Bush's uncertain trumpet

Posted: Aug 12, 2004 12:00 AM

WASHINGTON -- The fragile morale of Republicans took a battering when the Labor Department reported only 32,000 new jobs were created in July. Democrats immediately crowed that unhappy days were here again, but the real political problem for President Bush may be his reliance on the vagaries of government statisticians to give his re-election campaign a boost.
In the opinion of economists I consulted, the 32,000-job figure reflects less the real state of the economy than faults of methodology in the Labor Department's Bureau of Labor Statistics (BLS). It also points up the president's failure to effectively preach the gospel of economic growth. Two weeks away from his party's national convention, Bush has not pronounced a second term agenda.

 Accordingly, what Bush says at Madison Square Garden in accepting the nomination has become crucial. Word has seeped out of the White House's locked doors of bold talk about not only Social Security reform but tax reform as well. He cannot afford to follow John Kerry's course and make his speech a patchwork of campaign applause lines. The public perception of the economy, more than Iraq, looks like the key to who will be elected president.

 To appreciate the political impact of only a 32,000-job increase, compare the morale of the two political camps. When John Edwards was caught on camera this week telling supporters "we're going to win, we're going to win," he was voicing a now familiar Democratic mantra. No such confidence is exuded by Republicans. In private, doubt is constantly expressed about the outcome on Nov. 2.

 Thus, the Republican faithful look to economic statistics as the ancients examined entrails of a sacrificed animal. They were so shaken by the 32,000-job figure for July that they did not sufficiently point to the absurdity of Sen. Kerry's suggestion on the campaign trail last week "that our economy may be taking a U-turn" back to recession. In fact, the BLS for more than a decade has been undercounting job creation, unable to keep up with changes in the structure of American business.

 A rosier Labor Department measurement is the household survey of job increases, which showed a gain of 629,000 in July, 1,181,000 since December and 2,056,000 over the last 12 months. Furthermore, the July unemployment rate is 5.5 percent -- a low rate and exactly what it was in July 1996 when Bill Clinton was seeking re-election. In contrast, unemployment was 7.7 percent in July 1992 as the senior George Bush began his descent.

 That these favorable numbers are not trumpeted by Bush's political operation suggests an uncertain trumpet. Hearing no battle cry, Republican loyalists are easily unnerved by even questionable statistics. They need to hear about the future. Bush's tax reductions, particularly dividend and capital gains cuts, have revived the economy. But even ardent Bush-backers yearn for his plans to promote further economic growth.

 That includes the president's long-awaited push for reform of Social Security through personal savings accounts, but Bush's own supporters also believe the time is here to talk about badly needed tax reform. At a minimum, he is being called on to intensify efforts to make his tax cuts permanent and to relieve the egregious alternative minimum tax's pressure on the middle class.

 But something more is needed. Starting with his 2000 campaign for president, Bush has said hardly anything about tax reform. Word has been passed in Washington that the president's convention speech may call for a flat tax. Anything that specific seems unlikely, but a pledge to pursue genuine tax reform in his second term would inform voters that there really is a substantive difference on economics between Kerry and Bush.

 Since the disloyal Treasury Secretary Paul O'Neill and the super-loyal National Economic Director Lawrence Lindsey were sacked in December 2002, there has been mainly silence from their successors. The result has been inordinate political dependence on whether the BLS is dispensing good news or bad news. This White House's inclination to stand pat on all policies except the war against terror is viewed by increasingly fretful Republicans as the passport to another one-term Bush presidency. George W. Bush has about two weeks to begin changing.