BUSINESS

The Economy Sucks. But Is It ’92 Redux?

For the first time since Bill Clinton took the White House, the economy could be the deciding factor.

All photos: Getty Images, except top right: Scout Tufankjian / Polaris for Newsweek

The Economy, Stupid: (Clockwise from top left) Consumer spending and unemployment are up; Wall Street is wobbly; home sales are slumping; the price of gas is sky high

By Daniel Gross | NEWSWEEK

From the magazine issue dated Jan 21, 2008

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Clinton makes a gritty, unexpected comeback in New Hampshire. The contentious primaries pivot from a war in Iraq to economics. Business people fret about recession. What is this, 1992?

Not since James Carville helped Bill Clinton take the White House 16 years ago by reminding him "it's the economy, stupid," has the nation's economic state played such a key role in a presidential campaign. CNN's New Hampshire exit poll found that 97 percent of Democrats and 80 percent of Republicans expressed anxiety about the economy. Of course, the economy is in a worse place than it was when Hillary Clinton's husband was on the campaign trail. Today, the nation is perilously close to sliding into a recession; in '92, the economy had already started growing, though a jobless recovery doomed George H.W. Bush's re-election bid anyway. The lesson? Voters' perceptions matter more than whether the economy is technically expanding or contracting.

The news since the ball dropped this year in Times Square has been unrelentingly dour. We've learned that in December, the unemployment rate shot up from 4.7 percent to 5 percent, and the manufacturing sector unexpectedly shrank. Santa Claus left retailers lumps of coal for Christmas. Macy's, the 850-store chain that is an excellent proxy for middle-class spending, reported that same-store sales slumped 7.9 percent in December.

Just two years ago, Wall Street economists spoke of a Goldilocks economy, in which everything was just right. These days, it's the three bears. As of this week, the economists at Merrill Lynch, Morgan Stanley and Goldman Sachs are all predicting a recession for 2008. "I think it's already started," says David Rosenberg, chief economist at Merrill Lynch. "The real tipping point was the employment report."

But policymakers aren't ready to give up on the business cycle. In a recent interview with NEWSWEEK, Treasury Secretary Henry Paulson, the former Goldman Sachs chief executive officer who is the administration's designated market whisperer, stayed upbeat and on message. "Our economy, like any other, has its ups and downs," he says. "But you know, I believe our economy is going to continue to grow." What gives Paulson his optimism? "The president's pro growth policies, the fact that government revenues are coming in ahead of forecasts and that our deficit is now down to 1.2 percent of GDP."

There are bright spots, to be sure. Exports rose 13 percent in November from 2006.The farm belt is thriving, thanks to record prices for grains. Regions that produce coal, gas, oil or minerals are riding the global energy boom.

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Posted By: Davemathes @ 01/20/2008 3:17:20 PM

It is once again the"Economy Stupid" and both parties better get that soon. In light of the Republican stupid responses (Cut taxes again for the rich and make the Bush taxes permanant) they clearly show they don't get it. The Democrats numbers are just as bad. We need alot more than ashort time $800 per person break to take care of the economic problems that will bring us down in the next year. Both the Obama solution and the Clinton solution are not enough to shake the problem when forclosures continue, mortgages become impossible to get and insurance companies that back debt can't pay off. This is the BUSH recession!
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Posted By: ObamaMama @ 01/17/2008 5:53:55 PM

Thanks for contributing this knowledge! Kudos to writer Andrew Romano/ Stumper/ "The Race War" and his unbiased presentation of remarks during the course of several days. Closes with something like, "You decide....'" The campaign tactics attack dogs unleashed by the Clinton camp on Senator Obama give every indication of HER STATUS QUO:dirty politics as usual, including reaching to the most experienced in that vein. EXACTLY OPPOSITE of how Senator Obama hopes to mend the great American divide. Mrs. Clinton's initial announcement: "I'm in it to win it.'", supported by suing over caucuses in Nevada is a bellwether of their tactics. Remember, No matter where you go, there you are!!! Senator Obama, showing true leadership qualities, was first to announce a "truce" of sorts to the remarks. FIRST. And he has Americans in mind FIRST, not a private agenda. Mrs Clinton has copied "change" and "American" from him. But there's one thing that won't change: her, her motives, her vendetta. She's very feeble about LBJ. The efforts of a nation and its movement led by Dr. Martin Luther King and other passionate supporters, and wholly supported by the Kennedy administration left LBJ little more than to sign off on it, something he himself acknowledged. And if she can't take the heat in the kitchen, she needs to get out!!! The Clinton camp is the one with "'Open mouth, insert....' " (You decide.) HER camp is having to backtrack, put spin on badmouth comments. Senator Obama embodies very positive leadership qualities and abilities. He is particularly EXPERIENCED in thinking before speaking, and his clearcut concern is to run a very ethical campaign. Intelligent voters don't choose a candidate based on ONE factor: (like I'm a woman). Both Senator Obama and Mrs. Clinton have provided the public insight into how they personally deal with events, remarks, issues! WATCH!!!!
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Posted By: stanjz @ 01/16/2008 7:23:37 PM

History has been overtly generous to the Clintons in what it perceives they have done for the poor.
Federal Minimum Wage Bush one-April 1991 $4.25
Clinton-October 1996 $4.75 Clinton-September 1997 $5.15 You don't close the gap between the rich and poor with a .90 /hr raise over 8 years!
???The income gap actually grew more during the Democratic Clinton administration than it has during the Bush administration. According to U.S. Census data, the share of income for the wealthiest 5 percent rose from 18.6 percent in 1992 to 22.1 percent in 2000. That???s a jump of almost 19 percent.???
Furthermore, capital gains tax was only 20 percent during the Clinton Presidency. That means the super rich only paid 20 percent on their income from the stock market. Actual wage earners would pay up to 38 percent. Most CEO???s get paid through stock so they only pay 15% tax now and 20 % back then. The Clinton???s never indexed the minimum wage to inflation like Barack Obama wants to, so the poor immediately saw inflation eat away at their small gains.