Is This Your Father's Recession?

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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."