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October 1, 2004



PAUL GIGOT: This is one of those rare elections when the economy is not the single most decisive issue. That may be fortunate for President Bush. You can make a case -- and some of us will -- that the economy has been, and is, in good shape considering the obstacles. But there is still a lot of concern among voters. This week's Gallup Poll found 35 percent thought economic conditions are excellent or good. But 64 percent thought they were fair or poor. Forty-three percent thought things are getting better, but 48 percent thought they are getting worse. And if you go out and talk with people, as we did in Connecticut, you find uncertainty and anxiety. Here's a report from correspondent, Stan Bernard.

REAGAN: Are you better off than you were four years ago?

STAN BERNARD: That's the question candidate Ronald Reagan asked voters in 1980. But is that the question today?

STAN BERNARD: It's much better to ask, How are you feeling about things? If they think the economy is their real problem, then they're not going to be paying much attention to terrorism.

STAN BERNARD: How a voter feels about the economy in this election year will most likely have a far greater impact on how he or she votes than the realities of the economy, on which there is little agreement.

BUSH: Our economic plan is working.

KERRY: There are seven million jobs short.

BUSH: Our economy is recovering.

KERRY: This is the worst jobs economy since Herbert Hoover.

WOMAN: No one feels that their job is safe. Whatever is in the paper that day turns my confidence level to a pro or a con. I think that in general, you know, it's a very unstable time.

MAN: People have an intuitive sense about the world they're operating in. And that tells them whether the world is safe and comfortable and familiar. I wouldn't label that feeling, that intuitive sense, anxiety. If they're anxious about the world they're operating in, their habits, their theology, their partisanship, no one controls how they're going to vote. And then everything's up for grabs.

STAN BERNARD: Are you optimistic?

MAN: Oh, absolutely, absolutely. I feel good. There's about a billion dollars of investment going into downtown Hartford right now.

STAN BERNARD: Downtown Hartford is undergoing a Renaissance. It features a new convention center, and commercial and residential property. Despite this, even the most optimistic Hartford resident who we spoke with, are troubled by the economy.

MAN: Before the convention center's done and the new civic center and all the apartments that are coming on line, we're probably still one, two years out, minimum, before that first dollar hits my cash register. So right now, getting through that period, this is a high-cost business. We're watching it very closely, feeling a little uneasy.

STAN BERNARD: Are we better off than we were four years ago?

MAN: In Connecticut, no.

STAN BERNARD: John [Turinzonni?] is Connecticut's state labor economist. He keeps track of the number and quality of jobs in the state.

JOHN T.: In Connecticut four years ago was really when we were at the peak of our employment levels, and we're down over 50,000.

MAN: Connecticut has had no job growth since 1989, and yet our income has gone up very, very significantly in aggregate. Now what's happening is that we have now got an environment in which we see the economy growing probably three and a half, four percent, but creating maybe one percent job growth.

SUSAN REYNOLDS: Permanent jobs are tough to come by.

STAN BERNARD: Susan Reynolds is an unemployed single mother of two teenagers.

SUSAN REYNOLDS: Everything goes to rent. If it's not rent, it's food. And if it's not food, it's bills.

STAN BERNARD: When do you go out and search again?

SUSAN REYNOLDS: I search all the time. I do most of it on my computer, send out my resume. My last outage I sent out roughly 100 resumes a day.

STAN BERNARD: Is it tougher now than it's been?

SUSAN REYNOLDS: It's really tough right now. The jobs really aren't there. They're gone.

STAN BERNARD: Who's coming in looking forward?

MAN: We are getting better quality applicants for less money now than ever. I remember back even a couple years ago, I would put in an ad in the paper, sometimes I wouldn't get one response. And I was paying more than I ever have. Now, if I need help I'm almost reluctant to put an ad in because I know I'm going to be deluged with 150 applicants.

STAN BERNARD: For those people who are more concerned about the economy than other issues, it ultimately comes down to jobs and income.

WOMAN: [UNINTEL] are going out. The surplus of candidates today is really tremendous in comparison to what it used to be.

STAN BERNARD: Are they taking less money?

WOMAN: There's a certain cut-off that they won't go below. However, they are taking less dollars for a different type of skill set and a different type of opportunity.

MAN: There are certainly people for whom that unemployment picture has led to rather dramatic result. They're losing their houses, or they're being forced to file bankruptcy. In many cases, it's not that they're unemployed, but that they're underemployed. They lost their job and now they're working at the Wal-Mart's, or a Lowe's, maybe making half of what they were making before.

STAN BERNARD: Recent statistics out of the Census Bureau say the rich are getting richer and among the poor, more are falling below the poverty line.

WOMAN: Four years ago I was making 15 dollars an hour temping. I got a permanent job, it went down to 13. I'm back temping again. The jobs aren't there. It's down to 11 an hour. I'm sure we'll have to take another step back.

STAN BERNARD: How far back can you go?

WOMAN: Not much farther.

STAN BERNARD: How do you feel about the future?

WOMAN: Today, pessimistic. If I have a job tomorrow, I'll be optimistic.

MAN: Basically, most of us have a common way of making decisions. We buy the same cereal, the same brand of gas. These are our habits. And politics is a habit. Habit drives most people's voting. Except when they get anxious. And when they get anxious people stop relying on their habitual cues.

