Improving Economic Signals
May No Longer Deliver Votes
Nagging Anxiety on Jobs, Pay
Haunts Bush Re-Election;
View From Swing States
President Cites 'Transition'
By JACOB M. SCHLESINGER
Staff Reporter of THE WALL STREET JOURNAL
WEIRTON, W. Va. -- In 2000, Chuck Svokas voted for George W. Bush. The 56-year-old resident of this industrial area was angry at the Clinton-Gore administration over steel imports. The support of self-described conservatives such as Mr. Svokas helped Mr. Bush carry this state by a slim margin.
This year, Mr. Svokas says he will vote for Massachusetts Sen. John Kerry. He likes some things the president has done, including invading Iraq. But as Hancock County's economic-development director, Mr. Svokas has been mostly disappointed. The workers at struggling Weirton Steel Corp., the county's largest employer, saw their pensions slashed last October, and the company goes to court Monday seeking to terminate retiree health benefits. About one-third of the company's workers are expected to be laid off over the next few weeks.
"It's a stressful time for a lot of people here," says Mr. Svokas. Mr. Bush "doesn't look like he has a grasp of what needs to be done for the American economy," he adds.
That's a widely held and spreading sentiment -- especially in the pivotal swing states of the industrial Midwest and Northeast -- and the darkest cloud hanging over Mr. Bush's re-election bid. The 2004 presidential contest could well be determined by the tallies in states such as Ohio, Pennsylvania and West Virginia -- each decided by thin margins in the last election.
The dissatisfaction with Mr. Bush is a bit perplexing, since by many measures the American economy is rebounding smartly. That's so even in places such as West Virginia, where, despite all the attention to bad news, the unemployment rate has fallen by a full percentage point over the past year. At 5.2%, it is well below the national average.
The problem for Mr. Bush is that the benefits of the current boom don't seem to be spreading as widely, or as meaningfully for workers, as the last one. Many of the new jobs in Weirton pay $10 to $12 an hour, compared with well over $20 for the old ones. When one company came to Mr. Svokas recently, seeking to expand operations and hire 350 additional people, he asked whether those workers would get health insurance. The response, Mr. Svokas says, was: "The company will pay a small portion of it, while employees will pay for most."
In sum, basic changes in the way the economy works have created a new political equation this year, loosening the old links between prosperity and a president's popularity. The result is a disconnect between what the statistics say about the economy, and what some Americans feel and perceive.
Numbers Game
The equation used to be simple: If the economy was growing strongly, the incumbent had a huge edge. By that measure, Mr. Bush should be cruising to easy victory. Gross domestic product grew at an eye-popping 6% annual pace in the second half of 2003, and should expand at a brisk 4.7% rate through 2004, according to the consensus forecast of Blue Chip Economic Indicators. When Yale economist Ray Fair plugs those numbers -- plus low inflation -- into his respected model for predicting presidential elections, he projects Mr. Bush to draw 58% of the vote.
Yet last week's Wall Street Journal/NBC poll showed the nation split -- 48% to 48% -- on whether Mr. Bush deserves re-election, with economic concerns the largest reason for the low support. And 47% of those surveyed said they worried various elements of today's economy -- from the shrinking availability of health care and pensions to intensified job losses from foreign competition -- mean that "America no longer has the same economic security it has had in the past."
Some of that is the result of old-fashioned election-year jousting. Challengers have always contended that a sitting president's positive economic indicators don't really add up to what they appear.
But even Mr. Bush and his aides acknowledge something different is going on this year. New technology, higher productivity and broader globalization have made American businesses more efficient, profitable and dynamic, and the past year's rapid growth dramatically lifted the stock market.
Yet that dynamism has done little to generate new jobs overall and contributed to a heightened state of anxiety for millions of Americans who feel less confident about the size and certainty of their piece of the pie.
In February, the number of workers on nonfarm U.S. payrolls was 2.2 million less than when Mr. Bush took office in January 2001. The weak job market has in turn depressed wages, salaries and benefits for those still employed. Over the past year, average wages have risen just 1.6%, the slowest rate in the four decades for which data are available, according to the left-leaning Economic Policy Institute.
