Is This Your Father's Recession?

By JAMES CARNEY AND JOHN F. DICKERSON

George W. Bush usually likes to have a little fun at Larry Lindsey's expense. As the President's chief economic adviser, Lindsey must trek downstairs to the Oval Office three days a week and brief his boss, the Vice President and other top aides on the state of the American economy. Lately, Lindsey has barely been able to get a word out of his mouth before the President starts giving him grief. "When are you gonna bring me some good news, Lawrence?" Bush asks with a wink or a grin. "Any good news today, Lawrence?"

But last week the news was so bad that Bush was hardly in a mood to kid around. The nation's unemployment rate, which had remained steady--and low--while other indicators turned bleak, leaped to 4.9% on Friday, its highest level in four years. Wall Street was raining red arrows as the Dow lost 427 points in just two days--3.5% for the week--while the NASDAQ fell 6.5%. At a noon meeting in chief of staff Andy Card's office, top Bush aides decided to clear the President's afternoon schedule and dispatched him, grim faced, to the South Lawn of the White House to reassure Americans--and the markets--that he was "deeply concerned." They summoned House Speaker Dennis Hastert and Senate minority leader Trent Lott for the occasion--a deliberate display, says a top aide, "to show that the Republicans remain united." Lott and Hastert stood by as Bush declared, "We've got a plan to get our economy moving so Americans can find work." After he spoke, Wall Street kept going south.

For months the White House has been trying to find the perfect pitch for Bush's words about the anemic economy: showing he is aware but not alarmed, positive but not Pollyannaish. This kind of delicate hand holding may be as much as any President can do to alter the course of a sprawling national economy. Having already deployed his most powerful weapon, tax cuts, and shackled himself to a promise not to spend Social Security surplus money, he is left to temper the worry during the wait. But the longer it lasts, the more the downturn is foreshortening Bush's plans and expectations, endangering everything he wants to get done in office. The downturn has taken chunks out of the magical budget surplus, threatening the President's plans to reform education and rebuild the military. Suddenly there's talk of a second Bush recession.

Although Bush was flanked by Vice President Dick Cheney and G.O.P. congressional leaders, the far bigger presence on the South Lawn Friday was the memory of his father, whose perceived lack of concern for average people during the last recession cost him a second term. Faced with the 1990-91 downturn, "41," as his son calls him, wasn't much for feeling people's pain or offering them relief. Washington should stand back and "let the economy right itself," the former President used to say, and it eventually did--just in time for him to lose. The elder Bush's belated attempts at empathy were feeble and sometimes laughable. In a famous photo op in 1991 to send the message to consumers to spend, he bought some tube socks. On a visit to economically devastated New Hampshire, Bush Sr. sounded like an automaton when he uttered the words, "Message: I care." The son is different, say aides. "He's learned his father's lesson," says a senior White House aide. "The American people need to see you, and you need to show them that you care."

But if Bush has figured out that smart Presidents shed tears, he is still learning that his options are limited. Bush's "plan" to jump-start the economy is the same plan he's had since the campaign. Its featured item--a $1.35 trillion, 10-year tax cut--has been enacted into law. Most of those $300 and $600 rebate checks have been sent out. Now Bush must hope that taxpayers use that money to spark a rebound or that the Fed's rate cuts ignite a rally on Wall Street. The other elements of Bush's proposed cure--freer trade and energy reform--face hurdles in Congress and, even if enacted, offer more distant relief.

If that weren't hard enough, Bush must battle the recession while he fights with Congress. Democrats are accusing the other party of recklessly wasting the surplus and endangering Social Security. The White House insists that it can juggle the economy and the budget battle without dropping its focus on the rest of the President's agenda. Bush needs to speak out enough about the slowdown so voters don't think he's detached, his advisers say, but he shouldn't talk about it so much that he keeps the woe on the front page--or worse, adds to darkening consumer sentiment. It's an imprecise balance. In speeches he talks more about how he will "work hard" to get things done in Washington--a reaction to lingering criticism of his 28-day vacation. And aides say he is going to "focus like a laser beam" on the economy, a line lifted directly from Bill Clinton's 1992 campaign. But at the same time they insist that Bush is not consumed by the fiscal tremors. "We're in an instant-aid society, where every week you have to do something new," says spokesman Ari Fleischer. "He doesn't subscribe to that."

