Most economists are convinced a recovery is underway. The problem for President Bush will be how many voters agree or, more specifically, how many are confident about their own and their nation's future. Signs of a U.S. decline in international competitiveness were abundant long before the recent recession got underway. Now concerns about the cohesiveness of American society as a result of the Los Angeles riots are likely to compound disappointment in the slow pace of the current uptick.
In political terms, the economy could be a wash in the November elections. Unemployment, now at 7.2 percent, may stay near that number until election day. Overall growth in gross domestic product is expected to be in the 2 percent range. The recovery, in other words, will be unusually weak but a recovery nonetheless and hardly an asset for likely Democratic nominee Bill Clinton.
Indeed, polls indicate that voters harbor at least as much doubt about how the Democrats would manage the economy as they do about the Republicans. Many who feel the recession is over think government has done a poor job. Given this lack of faith in the political establishment, Ross Perot's independent bid for the presidency as a take-charge entrepreneur could get a boost.
So far, the Federal Reserve Board has cooperated with the Bush White House by slowly ratcheting down interest rates, and may again soon. But neither Fed chairman Alan Greenspan nor Mr. Bush can exorcise an overhang of indebtedness that acts as a drag on a robust expansion. This dampens demand for credit though this could change as corporate profits climb and economic activity gradually expands.
Until Los Angeles erupted, the state of the economy was by far the biggest issue on voters' minds. Now concern over racial tensions and personal security put new factors into the campaign, though the political impact cannot yet be readily measured. Some additional government money may be released to help the inner cities but it probably won't be enough to dent the unemployment rate.