At the same time, many families have seen the fraying of conventional safety nets, such as health insurance, pensions and government services, that are especially important in just such times of instability. The share of Americans lacking health insurance of any kind rose to 15.2% in 2002 from 14.6% the year before. And while overall inflation is down, the bills for some major household expenses -- including gasoline and prescription drugs -- are leaping upward. Public college tuition rose 13% during the current school year.
"I don't think things are any worse than they were three years ago," says Richard Basile, a 60-year-old business consultant in Ellwood City, Pa., which lies 50 miles across the border from Weirton and shares similar struggles. "But Bush has to come up with ways to make the American people's psyche feel more secure." Mr. Basile says he voted for Mr. Bush four years ago but hasn't yet made up his mind this year.
Emerging Theme
Nagging insecurity amid prosperity is the emerging economic theme of the 2004 campaign. In that debate, the question of whether free trade helps average Americans by opening up the economy or causes those anxieties has become the boldest rhetorical dividing line between the two candidates.
Mr. Kerry advocates tougher action against outsourcing and imports, as part of a broader platform to ease the heightened angst, even if that means tamping some market forces credited with generating growth. Another plank involves a big new federal health-care subsidy by raising taxes on corporations and the rich. "My campaign is about replacing doubt with hope, and replacing fear with security," Mr. Kerry said after unofficially clinching the nomination earlier this month.
Mr. Bush brands Mr. Kerry's trade policy "economic isolationism." The president and other Republicans talk about further reducing government limits on business and investors -- betting those steps will foster growth that ultimately flows to the masses. Mr. Bush's plan for spreading wealth calls for scaling back federal programs, including more tax cuts and partial privatization of Social Security.
In Ohio last week, Mr. Bush acknowledged that "this is a time of transition ... and if you're one going through transition, it's not an easy experience." But he blasted "some politicians in Washington" -- a dig at Mr. Kerry -- who "see this new challenge and ... want to respond in the old ways" of bigger government and more trade barriers. That, he said, "is the enemy of job creation."
The feeling of insecurity is especially intense -- and especially politically significant -- in the 200-mile band stretching from Western Pennsylvania to Eastern Ohio, cleaved by West Virginia's northern panhandle incorporating Weirton. Mr. Bush won West Virginia narrowly in the 2000 election and carried Ohio with just 49.97% of the vote. Former Vice President Al Gore took Pennsylvania, with 50.6% of that state's vote. All three states are considered up for grabs this time around. Their combined 46 electoral votes make up one-sixth of the total needed to win the election.
Signs of economic vibrancy are visible in the region, some attributable to the much-vilified globalization trend. New Japanese auto-parts factories are sprouting in West Virginia to supply a Toyota engine plant in the state. The Cabela's Inc. hunting, fishing and outdoor gear chain is building a mammoth 175,000-square-foot store near Wheeling, W. Va., expected to employ 400 people and draw as many as five million visitors a year.
In Weirton, Mr. Svokas can reel off a list of companies that have opened or expanded recently -- a door manufacturer, a tire-recycling plant. The state's recent relaxation of gambling rules has created a slot-machine boom in the region, with two big racetracks bustling with activity and spinning off hotels and restaurants.
In Ellwood City, Pa., Mr. Basile notes the expansion of a chemical company and local car dealerships. A few miles southeast lies the Pittsburgh bedroom community of Cranberry -- a rapidly growing clutter of construction sites, shopping centers, offices and hotels.
In Pennsylvania as a whole, the unemployment rate is now 5.3%, compared with 5.9% a year earlier and 5.6% for the country. Ohio still struggles the most of the three states, with its jobless rate stuck persistently at 6.2%, up a notch from 6% a year earlier. But, as Mr. Bush noted in his latest appearance there, the state's downturn has been eased by foreign investment, such as Honda Motor Co.'s factories employing 15,600 workers.
But during the three years of the Bush administration, the twin forces of globalization and productivity have helped kill tens of thousands of manufacturing jobs -- particularly steel jobs -- that long defined this area. However bright the economic future may be otherwise for these states, those jobs are likely gone forever.
