Bush Team Sensed Economic Slump Early
By RICHARD W. STEVENSON
ASHINGTON, April 21 — Last fall, as the presidential campaign gave
way to the long count in Florida, Dick Cheney picked up a
disturbing nugget of economic intelligence.
Mr. Cheney, who was a director of the Union Pacific Corporation
before George W. Bush chose him as his running mate, heard that
loadings of railroad freight cars were down.
That information, suggesting that the economy was deteriorating,
was consistent with other soundings the Republican ticket had been
taking for months. And it fit the long-held view of Lawrence
Lindsey, the campaign's bearish economic adviser, that the good
times of the Clinton years were partly an unsustainable bubble.
So Mr. Cheney moved to ensure that the new administration would
not be blamed for an economic downturn if he and Mr. Bush were
declared the winners of the election. In a televised interview in
December, he declared, "We may well be on the front edge of a
recession here."
Mr. Cheney's prediction, which proved correct after the election
was settled, began an effort by Mr. Bush and his team to deal with
an issue that they had concluded before Election Day would loom
over their agenda and political prospects if they won. The
economy's powerful role in shaping Mr. Bush's start in office was
reinforced this week by the Federal Reserve's surprise decision to
cut interest rates for the fourth time this year because of
weakening business conditions.
But despite the gloomy pronouncements, Mr. Bush has offered no
policy initiatives tailored to the slowdown, aside from agreeing to
speed his tax cuts. And even on that idea, Mr. Bush has not made or
endorsed a specific proposal, leaving it to Congress to work out
the details.
Having absorbed the main lesson of his father's defeat in 1992 —
never let yourself be portrayed as out of touch with the economic
concerns of voters — Mr. Bush and his team took office in January
determined to establish that they were aware of, and sympathetic
to, the economic anxiety. Yet they were also determined not to let
a slowdown, of unknown severity and duration even now, upset the
agenda they had campaigned on, especially Mr. Bush's tax cut.
Their strategy has been to speak more bluntly than most presidents
have spoken about the economic risks — to the point where Mr. Bush
has been accused of talking down the economy — but also to assert
that policy proposals developed and debated during a period of
confidence and optimism remain the right prescriptions for an era
of uncertainty.
"The president's acute awareness, which he makes clear every day,
of how the economy affects the lives of everyday people, is there
for all to see," said Mitchell E. Daniels Jr., the director of the
White House's Office of Management and Budget. "It's not necessary
to posture."
Mr. Bush's approach has risks. In emphasizing for the past few
months that a tax cut would help revive the economy, Mr. Bush has
left himself open to criticism that his rationale will shift with
economic circumstances. And by using the slowdown to make the case
for his tax cut, Mr. Bush has drawn fire for playing politics with
the economy.
Mr. Bush's approach also risks promising more than it can deliver.
Even an accelerated tax cut is not likely to put money into
anyone's pocket until late summer or fall. And, critics say, Mr.
Bush's promise to deal with rising energy costs by promoting more
oil and gas exploration and the construction of power plants will
take years to have an effect.
"The singular focus on a large tax cut has led him to be too
negative a voice on the economy and seemingly too unconcerned with
maintaining long-term fiscal discipline," said Gene Sperling,
President Bill Clinton's economic adviser. "Therefore, the tax cut
push may have negatively affected his ability to be perceived as
steady economic leader."
But the White House appears to have calculated that the most
important thing is for the president to show he is engaged.
Mr. Lindsey typically briefs Mr. Bush on the economy and related
issues three times a week in the Oval Office. The sessions are
usually attended by Vice President Cheney; Andrew H. Card Jr., the
chief of staff; Mr. Card's deputy, Josh Bolten, who was the
campaign's policy director; Karl Rove, Mr. Bush's political
adviser; and Karen P. Hughes, his communications director.
White House officials said Mr. Rove was tracking the effect of the
economy on the mood of voters and the president's popularity.
Republicans inside and outside the administration said the White
House was paying particular attention to polls that asked whether
the country was headed in the right direction, a measure that
typically tracks public perceptions of the economy. Those polls
have shown a relatively steep drop in optimism since November.
His aides said Mr. Bush was aware of the power of business cycles
through his perceptions of what the 1990-91 recession cost his
father politically and on his experience in the oil industry, where
booms and busts are facts of life.
"My sense of him on this issue and many others is that if we
handle it right and it comes out right, you'll get credit for it
regardless of what criticism you take in the meantime," said a
senior White House official who spoke on the condition that he not
be named.
Still, administration officials have been trying to get a handle
on how the politics of the economy will play out. The growing role
of the stock market in the economy has been a topic of conversation
among the political and economic advisers.
Mr. Lindsey often keeps the television in his office tuned to
CNBC, and talks regularly to people on Wall Street. He said Mr.
Bush, who has an M.B.A., was comfortable with the jargon of the
markets. "You can talk to him about spreads, this over that, and
he's there," Mr. Lindsey said.
There was some relief in the administration that the downward
lurches in the markets this year did not prompt widespread selling
by small investors or lead to a political backlash by people who
mistook the stock market for a one-way bet.
The administration has made no move to increase financing for
programs that might ease the effects of a downturn on people.
Instead, the administration is banking heavily on its tax cut, and
to a lesser extent on its forthcoming energy policy, to put a floor
under any downturn and set the stage for a resumption of growth.
The policies Mr. Bush ran on "were good for the short term, the
medium term and the long term," said Paul H. O'Neill, the treasury
secretary.
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