Mixed Economic Picture Works for Bush and Rivals

On a Wednesday morning, union workers and Democratic partisans gather in this Rust Belt city to hear John F. Kerry confirm something they feel in their bones: The economy has gone terribly awry.

“People who did everything that was asked of them have seen their jobs just wiped away,” the Massachusetts senator says. “Dreams of retirement are challenged, and people live in anxiety.”

One day later in Louisville, Ky., President Bush coaxes a factory manager to talk about his plans to add 30 workers. “Inflation is low, interest rates low, manufacturing activity is up.... The economy is getting better,” Bush says.

As the race for the Democratic presidential nomination reaches a possible end today -- depending on the results in Super Tuesday’s 10 contests -- Bush and the candidates wanting to replace him often have seemed to be describing two different worlds.

And that, in itself, says something important about the U.S. economy these days.

The economy is in such an unfamiliar place -- with businesses bustling and yet reluctant to hire new workers -- that economists are struggling for an explanation. And the mixed signals have allowed the president and his rivals to paint vastly different -- yet plausible -- pictures of the U.S. workforce and its prospects.

Gross domestic product has jumped 7% since Bush took office. But companies have shed more than 2 million workers. The stock market had a great 2003. But wage growth has been sluggish. Home ownership is at a record high. But many Americans are worried that prosperity is slipping away to low-cost Beijing and Bangalore, India.

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‘Competing’ Realities

“The economy now is very much like a Faulkner novel,” said Rob Koepp, a research fellow at the Milken Institute, an economic think tank in Santa Monica. “You have competing and schizophrenic versions of reality. But it’s one reality.”

In most elections, the party out of power tries to highlight economic insecurities to build its case for change. By traditional standards, that should have been a hard task for this year’s crop of Democratic candidates, including Kerry, who could virtually lock up the race with a sweep of today’s races, and Sen. John Edwards of North Carolina, his last major rival. After all, companies have generally rebounded from the 2001 recession, and consumer spending remains high.

But throughout their primary campaign, the Democrats have focused their fire on the economy, noting that the rising demand for goods and services has not led to robust job growth. The economy has expanded at a strong 6% pace since the middle of last year, while jobs have grown barely 1%. Company payrolls are below their pre-recession levels.

“That’s highly unusual, and it’s an obsession with economists right now,” said Pierre Ellis, senior global economist with Decision Economics, a New York consulting firm. “We’re short hundreds of thousands of jobs, if not millions, from where we should be on this track.”

Many economists point out that companies have become more efficient, allowing them to produce more without hiring new workers. And firms that do hire workers are more apt to add them in low-cost countries, such as China and India.

Also, some economists say that more people are working than government statistics show. They say that employees dislodged from big firms often are hanging out their own shingles, becoming self-employed software programmers, fitness trainers, management consultants and the like. These workers may not be turning up in their full numbers in some government statistics.

Economists are debating the depth and significance of these trends. But together, they seem to be producing anxiety -- questions about whether higher productivity, the offshore shift of jobs and more self-employment ultimately will lift U.S. living standards or help cause an extended period in which Americans can expect less from U.S. employers and more job competition from abroad.

When a trend like out-sourcing is in flux, “people’s minds don’t get made up about it. And while they aren’t made up -- the jury is still out -- you can contend anything about it,” said Donald Straszheim, former chief economist for Merrill Lynch.

In this climate, Bush and the Democrats have spent a great deal of time trying to mold public perceptions of the economy. At times, the two parties seem like they are giving dueling lectures in Economics 101.

Bush has billed each of his recent speeches on the topic as “a conversation on the economy.” He has held at least seven since December -- many in states that could prove crucial to the election’s outcome, such as Florida, Missouri and Pennsylvania.

These events usually feature the president in almost a talk-show setting, sitting on a stool, microphone in hand. The president’s outlook is sunny. Bush peppered the words “hopeful” and “optimistic” throughout his appearance in Louisville last week at ISCO Industries, a piping manufacturer.