The American steel industry's plight long preceded the Bush presidency. Indeed, his 2000 campaign successfully tapped into industry frustration with President Clinton's free-trade policies. A week before that election, then vice presidential candidate Dick Cheney went to Weirton and promised at a rally: "We will enforce our trade laws. There will be no more looking the other way."
Even many veteran Democrats chose the Republican ticket based on that issue. "We all felt betrayed by the Clinton administration, and Gore was a victim of that," says Democratic state Sen. Edwin Bowman, who voted for Mr. Bush then -- but says he won't do so again. In office, Mr. Bush tried to aid the steel industry, ignoring his free-market advisers to impose import tariffs in March 2002. But he lifted those protections last December under pressure from the World Trade Organization and American buyers of steel, such as auto makers, who complained of rising prices caused by the tariffs.
The sharp decline of manufacturing jobs has come to symbolize the loss of stability, high-paying work, fully funded health care and generous pensions in this area. Tony Celli was jarred last May when, in his mid-50s, he was laid off from his job as procurement director for a steel-mill equipment company near Ellwood City. He says he never had to interview for a job before, and often was recruited for new positions.
But it took him five months of applications and rejections to find a new position at a local firm making road signs, at half his old salary and with no corporate matches for his 401(k) plan. A lifelong registered Republican, he's planning a vote for Mr. Kerry: "For sure, I'm not better off than I was four years ago."
Health Insurance Costs Rise
School districts have been forced to cut back on health benefits as insurance costs skyrocketed. Denis Chapman, who teaches high-school English in Ona, W. Va., says he pays $600 a year more for health insurance than he did a year ago.
Timothy Golling lost his corporate health insurance along with his job cleaning buildings in Pittsburgh in December. He can keep his health insurance for $299 a month -- something he's trying to do as he recovers from foot surgery. "I'm just scraping by," he says, "trying to figure out each month which to pay first -- the health insurance or the mortgage."
The pinch has been made worse by falling tax revenue for state and local governments, which have been forced to raise taxes or cut services. Pennsylvania recently boosted state income taxes, and Mr. Golling says he just got a notice in the mail saying his local property taxes will go up as well. The city of Pittsburgh recently increased its parking tax by more than 50%.
The most visible emblems for the new economic anxiety are the region's thousands of retirees who suddenly find pensions slashed as old employers restructure. John Bodonski, who retired three years ago after 31 years as a clerical worker at Weirton Steel, has been living on a pension of $1,122 a month, plus full health care. As the company works its way through bankruptcy proceedings and a sale, both are being cut.
Mr. Bodonski, 56, works nights cleaning up the local union hall and says he's looking for other cleaning jobs. "What upsets me is I did everything I was supposed to do -- worked hard and educated my two daughters," he says. "And what do they do? They take my pension and send $87 billion to Iraq."
Dave Leasure worked for 26 years as a truck driver at a hot roll plant in the Northeastern Ohio city of Massillon before his hulking factory closed just after Christmas in 2002. At age 53, he gave up health insurance. Signing onto the health plan offered by his wife's employer would have cost $200 a month, making it harder for him to pay his son's college tuition.
Now, Mr. Leasure works for America Coming Together, a recently created liberal Washington-based group dedicated to Mr. Bush's defeat this fall. The $8-an-hour pay is well below his old wages, and he gets no benefits. Mr. Leasure spends his evenings walking through Massillon's neighborhoods, knocking on doors to get signatures on a petition to Mr. Bush demanding new steel tariffs. On a recent evening, nearly everyone answering the door enthusiastically signed.
Massillon is in Stark County, Ohio, a swing county within a swing state that tends to pick winners in presidential elections. In 2000, Mr. Bush carried Stark with 78,153 votes to Mr. Gore's 75,308. Many of the voters answering Mr. Leasure's knock say they're registered Republicans who voted for Mr. Bush in 2000 -- but don't think they'll do so again. "I voted for him because I belong" to the National Rifle Association, says Daniel Cain, a 70-year-old retired steelworker, chatting with Mr. Leasure on his front porch. Now, "I just don't trust him," he adds, "because of all the shipping of jobs out of the country."
Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com |