So Bush will spend this week on his favorite topic, education, in an effort to get his stripped-down reform plan out of Congress and onto his desk. And toward the end of the month he will launch what aides are touting as a major new initiative called "Communities of Character"--an attempt to spur responsible behavior through policies aimed at teaching character education in schools, helping the children of prison inmates and encouraging volunteerism. Bush will also make simple bully-pulpit appeals to patriotic and civic pride. "It's why he ran for office," says White House Counsellor Karen Hughes. "It's the essence of compassionate conservatism."

But that essence may be lost on Americans more worried, at least for the moment, about money than morality. The debate over the economy and the budget threatens to drown out everything else Bush wants to do. Even trial balloons like the White House's flirtation with the idea of reducing capital-gains tax rates for two years to add energy to the economy are likely to provoke weeks of contentious debate, derailing any neatly choreographed events meant to change the subject. By October, when Bush is threatening to veto spending bills that exceed his budget guidelines and Democrats are accusing him of gutting social programs, boutique ideas and visits with schoolkids may seem woefully out of touch.

Bush has some facts on his side. Despite all the pain people may see and feel, and their anxiety about the future, the U.S. economy is not even in a recession--which is defined as two consecutive quarters of negative growth. (The second quarter, the worst in eight years, registered 0.2% growth.) And the economic downturn is something that started before Bush took office, a fact that the President and his surrogates not surprisingly point out at every turn. "For the last 12 months," Bush told a Teamsters rally in Detroit on Labor Day, "let me repeat--for the last 12 months--the economy has been way too slow." He added, "People are hurting. And people are suffering. And there are families who wonder about how they're going to feed their kids, and I understand that, and we've got help in Washington." Message: I care, but it ain't my fault.

While Bush was taking to the podium to show his concern, others in his Administration were sending a slightly different message--that everything was going to be O.K. once the tax cut kicked in. "We feel like the President's tax cut came at the right time," says Hughes. "It is going to show this year and then again next year." This Friday retail sales figures for August will be released, providing the first sign of whether the $27.8 billion that has been distributed in tax rebates has given the economy a jolt. Aides also hope that a lift will come in January, when tax rates will each be reduced 1% and the child tax credit will be raised to $600. The cumulative effect, the Administration promises, is that the economy will turn around by December or early in 2002.

But what if the Administration is wrong? Behind the scenes, White House aides are girding for a long downturn. Even if their predictions of near-term recovery are off, they say, the longer-term business cycle is on their side. "Recessions don't last for more than two years," muses a senior White House aide, who, like many, uses the word recession as if we were in one. "Ultimately, when the economy turns around, the voters will give the President credit. And then what will the Democrats do?"

Remarks like that only quicken the already thumping pulse of congressional Republicans, who must face the voters next year, not in 2004. That's why last week House Republican leaders were pushing hard for an immediate second round of tax cuts--the cut in capital-gains rates--to stimulate the economy. The President and his staff argue that his tax cut--plus passage of his energy plan and expanded "fast-track" authority to negotiate international trade agreements--will solve the problem. They're wary of a capital-gains rate cut, which liberal Democrats would ridicule as a sop to the rich.

Of course, Democrats are already making that argument about Bush's tax cut, letting no cable show go unvisited in order to blame the hard times on the President. They declare with straight faces that the slowdown didn't "really" kick in until moments after Bush took the oath of office, and they delight in the opportunity provided by the shrinking surplus to accuse Republicans of raiding the Social Security trust fund and "endangering our seniors." Though intellectually suspect, it's a potent attack. Republicans returned to Congress after the recess to an internal poll that showed that voters' concern about the future of their retirement system had doubled.

For the Republicans, hope lies with those who predict that the economy will rebound by early next year. Indeed, the elder Bush always believed that if the recovery had just started a little earlier, he would have been re-elected. Bush adviser Lindsey is among those who think the calendar will shine on the younger Bush. But until it does, when the President asks, "Any good news today, Lawrence?" the answer will continue to be "No."

--With reporting by Douglas C. Waller and Adam Zagorin

With reporting by Douglas C. Waller and Adam Zagorin