STAN BERNARD: It's happened before, the successful Ronald Reagan run against the Jimmy Carter economy in 1980. And the Clinton run against the senior Bush in '92, the year of it's the economy, stupid. Voter defections from one party to the other ran as high as 30 percent. Democrats are measuring the anxiety level this year, looking for a repeat of that pattern. For The Journal Editorial Report, I'm Stan Bernard.

PAUL GIGOT: Susan, the economy's growing last year by about four percent. Alan Greenspan, the Chairman of the Federal Reserve says it's a good, strong economy. What explains this anxiety that that report showed us?

SUSAN LEE:  Well, I think as the report really nailed it, it's jobs. People -- this, for reasons which economists don't quite understand, the employment recovery in this recovery has been very, very, very slow. And as the report pointed out, you get a job, it's not at the same amount of money before you lost your job. In a sense, though, this is an interesting anxiety, because it's not really Bush's fault. It's a lot of bad luck. We've had a 20-year secular upswing. On top of that, there was the two, three, four year bubble economy. That created a lot of bubble jobs. Those bubble jobs are gone. They're not going to come back. So what we've seen, gradually and slowly, is a recovery in the secular sense of jobs. But we're not going to get back to where we were four or five years ago. And that's not Bush's fault.

PAUL GIGOT: Just to buttress your point, the unemployment rate now is 5.4 percent. The unemployment rate in 1996, when Bill Clinton ran for re-election heralding this great prosperity, was 5.5 percent. So some of this is really about perception, Dan. And how have the Kerry people been successful in being able to define the economy as this one-issue, jobs? And really, one definition of the jobs, which is the payroll survey.

DAN HENNINGER: Well, I think because there's something to a job growth has been relatively weak, and I'm going to propose an alternative explanation for it right here. There was a big story in The Wall Street Journal last week. Let me quote from it. General Motors jolted Wall Street yesterday by reducing its 2004 earnings forecast to six dollars from seven dollars a share, and conceding that rising U.S. health care costs are overwhelming efforts to boost profits. Every person that gets hired by a corporation in this country is taking on an enormous cost in health care coverage. And we say there's a health care crisis in this country, and then Washington doesn't do much about it. But out there in the real world, it's a significant day-to-day problem which affects hiring. In a global economy, these corporations have to hold their costs down and increase per-worker productivity. And if you are taking on the additional cost that health care does now, it's a problem.

PAUL GIGOT: But this would be happening whether George Bush was president or whether John Kerry was president.

DAN HENNINGER: Absolutely.


DOROTHY RABINOWITZ: And this raises a point. Just how many voters out there are going to be saying to themselves, Well, the only way out of this is to vote for John Kerry? And I thought it was an interesting poll, and a very intelligent question on the Washington Post's poll weeks and weeks ago, which asked the voter not which candidate thinks more about you and people like you, but which is more important, the candidate who is going to be a strong leader, or the candidate who knows you and your problems? An overwhelming majority of the voters, of the people polled, said, The candidate who is presidential will be the strong leader. Which is a fairly selfless estimate. Instead of the me me factor it shows that 9/11 and all of those emergency feelings still exist.

PAUL GIGOT: One of the things that this president didn't do which his father did, was take for granted that there would be a kind of natural recovery, just say, we'll come out of recession, it'll be fine by the time I run for re-election. Bush didn't do that. He took the capital he won in 2002, with the senate victory. And he said, I'm going to re-double, I'm going to double down on tax cuts. And he proposed the tax cuts on dividends, and he accelerated income tax cuts. And I would argue that if he hadn't done that, he might be well behind now, because that tax cut has helped us, after 2003. Because you've seen, since the tax cut passed, the growth rate go up from what it had been.

SUSAN LEE:  Well here's my problem with that. You may be right. If you're right, you are partially right. Alan Greenspan and loose money really fueled this recovery, with all the low mortgage rates and a lot of those cash out re-five. But what you were saying, which I've just forgotten --

PAUL GIGOT: Is was the tax cut really has helped [UNINTEL; OVERLAP OBSCURES]

SUSAN LEE: Oh, no, no, no, no. The tax cut has helped. But in a [Cainesian?] kind of way. As Bush keeps saying on the campaign trail, I've put money in your pockets. Now you can afford things. Well that's a short term. That's really short term. And now we're going to see in the next year or so that our recoveries slow down and peter out because the tax cut did not increase work, saving, and investment.

PAUL GIGOT: I disagree with that, Susan. I think it did do that. And if we didn't have it I think we'd be in even worse shape, because that easy money that you talked about -- easy money for too long -- has been one of the reasons we have 53 dollar oil. And that oil, that 53 dollar oil and two dollar gasoline, is really what has hurt in the last few months consumer spending, retail spending. And taken about a one percent off of GDP growth.

DAN HENNINGER: Can I throw one more thing on the table? Why hasn't John Kerry brought up the stock market? The market has been basically flat or down the entire year. He has not mentioned it once. And all I can come up with is that most, two-thirds of the voters in this country are stock owners now. They have 401(k)'s. And Kerry is talking about rolling back the tax cuts. Now the capital gains and dividends would probably apply to the richest people. But he probably doesn't want to raise the issue of taxing stock.

PAUL GIGOT: All right, Dan, you get the last word. Next subject.