Economic growth peaks at just right time for president seeking re-election

IN the 1992 presidential election, the Clinton winning slogan was "It's the economy, stupid"

IN the 1992 presidential election, the Clinton winning slogan was "It's the economy, stupid". George Bush might have won the Gulf War a year earlier but in 1992 Americans were worrying about a sluggish economy and rising unemployment and Clinton homed in on these fears.

In this election, the Republican challenger, Bob Dole, has no such opportunity. The economy is booming, interest rates are low, unemployment is falling, over 10 million new jobs have been created and the Dow Jones index on Wall Street has gone over 6,000 for the first time in its history.

Not that Dole has not tried to attack on the economic front. He has been telling voters that the economy under Clinton is in bad shape. He has even said that it is "the worst economy in a century". But with the good news flowing in on all fronts, the Clinton campaign has had no trouble squashing that one.

The biggest disappointment for Dole has been the failure of what was meant to be the keystone of his campaign to win the White House - the 15 per cent across-the-board tax cut. It has gone down like a lead balloon. Ditto his pledge to halve the capital gains tax.

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The problem for Dole was that he was also promising to balance the budget and eliminate the deficit by the year 2002 but without cutting most of the big spending programmes like social security. Medicare and defence. The majority of the voters have shown that they do not believe it is possible to give an average family an annual $1,600 tax cut and get rid of the deficit as planned.

Dole has run ads saying that over 100 economists including distinguished Nobel-prize winners believe it can be done. The Economist magazine surveyed over 60 leading economists at America's top IS universities and 83 per cent said it was not possible to do as Dole promised. The Clinton campaign has made full use of this survey to undermine the tax cut, and it is significant that Dole has now made the Clinton character rather than the tax cut his main plank.

The president has targeted the lowest income groups for tax cuts but he has also appealed to the middle classes by proposing generous tax credits to finance third-level education for college students.

Clinton has also been lucky. The economy was starting to turn around in the closing stages of the Bush presidency but too late for the incumbent to gain electoral advantage.

Then the Clinton $16 billion economic stimulus package was humiliatingly rejected by a Democratic Congress at the start of his first term. This setback is now seen to have been a good turn for the president as it helped him to focus on reducing the spiralling budget deficit which was keeping interest rates high and world financial markets uneasy.

Following the advice of Alan Greenspan, chairman of the Federal Reserve, President Clinton set his sights on reducing the deficit

This meant tax increases for the better-off but the pay-off came in reduced interest rates and a boost to economic growth which is probably peaking now just at the right time for a president seeking re-election.