Economic surge aids GOP in Indiana. But pockets of discontent about economy complicate elections

The Michiana Country Livin' RV Center says a lot about the Midwest in 1988. The Elkhart dealership is packed with recreational vehicles. Sales are up. It almost seems the local economy is a perfect script for a Republican win next week.

But there's another, gloomier view of the United States economy, which crops up in union halls and inner cities in the district. Which view will predominate next Tuesday? One of the clearest tests will take place here, in northern Indiana's Third Congressional District. Two years ago the Republican incumbent, Rep. John Hiler, held onto his seat by only 47 votes - the closest House race in the country that year. Now, the conservative Republican is locked in a hard-fought rematch against Democrat Tom Ward. The race is considered very close.

On the stump, Representative Hiler has a lot to point to.

``We have the lowest unemployment rate we've had in nearly 14 years,'' he tells an audience in a Veterans of Foreign Wars hall in Marshall County. ``Our congressional district has over 66,000 more people working today than were working eight years ago.''

In fact, the economy in the district has recovered from its big problems in the early 1980s.

The unemployment rate has fallen by at least half in all six counties that make up the district. By August of this year, Elkhart and Kosciusko - the two most Republican counties in the district - were reporting negligible unemployment, 3.5 and 2.6 percent respectively.

The picture of recovery mirrors what is happening across much of the Midwest, says David Allardice, assistant director of research for the Federal Reserve Bank of Chicago. ``The region does look better than it did.''

And here, at least, the picture is optimistic.

``It's been on a pretty steady increase since '82 [and] '83,'' says Craig Erickson, general manager of the Elkhart RV center.

``We have people commuting in from southern Michigan,'' adds Mike Swihart, associate pastor of an evangelical church in Goshen.

But this economic growth has not spread everywhere in the district.

``Sure, there's a lot of work, but you can't survive on the wages they are paying,'' says James Stewart, president of Local 748 of the United Automobile Workers in Plymouth, Ind.

Eight months ago, his local went on strike against a radiator manufacturer. Now, the plant is being moved to South Carolina, he says, and his best job offer so far is $6.68 an hour - down from the $11.60 he was making.

``We're going to need a change,'' says Freeman O'Bannon, a black pipefitter living in South Bend. People can't make it on wages of $4 an hour, he adds.

These pockets of economic difficulty - and South Bend's large Democratic majority - are likely to make the race very close, according to campaign officials on both sides. Neither expects to win by more than 2,000 votes. Since he upset House Democratic whip John Brademas in 1980, Hiler has always had to work hard to win this very divided district.

Yet, even Mr. Ward, the Democratic nominee, concedes that he has an uphill battle this time.

``My challenge is: Let's look behind the facade,'' he says. ``What are we going to have to pay for this short-term prosperity? It's being built on a credit card. Sometime or other, we have to pay the piper.''

Such a gloomy message was unlikely to win the district, he adds, so the campaign has focused on other issues, such as social security and the environment, to position the Democrat as champion of the little guy. The environment issue has played surprisingly well, because of highly publicized charges, never substantiated, that a foundry owned by the Hiler family had dumped toxic sand.

But with only a few days to go, the Republicans are sounding cautiously optimistic, especially with an economy humming along.