Bush’s main theme is that the deep tax cuts he championed have sparked the economy after the setbacks of recession, corporate scandals and the Sept. 11 attacks. The tax cuts, he says, have given individuals and businesses more money to spend.

Bush asked ISCO President Jim Kirchdorfer to talk about the $3 million he spent last year on new equipment. Then Bush elaborated with a short economics lesson. “See, the tax bill we passed encouraged this company to invest.... We’re trying to encourage Jim to make the decision to expand his business by buying new equipment,” Bush said. “And when he buys new equipment, somebody has got to manufacture the equipment. And when somebody manufactures the equipment, it means they’re working, right?”

The president made only a veiled reference to the nation’s sluggish job creation, saying: “We are in a changing economy. These are exciting times, but change creates the need for government at all levels to act.” That action, he said, should include training programs to prepare workers for “the new jobs of the 21st century.”

Kerry and Edwards, by contrast, talk constantly about layoffs and of jobs moving to other nations.

Nearly every time Kerry takes the stage, out comes the litany of loss: Ohio is down 265,000 jobs since Bush became president ... 5,000 jobs gone in Tennessee ... 300,000 in Michigan.

While Bush has set his events at thriving companies, Kerry last week toured the rusting hulk of an Ohio steel mill closed in 1984. “Today, only ghosts work at the line of the Youngstown Sheet and Tube,” Kerry recounted to a Toledo audience the next day. “To walk through that silent place was to get a heartbreaking reminder of the millions of Americans without work all over our country, in industry after industry.”

This is how Kerry painted the economy to his standing-room-only crowd: “Some people are working two and three jobs, and [college] tuitions keep going up and are out of reach. The healthcare keeps going up and it’s out of reach.... Under George Bush, people are working harder and harder just to stay where they are.”

He stood beneath a banner that read, “John Kerry: Protecting America’s Jobs.”

In Kerry’s view, the Bush tax cuts not only failed to spur the economy but also heavily favored the wealthy. “He promised his tax cuts would create 4 million new jobs,” Kerry has said. “So far, we’ve lost 3 million. Now he wants to make his tax cuts permanent. I think when you’re 7 million jobs in the hole, step number one is pretty simple: Stop digging.”

Kerry says he would create new tax breaks for manufacturers and end tax breaks that he argues encourage companies to move jobs offshore. He has also proposed new tax credits to help cover college tuition.

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‘Two Americas’

Edwards also has pinned his presidential hopes in part on tapping into the uncertainty coursing through the middle class and the working poor. But while his talk of insecurity is similar to Kerry’s appeal, he marries it to an upbeat message.

“It seems today, we have two Americas, with two healthcare systems: one for the privileged, another rationed by insurance companies,” says a television ad that Edwards has aired in several states. “Two public school systems ... two tax systems.”

But the commercial, like his speeches, ends on an uplifting note: “Together, you and I can change America and make it work for all of us.”

His basic assessment is that the economy is not working for average Americans. He has said, “This president doesn’t get it. He believes that as long as everything is going well on Wall Street, everything is fine. He is wrong.”

In a New York City union hall last week, Edwards had several garment workers take the microphone to talk about losing jobs to overseas sources. He also used the forum to restate his argument that trade agreements should include provisions that guarantee workers’ rights to organize and establish tougher environmental standards.

Several economists said that until it becomes evident that new jobs are replacing those the nation has lost, anxiety will remain -- and potentially make for an unpredictable election.

Like Edwards, “Kerry is focusing on the people who are suffering real pain, and that version of what’s going on is accurate,” said Koepp of the Milken Institute. “My own view is that it’s not the whole story, and that Bush has the other side of the cube, where he’s talking about the business environment being much better.”

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Chen reported from Kentucky, La Ganga from Ohio. Times staff writer Scott Martelle contributed to this report.