Job Outlook Clouds Political Horizon

By: Glenn Somerville

By any measure, the Bush administration looks likely to take the United States into a 2004 presidential campaign down hundreds of thousands of jobs - and under pressure to prove it can fix the problem.

As the administration's new team of leading economic officials step up their public push for a "jobs and growth" plan some see as flawed, analysts say the arithmetic implies a bleak prospect for the single issue that means most to voters.

Since President Bush took office in January 2001, some 2.7 million jobs have been lost from private-sector payrolls, including more than half a million in February through April alone, according to government statistics.

There is little in recent economic data to suggest a sharp resurgence in growth. The most optimistic projections see a recovery of only 1.5 million jobs by the end of 2004, leaving hundreds of thousands unemployed as they go to the polls.

Bush cleaned out his top echelon of economic managers a few months back, worried about the lackluster economy, and the picture has yet to brighten.

On Friday, the Economic Cycle Research Institute (ECRI) said its weekly index, which gauges everything from investment risks to job market stability, moved to 121.8 from 119.4 the prior week - a gain too tepid to signal a robust rebound.

Muddling Forward

"It's telling us a recession is not imminent, but a strong recovery is not in front of us either", said ECRI's managing director, Lakshman Achuthan. That sentiment is widely shared by private-sector economists, and lies at the root of the administration's efforts to crank up job creation.

"We are fast approaching a situation where it will be increasingly evident that the economy is not on a good path", said economist Mark Zandi of Economy.Com in West Chester, PA.

"What people care about is: do I have a job and is my pay rising? Right now neither one of those is happening", he said.

Treasury Secretary John Snow said on ABC television's This Week on Sunday that economic activity would have to accelerate sharply from the anemic 1.6% annual pace of the first quarter this year to boost jobs.

"To create a full-employment economy, we need to double that, plus we need to be in the middle-threes at least. And we can get there", Snow insisted.

The most optimistic projections by the administration, pushing for a 10-year tax-cut plan that Congress already has begun scaling back, is that its proposals would create about 500,000 jobs this year and 1.5 million by the end of 2004.

The U.S. House of Representatives on Friday passed a $550-billion tax cut plan with a pared-down plan for reduced dividend taxation, bigger than a $350-billion package passed earlier by a Senate panel which made only the first $500 of dividends tax-free.

Bush made an early victory claim on Saturday and said he hoped the full Senate would finish the measure swiftly. "This week's progress demonstrates that both houses of Congress and both political parties agree that tax relief will help this economy. Now the discussion is about how much tax relief the American people need and deserve", Bush said.

Economists estimated 86% of taxpayers who receive dividends would pay no taxes under the Senate panel's proposal, but the Bush administration wants that made more generous in talks with the Senate and House in the next few weeks.

Stimulus or Reform?

But Lawrence Mishel, an economist with the Economic Policy Institute, said his concern was that the Bush jobs plan seemed not necessarily to have job creation as its central goal.

"Their plan has two objectives: one, to change the tax structure so that those who earn income from investments pay no taxes and, two, to shrink the role of government", by cutting taxation revenue flowing into Treasury's coffers, Mishel said.

Snow and other officials present the tax cuts as job-creating measures, but also as longer-term tax reform.

"Our primary concern right now has to be with jobs. we've got to get the economy growing", he said on Thursday.

"One way to think about it is, suppose the economy is going to recover anyway, (and) there's some probability of that, if we can add a good, well-founded, sound tax bill, you do no harm (and) you improve the efficiency of the economy", Snow said.