Slump complicates Bush's job

A stalled economy is likely to make it harder for the new president to carry out his agenda, including big tax cut.

New presidents often face worrisome challenges early in their tenure - and George W. Bush is no exception.

The sudden stall of the US economy - including a plummeting stock market and rising energy costs - may well undermine the new president's ability to push through his own carefully executed agenda. More important, it could eventually force him to alter his plans, including policy cornerstones such as a big tax cut, a partially privatized Social Security system, and an expensive national missile-defense shield.

Depending on the severity of the downturn, Mr. Bush could even end up joining the company of one-term presidents rejected by voters because a recession took place under their watch.

"If the economy goes south and the administration handles it badly, it could permanently damage the Bush administration," says presidential scholar John Kessel, at Ohio State University.

Democrats are already blaming the administration for "talking down" the economy by mentioning the "R" word as far back as December, when unemployment was a low 4 percent and economic growth for the quarter still a positive 1.1 percent - though steeply down from previous quarters. They assert that Mr. Bush tried to capitalize on fears of a recession to sell his tax cut.

The administration maintains it is just being realistic, calling it like it is. But today's economic trouble could spill over into other areas.

Take Bush's hopes of privatizing part of the Social Security system, allowing some workers to invest a portion of their earnings in the markets. Given the recent jolts investors have experienced, "he moves forward with the privatization scheme at his own peril," says Robert Reischauer, former director of the Congressional Budget Office.

The same goes for Bush's determination to get "trade promotion authority," also known as "fast track" - the congressional blessing for a president to negotiate trade deals, with lawmakers then voting only yes or no on it. Even President Clinton - a strong believer that free trade is good for the economy and does not, in the long term, undercut American jobs - was unable to add fast track to his list of trade wins on the Hill. And that was in the best of economic times.

Tax-cut proposal

The greatest concern at the White House is most likely over what's to become of Bush's plan to cut taxes. In some respects, Democrats have moved a long way toward his position. They no longer talk about targeted tax cuts but support across-the-board reductions. And they've been steadily upping the size of a tax package.

But the weakening economy has bolstered the argument of Democrats - and some moderate Republicans - that future surpluses won't be large enough to accommodate the president's $1.6 trillion plan. And they argue that his plan gives much more relief to the wealthy than to low- and middle-income Americans - making it less effective as an economic stimulus.

Economic weakness "may make it much more difficult to get the tax cut he wants through," says Stan Collender, a budget expert at Fleishman-Hillard Inc. in Washington and former aide on both the Senate and House budget committees.

Of course, the Federal Reserve may yet succeed in jump-starting the economy through a series of interest-rate cuts. And many economists believe America's economic and fiscal fundamentals are still strong enough to avert a recession.

"I don't anticipate that we're going to have a recession," says Roger Porter, who advised the president's father on domestic and economic matters. Mr. Porter also disputes talk that Bush's program is in danger. His education plan and faith-based initiatives - which are also major parts of his agenda - don't depend on what's happening in the economy, Porter points out.

Sticking to the plan

He also gives the administration credit for adhering to its plans and not changing course based on short-term dips in the market. "They've been focusing properly on the long-term thrust of policies," he says.

Mr. Kessel even points out the timing of the economic doldrums could actually be advantageous to Bush. If it follows a normal business cycle, an expansion would likely take place right when Bush is running for reelection, or perhaps even in time for midterm congressional elections.

Still, the economy has got to be a "huge concern" for the White House, Mr. Reischauer says, especially because the public's perception is that the economy's going haywire. "There is a feeling that something has to be done, and that [the administration] will be regarded as failing if they don't act," he says.

And if the slowdown turns into a recession, "at some point, it's going to be blamed on him, or, if the downturn isn't blamed on him, the failure to deal with it will be," says Mr. Collender.

The president is like a mayor of a big city in a blizzard, he explains. "He can't be blamed for it snowing, but he can be blamed for not plowing properly."

(c) Copyright 2001. The Christian Science Monitor