Fraters Libertas

Which Party Is Out Of Touch On the Economy?

There has been an ongoing worry among Republican faithful that the current President Bush would follow the same missteps that cut short his father's administration after one term. While the first President Bush enjoyed a spectacular foreign policy success with the first Gulf War he was viewed as being out of touch on the economy. The impression that he didn't "feel your pain" was one of the key factors that cost him the 1992 election.

Clearly W has recognized the political importance of the economy and has taken a number of steps (most of them either meaningless or actually counterproductive i.e.. appointing a manufacturing "tsar", imposing steel tariffs, agreeing to extend unemployment benefits, etc.) to show that he is concerned about it. He does not intend to have his father's fate befall him.

The Democratic hopefuls meanwhile have been wailing and gnashing their teeth over the sorry state of the economy and doing their best to hype the current economic difficulties. They see a poor economy or even the impression of a poor economy as their ticket to the White House and they're determined to get it punched. From Kerry's insincere sobbing on hearing the travails of an unemployed woman to Gephardt calling Bush's management of the economy a "miserable failure" (a phrase that he apparently has become so fond of he will use to describe anything he doesn't like: "that soggy breakfast cereal was a miserable failure", "Kucinich's hair piece is a miserable failure") the Dems are trying to portray the economy as one step away from the next Great Depression.

The trouble for them is that things are getting better on the economic front. Most indicators continue to show that a steady, albeit slow, recovery is underway and picking up momentum. The one critical economic measure that has remained stubbornly unchanged is the unemployment rate. And although the rate itself dropped slightly in August job losses continued. Usually at this point in a recovery the employment situation would be expected to have improved. This time around however it appears to a markedly lagging indicator of a turnaround.

But it won't be lagging for too much longer. Within six months I expect an noticeable improvement in the unemployment figures. During the most recent downturn many companies cut to the bone in terms of staffing. This has lead to increases in productivity as firms are discovering that they can do "more with less". And after the excesses of the late 90's boom it should not have been unexpected. When the times were good businesses, even the most well managed, had a tendency to become bloated. When the economy went south they discovered that to stay competitive they had to get lean (some might add mean). And in the last couple of years they shed jobs like a nervous cat sheds hair to do just that.

However, now most companies are probably about as lean as they can get. They're getting the job done with the staff they have but they don't have much excess capacity. With the economy continuing to recover and grow they won't be able to maintain current staffing levels much longer.

I work for a manufacturing company and we are actually quite concerned about our suppliers ability to react and keep up with our demands as the economy improves. Our orders are picking up as are orders for the manufacturing sector as a whole. This means that our material requirements will continue to increase and we fear that they will have a limited capability to respond rapidly enough. Because so many firms are operating so lean they have little or no excess capacity and will find their resources sorely taxed as they try to meet demands.

Up to this point companies have been hesitant to expand their workforce. They don't want to get burned if the recovery turns out to be illusory or short lived. But if the economy continues to improve, as most signs now indicate, they will not be able to hold off indefinitely. The same competitive pressures that forced them to let people go will now force them to hire people. The market, acting through their customers, will not allow otherwise.

So where does this put the Dems? If they continue with their rhetoric about the horrible economic conditions in the midst of a recovery and eventual reduction in unemployment, they will increasingly be seen as the ones out of touch with the economy, which will not bode well for their chances in 2004. Just ask Papa Bush.