Public Jitters About Economy Put Bush on Spot

THIS time last year, Michael Boskin, the White House chief economist, received a chart measuring the simultaneous nose dive of consumer confidence and the sharp drop in the President Bush's popularity. A message was attached: "Chairman of the president's council of economic advisers, beware!"According to sender Gail Fosler, Mr. Boskin didn't respond. One year later, Bush's ratings are again slipping fast while Americans grow more anxious about their economic future. Ms. Fosler is chief economist at the Conference Board, the New York-based research institution that examines United States economic trends and publishes a widely read monthly index of consumer confidence. There's a close correlation between the marked declines in consumer confidence and voter-approval ratings for the president, she says. The public is concerned about Bush's approach - or lack thereof - to domestic economic problems. The popular perception appears to be that he's out of touch. The president has taken the heat from critics for failing to address pressing problems at home and preferring instead to tackle any number of international issues abroad. Meanwhile, he and the Democrats have been in a shouting match over quick fixes to stimulate the US economy. Economists say short-term interest-rate cuts and tax breaks - the politicians' panaceas for lack of economic growth - will simply fail to boost consumer spending, an essential two-thirds of economic activity. In fact, Americans are deep in debt and worried about paying off their mortgages and credit-card balances. Surveys show that an increasing number of consumers are discouraged about their present finances and fearful of the future. They are not looking for new ways to spend money; they're trying to save more and borrow less. As leading Democrats assail the Bush administration for lacking the fortitude to reverse this retrenchment, White House advisers concede that they will offer no solutions until 1992. Bush was badly burned - and the stock market is still smarting - from his call for lower credit-card rates last week. "The problem with George Bush and the people around him is that he doesn't understand the source and the nature of the recession," says Robert Shapiro, vice president of the Progressive Policy Institute, an economic think tank of the moderate Democratic Leadership Council. Mr. Shapiro points to the credit crunch - caused by bankers who have been saddled with bad debts and are reluctant to lend to individuals and businesses - as the most disabling factor in the US economy. The resulting slowdown in economic activity has eaten into incomes and profits. Abnormally high levels of debt carried by corporations, for example, have reduced their inclination to reinvest. Growth in production is at a standstill.

Confidence plummets The net result has been sustained high unemployment and low consumer confidence, which plummeted in October at about the same time the Republican Party got edgy about declining support for Bush. When the consumer doesn't budge, nothing moves. "We're going to find out if you can lead the consumers to the punch bowl, whether you can make them drink," says Fosler. So far, the dramatic drops in interest rates, orchestrated by the Federal Reserve and touted by the administration as an important economic policy lever, have failed to lure people to borrow. Is there anything at all that policymakers can do to reactivate the economy? Analysts draw distinctions between long-term solutions and short-term measures. "Nothing can be done now," Fosler says of the short-term plans. The fault-finding now audible in the political arena "will be deafening next year" as the campaign draws to a close, she says. Much of the public's disillusionment, Fosler says, stems from the fact that "in a recession, people create expectations about the future. You expect things to improve; you expect a robust expansion." Regardless of the impatience and the politics, she says, there will be minimal growth over the next six months to a year. "We shouldn't push the panic button yet; the economy is not in such bad shape," argues Margo Thorning, chief economist of the American Council for Capital Formation. "Unemployment is holding steady at 6.8 percent, inflation is low and inventories aren't high," she says. "Bush is doing the right thing now by sitting tight, riding this [recession] out and not putting out a big, costly tax cut for the middle class." If some action becomes necessary, she favors a one-year tax cut for individuals proposed by Senate minority leader Robert Dole (R) of Kansas. "That would give consumers a boost psychologically," Ms. Thorning says. Like other pro-business economists, Thorning is concerned about the low US savings rate (one-third of Germany's rate and just over one-fourth of Japan's) and the lack of investments in industrial technology and expansion.

Tax credit suggested American exports accounted for the overwhelming percentage of economic growth during the past year. Thorning says an investment tax credit for small businesses and corporations would bring down the cost of expansion and spur further activity. Among the long-term proposals on Capitol Hill, one that may well win bipartisan support is a four-part, five-year economic growth package proposed by Republican Sen. William Roth of Delaware. He has coined a bill he calls JOG America (jobs, opportunity, and growth) and says, "It's time to get the American economy healthy and running again." So far, there's been no movement from the administration, but Senator Roth expects White House support, eventually. "We ought to move now on tax cuts, investment credits, and savings incentives [all part of his new bill]," he says, adding that the legislation would add roughly 1 percentage point to US economic growth.