COLUMN ONE : Numbers Don’t Add Up for Bush : Since 1988, income has dropped, growth slowed and joblessness climbed. Despite first term successes, Republicans no longer ask voters if they are better off now than four years ago.

WASHINGTON —  “Next Tuesday all of you will go to the polls; you’ll stand there in the polling place and make a decision. I think that when you make that decision it might be well if you would ask yourself: Are you better off than you were four years ago?”

--Ronald Reagan, Oct. 27, 1980

Since 1980, when Ronald Reagan ousted Democrat Jimmy Carter and rode a whirlwind of economic dissent into the White House, that simple question became the basic measure by which the Republican Party invited Americans to judge their presidential candidates.

Not this year.

In 1992, George Bush has not invited voters to apply the litmus test of personal prosperity to the last four years. Administration officials acknowledge that the President’s political fortunes are inextricably tied to the economic record of his first term. And they fear that 12 years of Republican rule may come to an end if too many Americans--this time prompted by the Democrats--ask themselves if they are better off today than they were four years ago.

“Look, if we play the economic numbers game in the traditional way, we lose,” conceded one high-ranking Administration official.

That assessment reflects the fact that right now, by most statistical measures, Americans as a group are indisputably worse off today than when Bush took office. Although the nation’s economy remains the world’s largest, the United States has lost ground over the last four years in three fundamental areas: economic growth, employment and income:

* Bush has presided over the longest recession and the slowest economic recovery since World War II. After adjusting for inflation, the economy has grown at an average annual rate of only 1.0% since he took office, the weakest performance of any President since Herbert Hoover.

* Although Bush pledged to create 15 million jobs during his first term, private sector employment has declined. Total employment has risen by 2.8 million, but only because of increased government hiring. Unemployment has increased by more than 2 percentage points, rising to 7.6% in August, when 9.8 million Americans were unable to find work.

* Even for those Americans whose jobs have remained secure, average earnings have not kept pace with rising prices. Median household income fell to $30,126 last year after adjusting for inflation, the lowest level since 1985. The declines under Bush have washed out all the economic gains made by the middle class in the late 1980s.

“On growth, jobs and income--Bush is in trouble on all fronts,” said Lawrence Kudlow, a conservative economist at Bear, & Stearns Co. in New York and a former Reagan Administration economic policy-maker. “By all of those standard economic measures, we are not better off.”

But Bush’s first term is not without its economic successes. Interest rates are at their lowest levels in 20 years, and consumers and corporations are seizing the opportunity to refinance the heavy debt burdens they built up in the 1980s.

Inflation, the bane of the American economy a decade ago, is no longer a serious threat, having subsided to an annual rate of only 3.1% during the first half of 1992. The so-called misery index--the sum of inflation and unemployment--is just 10.8%, down from 19.6% in 1980, the last time a Democrat occupied the White House.

Measures of Strength

The United States is the world leader in exports once more. And free trade throughout North America is closer to becoming reality, a prospect that many economists say will work to this country’s advantage over the long term.

“Conveniently, the other side has discovered many weaknesses, and very few strengths,” Bush said in a recent address on economic policy. “But they have no more right to argue for partisan purposes that our economy is weaker than it is than I have to understate our problems. Our strengths are real.”

Nor can economic statistics measure the potential benefit to Americans of the end of the Cold War. This is the first presidential election in nearly 50 years in which the United States lives virtually free of the threat of nuclear destruction from communist adversaries.

The United States has won the central struggle of the second half of the 20th Century. It is free to reduce defense spending and devote more of its resources to productive uses. Republicans, in fact, note that the nation’s short-term problems are attributable in part to declining defense outlays, a trend they say will ultimately enhance economic growth.

“When we look at the big picture, there is no question our country is better off,” said Sen. Phil Gramm (R-Tex.). “For the first time, our children can go to bed without the threat of nuclear war. We won the Cold War.”

“I understand why some people think we are not better off, but I don’t agree,” Treasury Secretary Nicholas F. Brady said in a recent interview.

