NEWS ANALYSIS : Credit Card Cap Uproar Accents Bush Dilemma

For a President under sudden political pressure over a still-stagnant economy, it seemed like a good idea at the time: jawboning against the high interest rates consumers pay on their credit cards.

But when the Senate seized on the idea and voted last week to cap credit card rates at 14%, the stock market plunged and George Bush discovered that he was in the middle of a political minefield.

Now, the fallout for Bush from the credit card controversy has underscored the dilemma he faces on the economy as a whole just as the presidential campaign begins to heat up.

On one hand, Bush has found that mere cheerleading may not be enough to bring about a speedy recovery. And trying to coast through the coming election season on optimistic rhetoric alone could be dangerous to his 1992 reelection prospects. In fact, Friday’s stock market mini-crash suggested that a jittery Wall Street is frustrated and increasingly angry over the President’s perceived failure to provide strong leadership on economic affairs.

“The market was saying: ‘Look, it is time to develop a comprehensive, fundamentally sound economic strategy.’ But, instead, all we’re getting right now is political posturing from the White House,” said Thomas Carpenter, chief economist of ASB Capital Management, a Washington-based investment company.

Even some Republicans admit that voters seem to see the issue in the same way.

“I think the voters are saying that, much as they saw President Bush take a very aggressive and active lead in international affairs, they are looking for that same type of role for him to play in the affairs of the economy,” GOP pollster Linda DiVall said.

On the other hand, an attempt by Bush to develop a more activist economic policy poses even greater difficulties than standing pat. Any false move might be seized upon by his Democratic rivals. Potentially more damaging, most of the standard remedies for a sluggish economy are anathema to Bush’s own supporters, even though many are uneasy about the possible political consequences of doing nothing.

Symptomatic of the problem, the President has delayed plans to push for a tax cut at least until his State of the Union address in January. He and his advisers fear that if he campaigns for a capital gains tax cut that is popular with the wealthy, the Democrats will savage his proposals. Yet his inaction has given the Democrats the opportunity to blast him for his apparent preoccupation with foreign affairs, while angering Republicans who worry about the lingering economic slump’s impact in 1992.

For now, the official stance is that Bush plans to stay on what White House spokesman Marlin Fitzwater described Monday as a “sound course.”

“When things get tough, you gotta be strong,” Fitzwater said. “You gotta be a man of steel and the man has steel will.”

Bush himself said last week: “The first rule of economic policy puts me in mind of the Hippocratic oath: Do no harm. . . . We’re going to resist the quick-fix solutions out there.”

While Bush has decried easy solutions and has resisted advice from within his Administration that he needs to act now to cut taxes, his vice president told reporters Monday that a capital gains tax cut would be a “silver bullet” to bring on a recovery.

Vice President Dan Quayle said that Congress should not just “stand there and do nothing, and cry about the state of the economy . . . and then blame it on the President.”

Bush too has been lashing out at Congress.

But with the economy seeming to hand the Democrats their first politically productive issue in a long time, Bush has begun to issue what even his aides concede are hollow-sounding and even reckless economic pronouncements.

His comments about credit card rates last week that helped trigger the market crash, for example, were inserted into a speech at the last minute and had not been run past his economic advisers. Asked who was the source of the statement, one senior Administration official sighed and said: “We wish we knew.”

Both Democrats and Republicans in Congress saw Bush’s comments as an opportunity to take up a seemingly popular cause.

“He threw out the gauntlet and we picked it up,” said Rep. Esteban E. Torres (D-La Puente), chairman of the House Banking subcommittee that is considering some form of interest rate cap.

In the Senate, it was a member of the President’s own party--New York Sen. Alfonse M. D’Amato--who took up the issue and had little difficulty winning swift and overwhelming approval of an amendment that would place the 14% cap on credit card rates.

Suddenly, Bush found himself backpedaling, saying that he meant only to “jawbone” bankers into taking action. But even his advisers acknowledge that the distinction may have been lost on the public.

Richard G. Darman, director of the White House Office of Management and Budget, said Monday that the Bush Administration has been sending mixed messages on dealing with the country’s economic problems. “We have to improve the way in which we communicate,” he declared.

Although the “lively debate” within the Administration and the Republican Party over how to proceed in addressing the problems is healthy, Darman said, “we are not yet doing as good a job communicating what it is we’re really for and how it makes sense. We’re aware of the problem and we’re working on it.”

A key concern, of course, is that any program the White House sends to Capitol Hill will be reshaped by a Democratic-controlled Congress. “You are going to have sausage come out the other end,” said Rep. Jerry Lewis (R-Redlands), a member of the House Republican leadership.

But even Lewis conceded that the President is further hamstrung by the fact that he cannot even count on the backing of his own party in Congress. Many Republicans might join the Democrats in loading up tax legislation with extra provisions that the White House would oppose.

“He doesn’t have confidence that he has his own troops behind him all the way,” Lewis said. “Nobody is answering the question, yes, we will be there at the other end, Mr. President.”

Ultimately, however, Bush may not be able to avoid dealing with Congress. Rep. Leon E. Panetta (D-Carmel Valley), chairman of the House Budget Committee, said that the credit card interest rate episode “marks the difference between trying to approach economic issues with sound bites and fund-raising dinners, as opposed to setting a strategy with Congress.”

And many of Bush’s supporters in the business community and on Wall Street are upset by their perception that the White House does not even seem to be trying.

“Pushing for a capital gains tax cut might be difficult to get through Congress but it is no more difficult than trying to find peace in the Middle East and Bush has certainly spent a lot of political capital on that,” observed Carpenter. “Why can’t they do the same on taxes?”

But Democrats, who can barely suppress their glee over Bush’s recent actions on the economy, now believe that his inaction will provide them with their best chance to make the 1992 presidential race a competitive one.

“I think the Republicans are in disarray,” said Rep. Sam Gejdenson (D-Conn.) “They don’t have a lot of places to go on economic policy. Bush now finds himself left with just the hope that the economy will come out of this by itself. And I don’t think there is any question that the Democrats can seize this opportunity.”

Times staff writers Jack Nelson and Robert Shogan contributed to this story.