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The Struggle To Sell The Economy's Sizzle

It's the kind of blunt feedback the White House rarely receives. On a recent conference call with business allies, one prominent lobbyist lamented the disconnect between upbeat economic statistics and the sour public mood. "Why aren't you people glorifying the obvious?" he asked. "This is a great economy."

Message received. The Bush Administration has gone into public-relations overdrive to talk up the good economic news. On Jan. 6, President George W. Bush underscored positive employment and growth numbers in a speech before the Economic Club of Chicago. With gross domestic product rising at a 4% rate in the third quarter, "the American economy heads into 2006 with a full head of steam," he declared. Deputies from Treasury Secretary John Snow at the New York Stock Exchange to Assistant Labor Secretary Victoria Lipnic at Brett Favre's Steakhouse in Green Bay, Wis., fanned out across the nation to drive home the message.

Fear of a Wipeout

The president's business friends have good reason to spread economic cheer. They want Bush to pass the stalled business agenda: locking in the 2001 and 2003 tax cuts, reforming the legal system, and enacting trade pacts. That's a tall order without an uptick in public confidence. Corporate lobbyists also fear that angst over Iraq and anger at Washington's burgeoning lobbying scandal could lead to a GOP wipeout in November's midterm election, especially if public anxiety over the economy lingers. "We have not done a very good job of getting our message out," Allan B. Hubbard, the President's top economic adviser, told BusinessWeek. "We have to keep reminding people that this is a remarkable economy."

White House officials acknowledge they were slow to address the perception gap. Hurricane Katrina "distracted the economic team," concedes one senior Bush aide. Officials say they couldn't boast of a stellar economy as the Gulf Coast struggled to recover. And the post-Katrina spike in gasoline prices fueled widespread pessimism.

Now the President is highlighting a 4.9% unemployment rate, 400,000 new jobs created in the past two months, and 3.5% annual productivity growth since he took office. But aides acknowledge that such good news is overshadowed by massive layoffs at General Motors (GM), airline bankruptcies, and corporate pension woes. "Job cuts are on page A1 and job increases are on D1," says White House Deputy Press Secretary Trent Duffy.

To move the good news to the front page, the White House decided that it needed a sustained commitment from the Persuader-in-Chief. "When he talks about it, it's national news," says Bush outside adviser Charlie Black. But there's plenty of work to do. A Jan. 5-8 CBS News Poll found that just 20% of Americans think the economy is improving, while 37% believe it is worsening and 43% say it is unchanged.

Democrats say Bush's happy talk is out of sync with such financial realities as soaring costs for tuition, health care, drugs, and heating. Charges Senator Charles Schumer (D-N.Y.): "For the Administration to be out there saying things are great shows just how out of touch they are with the average American." Hubbard says the President knows that Americans are squeezed by high energy and health costs. But he says Democrats would hurt struggling families more by letting tax cuts expire. In the end, the White House is betting that the real answer to its PR problems is an increasingly vibrant economy.

Allan B. Hubbard, the Bush Administration's top economic salesman, is a Harvard Business School classmate of Bush and a former CEO. The director of the National Economic Council sat down with BusinessWeek correspondents Richard S. Dunham and Howard Gleckman on Jan. 11.

A lot of middle-class people feel a financial squeeze. How can the Administration deal with that?

That's definitely a concern. Health care has been gnawing away at people's wage increases for the last 20 years and has become a much bigger problem in the last five. Health-care costs are a crisis in America, and the President is very concerned about that.

What can he do about it?

He's looking at a number of very important things. The source of the whole problem is third-party pay. The result has been overutilization [of medical services] and no pressure on pricing. We've got to get the individual who is consuming to know what the prices are and [to] have some skin in the game. Employers should insist that their insurance companies provide information so people are much better consumers.

How good do you think the economy is, compared with the booms of the late '90s or '80s?

I'd much rather be in our economy today than the '90s or the '80s. The problem with the '90s was there was excess. We knew it, but we just thought it was going to continue. It wasn't sustainable. What's wonderful about this economy is that it's broad-based and very sustainable. It's strong growth but not too strong, so it's not going to be a boom-and-bust situation.

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