Added former White House Chief of Staff John H. Sununu: “Things are not so bad--somebody has to say it.”

In any case, Bush’s advisers say the President should not be blamed for the economy’s immediate problems, arguing that he has been consistently thwarted from pursuing his policy goals by a Democratic Congress.

“This economy, and this President, were held hostage by a partisan Congress,” Sununu declared bitterly.

“Congress has never allowed the President to follow through on his economic objectives,” agreed Michael J. Boskin, the President’s chief economic adviser. “If it had, I think the economy would be in much better shape today.”

But those observations seem to offer little solace to an electorate racked by economic problems--including an alarming wave of white-collar layoffs by blue-chip companies. Voters seem increasingly impatient with the failure of America’s political leaders to address what they see as fundamental problems in the economy.

Understandably, Bush is the prime target for that frustration.

“It happened on Bush’s watch, so he’s got to live with it,” said Robert Dederick, an economist at the Northern Trust Co. in Chicago.

Unusual Recession

Bush’s political problems have been exacerbated by the unusual nature of the recession that began in mid-1990. Like a deep arthritis, the economic pain has radiated throughout all levels of society, as stevedores and seamstresses are joined in the unemployment line by the likes of once-affluent airline pilots and executives for high-tech companies.

The continuing slump increased the portion of the population falling below the government’s official poverty line to 14.2% last year, up from 13.0% when Bush took office. The number of Americans receiving food stamps and Aid to Families with Dependent Children has soared to new heights, while 1.5 million more pregnant women and infants are receiving federally supplied nutrition supplements.

Even more damaging in political terms, suburban America has been stunned by record numbers of personal bankruptcies and wave after wave of executive layoffs. One of every 100 people in the U.S. work force has fallen victim to permanent staff reductions at major corporations over the last four years. More than 40% of the jobs lost during the recession have come from the ranks of white-collar workers.

The Bush record on budgetary policy is bleak as well. In just four years, the federal deficit has more than doubled, ballooning to $333.5 billion this year. Total federal debt has increased to $4 trillion from $2.6 trillion four years ago.

Moreover, the continuing crisis in the nation’s financial system has led to the closing of 652 savings and loans and 577 commercial banks since 1989. Bailing out the S&Ls; alone will cost taxpayers $130 billion.

The collapse of the commercial real estate market, which is closely linked to the S&L; crisis, has left one in five offices in America’s downtowns vacant. The health of the residential housing market is not much better: Builders began work on fewer new homes in 1991 than in any year since 1959.

Underlying all the numbers is a new, troubling sense that this downturn is different from any the nation has experienced since the 1930s. The long-heralded global economy finally seems to have arrived with a vengeance, and it has caught the United States in a vulnerable moment.

Just as it was awakening from the 1980s boom with a wicked hangover of debt and stagnation, the country has been buffeted by brutal international competitive forces. But record deficits and partisan gridlock have left Washington virtually paralyzed in the face of a fundamental reordering of the world’s economic system.

All those forces have combined to make many Americans feel helpless. The sense of frustration is reflected in surveys of consumer confidence, which plunged to a 17-year low in February.

“What is different this time is that expectations about the future are much lower than in earlier recessions,” said Jason Bram, an analyst at the Conference Board, which tracks consumer confidence. “This time the recession has been longer, and the job cuts look permanent. So we have a whole different mind set.”

Reaganomics

Given the grim climate of the fall of 1992, it is hard to recall just how bright the outlook was four years ago, when Bush campaigned for President on the robust economic record of the Reagan Administration--and ran Democrat Michael S. Dukakis into the ground.

The President’s senior policy advisers say that Bush has had private misgivings ever since he was vice president about the long-term consequences of Reaganomics, with its emphasis on lower taxes, increased defense spending and little more than lip service to deficit reduction. But they say that Bush has felt constrained from publicly voicing his concerns because of the political debt he owes Reagan. They note, for example, that Bush was always much more concerned about the deficit than was Reagan.

