spend and businesses to hire.

This claim of economic success has little credibility on Main Street, says Andrew Kohut, director of the Times Mirror Center for People and the Press. ``There is a hard core of people out there who aren't being touched by this [recent improvement in the economy]. Corporate earnings may be up, but wages aren't.''

Mr. Kohut's most recent poll of working Americans shows 40 percent of respondents worry that they don't earn enough money; only a third of that group is encouraged that their future financial situation will improve.

``An awful lot of the electorate is feeling disillusioned,'' Kohut adds, because as soon as personal incomes do move up, the inflation-wary Federal Reserve will send interest rates higher.

Because of this, predicts Rep. Dick Armey (R) of Texas, the economic gains realized under the present administration will be short-lived. Mr. Armey, who is up for reelection this fall, says the Clinton economic plan, ``predicated on keeping interest rates down... is going to unravel because the Fed cannot do this.''

That leaves the deeper, more long-term problems - that Laura D'Andrea Tyson, chairwoman of the White House Council of Economic Advisers, calls ``outstanding policy issues'' - unsolved.

Despite the creation of new jobs, incomes have slipped even further during the past two years, and no relief is in sight, especially for the ``bottom 40 percent of the wage-earners,'' Ms. Tyson says. She warns that the ``working poor'' group is expanding, as ``18 percent of people who work full time don't earn enough to keep a family of four out of poverty.''

Tyson says the underlying problem is that low-skilled workers lack the educational base they need to learn skills required by high-technology work that pays higher wages.

Federal budgetary contraints have forced Labor Secretary Robert Reich to rely on the private sector to finance on-the-job worker training. This week, Mr. Reich kicked off his own campaign to win private-sector support. He tells business leaders of a widening gulf: 15 years ago, white male college graduates earned 49 percent more than white male high shool graduates; today that gap is 82 percent, and there is dramatic fallout from the middle class.

Reversing the negative trends in incomes and skills is impossible without investment. While the government's capacity is strictly limited by spending caps, the private-sector picture is even dimmer. Americans are saving money at roughly 2 percent of the gross domestic product, a rate far below that of other competing economies.

Clinton should encourage baby boomers who don't see their financial vulnerability to put more money away for retirement, says Margo Thorning, chief economist of the Washington-based American Center for Capital Formation.

Entrepreneurs contend that the best way to stimulate investments and job creation is by removing regulatory shackles on business. Their primary worry is not what the Clinton administration is proposing for education and training, but the more costly prospects of health, social, and environmental initiatives.

Already, meeting federally mandated requirements can account for as much as 40 percent of a company's investment in hiring a new worker, says Ohio University professor Richard Vedder, a labor economist who studies government employment policies. Data show an abundance of part-time, temporary, and overtime work - all designed to avoid these costs.

Looking past this November's election to the 1996 presidential campaign, Clinton's economic advisers are examining just how they can affect change for the average American's standard of living in the next year.

Republicans promised this week to enact a tax cut to spur economic growth if they gain control of the House this fall. Rubin says the White House has not rejected the idea of resurrecting the middle-class tax cut, a pledge that was emblematic of Clinton's successful campaign but was soon abandoned by Clinton in his earliest days of presidential policymaking.