Outrage Back at the Ranch

Message from McLennan County to George W. Bush: Yes, it’s still the economy that matters, but this isn’t your father’s recession.

Nearly 10 years after Bill Clinton invited experts to Arkansas to diagnose the wobbly economy he inherited from the first President Bush, his successor is summoning smart people to Texas this week to assess the economic conundrum that he now faces.

Here in Bush’s backyard, many people say there’s no comparison between the latest downturn and the one that may have cost the elder Bush his job: This one seems a whole lot worse.

“The last time the bottom kind of dropped we hardly even noticed it, because we didn’t have all those CEOs ripping us off,” said 72-year-old Betty Ritthaler of Hewitt, a Waco suburb. “This time, it’s just obvious in your face.”

Tuesday’s White House economic forum couldn’t be held on friendlier territory. The 250 participants will gather on the campus of Baylor University in Waco, about 20 miles from the 1,600-acre ranch that Bush calls home. The carefully screened roster of Cabinet secretaries, business leaders, economists, academics and other big thinkers will split into eight groups to discuss issues from corporate accountability to health-care security.

Many residents of McLennan County speak fondly of Bush as a favorite son, and they give him generally high marks for the job he is doing as president. But even if they don’t hold him personally accountable for corporate America’s financial scandals, their outrage over executive misconduct underscores the peril facing politicians of both parties as they try to respond to a different kind of economic cycle. It will take more than recycled proposals, boilerplate rhetoric and a presidential forum to assuage their anger. They want their money back.

“Across the board, almost everyone has lost at least a third of what they had, and some a lot more,” said Diane Jamison, a Waco investment advisor who helped many people take positions in the bubble market of the late 1990s. “You’ve got a lot of angry people out here.”

Many of them are older, more affluent Americans who are more likely to vote Republican, rather than blue-collar workers who traditionally lose their jobs in recessions. That makes the current downturn particularly treacherous for Bush, whose credentials as a business executive have suddenly become more of a liability than an asset.

“The people it really affects are retirees and near-retirees,” said David Wyss, chief economist for Standard & Poor’s, a financial analysis and information service. “You’re looking at rich old people. That’s pretty much the definition of the core Republican.”

Using the conventional yardsticks of job loss and contraction of the gross domestic product, Wyss noted, the recession of 2001 was (assuming it doesn’t stage a double-dip encore this year) the second-mildest in postwar history. However, in terms of value lost in the nation’s financial markets, it was the second-worst.

Roughly $7.4 trillion in stock market wealth has evaporated since the bubble was pricked in early 2000. Of that, $4.4 trillion has disappeared since Bush took the oath of office in January 2001. Not since Herbert Hoover and the crash of 1929 has the market fallen so far during the first 18 months of a president’s term.

The damage is not only deep, it is also broad. About 50% of American households now own stock, up from 37% in 1992 and 19% in 1962. For the millions of Americans who have 401(k) and other defined-contribution retirement plans, falling stock prices show up immediately as shrunken nest eggs.

“We’re a nation of stockholders now, and it’s hard to find a person who’s not affected,” said Baylor finance professor John Martin, a specialist in corporate governance.

The casualty list includes many of Bush’s 215,104 McLennan County neighbors.

Jerry Scott, 66, and his wife, Bunny, 65, depend on stock investments for about a quarter of their retirement income, and the market slide has cost them about $40,000. Jerry Scott, who spent 20 years in the Air Force and 19 at McDonnell Douglas Corp., blames crooked chief executives for most of the carnage.

Sept. 11 “was nothing compared to what we’re going through now,” Scott said. “Enron, WorldCom, all these other companies stealing the money, carting it off. The conniving and the cheating have really destroyed confidence, not only in the companies but in the federal government, which we thought was overseeing all of that.”

Scott said he voted for Bush in 2000, and he will probably do so again in 2004. But he thinks the White House and Congress need to do more to restore integrity to the executive suite. “I think both parties are equally responsible,” he said. “If the Democrats try to pin all of this on Bush, that’s not good. They need to be looking at how to solve these problems, rather than create more.”

Dorothea Jones, 80, is upset too. Like Scott, her anger is directed at corporate bigwigs, not Bush. “Anybody that does the things that they’ve done ... ought to be ridden out of town on a rail,” she said. “Or tarred and feathered.”

Jones has been widowed for 19 years and lives with her 49-year-old daughter, Margaret Lou, in the little town of Lorena. She sold the family farm three years ago and gets about $1,300 a month from stock and bond funds, Social Security and an annuity left behind by her husband.

“I’m just trying to keep all my stuff together so I can leave my one and only grandson something when I go,” she said.

Lee Innmon, 60, and her husband, Earl, 67, decided to retire from day-to-day management of their Chicken Express fast-food restaurant off Interstate 35 south of Waco and put their son, Randall, in charge. Now she’s not so sure her working days are over. She recently signed up to do volunteer work for the local school district, to get her foot in the door for possible future employment.

“I’ve been in the stock market about 10 years,” Innmon said. “One reason we turned the business over to my son is that stocks were doing so well.”

The market’s freefall has caused Jamison, the Waco investment advisor, to reconsider her own retirement plans. Fueled by fast-moving Nasdaq stocks, her investment account was worth $165,000 at the market’s peak in March 2000. Today, it’s worth slightly more than half that, about $85,000.

“I was planning to retire in five years, around age 60. But I would say now it might be 10 years because of the amount of money I have lost,” she said. “For a corporate CEO, this wouldn’t be a drop in the bucket. But for the rest of us, it’s real money.”

Polls suggest that for many Americans, the effect of the economic downturn on their college savings and retirement accounts has eclipsed their concerns about job security. That appears to be the case in McLennan County, where only a few large employers, such as Raytheon Co., have had big layoffs. The county’s jobless rate was 5.4% in June, compared with 5.8% for the state and 5.9% for the nation.

Waco veterinarian Charles Anderson said the recession hasn’t left a scratch on his practice, which keeps growing about 5% a year, good times and bad. But it put a big dent in his retirement account, which is down about 60%.

“Good Lord willing, I’ll practice another 10 years, maybe 15,” said Anderson, 57. “We still have faith in the system. We still have time to regroup. We’ll have an opportunity to sell the practice. But this certainly isn’t something we wanted to see happen.”

The market decline has taken an indirect toll on Baylor, a 13,000-student, Baptist-affiliated university. The school’s endowment has fallen to about $650 million from $700 million at the market’s peak, and new donations have slipped to $45 million from $52 million two years ago.

The shrinkage will reduce the annual draw by about $2 million, relatively small change in a $300-million operating budget. “We take a very long view,” said David Brooks, Baylor’s chief financial officer. “We expect the market to turn around. If people are just patient, it will come back.”

The political implications of the current economic cycle have become the subject of intense speculation.

Because stock ownership is more concentrated at the upper end of the income spectrum and Republicans are perceived as having closer ties to big business than Democrats, some observers believe GOP candidates are more vulnerable to voter retribution in this year’s midterm elections.

“If the stock market continues to nose-dive between now and November, I think you could see some shifting politically,” said Waco insurance agent Ron Keener, who has been busy selling low-risk annuities to people who have soured on stock investments.

Bush appears to be on safer ground, at least here in McLennan County.

“This has been going on for more than just the last year or two,” said Mike Hataway, who manages a Waco eatery called Buzzard Billy’s. “Most people realize he’s not the one who’s been cooking those books.”