“One of the great frustrations I have, and I know the President has, is that we cannot say that we inherited a mess,” confided one highly placed Bush Administration economic policy-maker who requested anonymity.

But Bush took the path of least resistance in 1988 and promised to continue the policies bequeathed to him by Reagan. And, apart from his celebrated “read my lips” pledge not to raise taxes and his vague proposal for a “flexible freeze” in spending, Bush did not formulate an economic agenda of his own.

The absence of a new Bush program could have been read as a warning sign. “It is very hard for a President to come in and follow through on a promise to continue someone else’s legacy,” observed Jim Miller, a former Reagan policy-maker and now director of Citizens for a Sound Economy, a Washington research group.

In hindsight, it is clear that Bush had the misfortune to assume the presidency at a cyclical peak in the nation’s economy. In January, 1989, in fact, the American economy was operating about as close to full employment and full capacity as it ever gets.

“Bush had horrendously bad timing,” said Robert Reischauer, director of the Congressional Budget Office. “When you come in at a cyclical peak, it is really hard to match that.”

For George Bush, it was all downhill from there. In 1989, the White House recognized that the long boom of the 1980s could not be sustained in the face of ever-rising federal deficits and the private debt burden left over from an era of financial market speculation. The Administration concurred with the Federal Reserve Board’s ultimately unsuccessful effort to manage a “soft landing,” in which central bankers tried to increase interest rates just enough to cool off the overheated economy while averting recession.

Both the White House and the Fed consistently misjudged the weakening health of the economy and the speed at which it was deteriorating. Between 1988 and 1990, economic growth, adjusted for inflation, fell from 3.5% a year to a mere 0.3%.

Trouble Spots

When the nation slid into recession just as the Persian Gulf crisis was heating up in the fall of 1990, Bush apparently still did not comprehend just how bad the outlook had become.

Even worse, the growth of the 1980s had masked a host of underlying structural problems that had gone untended during the Reagan era: the soaring federal budget deficit; the looming crises involving banks, savings and loans and commercial real estate; the growing gap between rich and poor and the intensifying competition with Japan and other foreign rivals.

In 1988, voters were willing to overlook those issues because the overall economy still seemed to be growing, incomes were rising and new jobs were being created. But as soon as economic growth crested, the receding tide revealed the rocks and shoals just below the surface. Those underlying problems, in turn, worsened the impact of the recession and made it difficult for the government to respond.

It was then that Bush’s failure to develop a clear agenda, “the vision thing,” really got him into trouble. Without an intense personal commitment to Reaganomics or any alternative philosophy, economic policy began to drift into indecision and self-contradiction.

“Bush’s biggest mistake, and his great tragedy, was that while presiding over the end of the Cold War, he failed to define what would follow it,” observed David Hale, an economist at Kemper Financial Services in Chicago.

Some analysts argue that Bush wasted a golden opportunity after America’s victory in the Gulf War to exploit his enormous popularity to push a domestic economic agenda through Congress.

“Bush failed to use his postwar mandate,” said Robert Hormats, vice chairman of Goldman Sachs International and a former Jimmy Carter Administration policy-maker. “He had an opportunity to get what he wanted from Congress in the spring of 1991. He thought he could just cruise on his popularity, but power that goes unused slips through your fingers.”

Bush and his advisers argue that his hands-off approach to the economy over the last four years has been deliberate. They say it reflects his fundamental belief that, when it comes to the economy, the White House should heed the advice of the medical profession’s Hippocratic oath: “First, do no harm.”

Sununu and others also note that Bush’s thirst to follow through on the handful of economic initiatives that interested him quickly abated after his first bitter battle with Congress in 1989 over his long-sought proposal to cut the tax on capital gains.

Senate Majority Leader George J. Mitchell (D-Me.) derailed the capital gains tax cut. The battle helped convince Democratic leaders that they could successfully attack Bush as a friend of the rich.

“After the battle with Mitchell, the President decided that he really could not deal with Congress on economic policy, and that was when he decided to focus on international economic issues, like free trade with Mexico, where he could sort of go around Congress,” said Sununu.

After 1989, economic policy under Bush became increasingly reactive and defensive. The President began to zig-zag in the face of economic and political pressures, shifting between accommodation and confrontation with Congress.

By early 1990, it became clear to White House Budget Director Richard G. Darman that the Administration was going to miss its deficit targets by as much as $100 billion, inviting higher interest rates and a collapse of confidence among foreign investors. Domestic and international pressure for a new budget accord with Congress began to build.

German Chancellor Helmut Kohl personally warned Bush that he had to deal with America’s budget excesses.

“Whether or not people (overseas) would buy our paper (U.S. debt) was starting to become a concern about that time,” Brady says.

But to get a deal with Congress, Democratic leaders insisted that Bush give up his no-new-taxes pledge of 1988. By June, 1990, Bush gave in to the pressure, and agreed to put taxes on the table in the upcoming budget summit. He eventually endorsed a deficit-reduction package that included a series of tax increases along with limits on future spending.

The decision turned out to be the greatest single political blunder of the Bush presidency. Bush had flip-flopped at the most basic level, just at a time when Americans were becoming increasingly concerned about the economy.

Throughout 1991, in internal meetings with the President, Darman and Brady consistently argued that recovery was just around the corner, Administration officials say.

Even last winter, as the bleak outlook began to have an impact on Bush’s standing in the polls, Darman, Brady and Sununu remained reluctant to take any action on economic matters. At one point, Boskin threatened to resign after Sununu blocked him from telling the President that his speeches were too upbeat.

Darman and Brady convinced the President last January to submit only a modest package of tax cuts in his State of the Union address and to resist the temptation to reopen the budget agreement. His tax cut package was quickly rejected by Congress, and Bush was forced to veto an alternative proposed by the Democrats that called for higher taxes on the rich.

Bush thus entered the 1992 campaign with little to say on the economy, other than to apologize for reneging on his no-new-taxes pledge and to criticize Congress for failing to pass his relatively modest economic agenda.

As he accepted his party’s nomination in Houston last month, Bush promised voters he had learned his lesson in his first term and would do things differently if given a second.

“There’s an old saying,” Bush said. “Good judgment comes from experience, and experience comes from bad judgment.”

How many voters will ultimately accept Bush’s apology and his pledge for the future may be the decisive question of the 1992 election.

Times editorial researchers Aleta Embrey and Pat Welch contributed to this report.

Bush and Economy

A comparison of the U.S. economy’s performance, by various measures, since George Bush took office. Unemployment rate January, 1989: 5.4% August, 1992: 7.6% Median household income 1988: $31,344 1991: $30,126 Inflation rate January, 1989: 4.6% August, 1992: 3.1% Population below poverty line 1988: 13.0% 1991: 14.2% Mortgage interest rate * January, 1989: 10.7% August, 1992: 8.0% * average for 30-year, fixed-rate loans Federal budget deficit 1988: $155.1 billion 1992: $333.5 billion * * estimate Bankruptcy filings 1988: 613,606 1991: 943,987 Sources: U.S. Treasury, DRI-McGraw Hill, Administrative Office of the U.S. Courts, Department of Commerce, Census Bureau, Bureau of Labor Statistics. Compiled by Times researchers Pat Welch and Aleta Embrey.

From Hoover to Bush

Average annual growth of the U.S. economy under 11 presidents, as measured by the gross national product:

Herbert Hoover Republican 1929-33 -6.8% Franklin D. Roosevelt Democrat 1933-45 7.2% Harry S. Truman Democrat 1945-53 1.9% Dwight D. Eisenhower Republican 1953-61 2.0% John F. Kennedy Democrat 1961-63 4.8% Lyndon B. Johnson Democrat 1963-69 4.6% Richard M. Nixon Republican 1969-74 2.4% Gerald R. Ford Republican 1974-77 2.0% Jimmy Carter Democrat 1977-81 2.9% Ronald Reagan Republican 1981-89 2.7% George Bush Republican 1989- 1.0%

Source: DRI-McGraw Hill