Steven Senne  /  AP FILE
Former Treasury Secretary Robert Rubin is the most prominent veteran of the Clinton administration to offer his economic advice to Sen. John Kerry.
By Martin Wolk Executive business editor
updated 8/28/2004 2:37:36 PM ET 2004-08-28T18:37:36

When Sen. John Kerry’s campaign wanted to refocus attention on the economy this week, officials turned to a group of Nobel Prize-winning economists who warned of President Bush’s “reckless and extreme” fiscal policy. Earlier in the month the campaign put the spotlight on its most prominent supporter from the business world, Robert Rubin, who said the prospect of long-term deficits is at the heart of the nation’s economic troubles.

Kerry’s stump speeches pledge better-paying jobs and relief for stressed middle-class families, focusing on “kitchen table” issues like the cost of health care and college tuition. But the campaign’s relentless focus on the budget deficit reflects the priorities of an economic team dominated by veterans of the Clinton administration.

Rubin, Roger Altman and Gene Sperling are among the high-profile veterans of the Clinton White House who are helping to shape Kerry’s economic platform. All three have been mentioned as potential nominees for top economic jobs should Kerry defeat President Bush.

Their success in balancing the budget in the late 1990s — a period of strong economic and stock market growth — informs their determination to hammer away at the Bush record on the issue and bring a pay-as-you-go philosophy to any major new programs proposed by the candidate.

“We have a horrendous long-term fiscal situation, and I think it is imperatively important that the next president has an internalized sense of how grave a threat that is to us — and a commitment to deal with it,” Rubin said.

Members of Kerry’s economic policy team were busy this week analyzing reams of economic data, including a Census Bureau report showing a $1,535 decline in average real household income over the past three years. Importantly, that figure excludes the impact of federal tax cuts signed into law by President Bush, but Kerry campaign officials say the tax cuts have not been enough to offset the decline in income for most families.

More recent data published Friday shows that economic growth has slowed substantially from a red-hot 7.4 percent pace last fall to a  modest 2.8 percent in the second quarter.

To the Kerry campaign, it is no coincidence that economic growth surged in the late 1990s as Congress maintained fiscal discipline and has struggled in the past few years as the deficit has ballooned.

Kerry “is going to return to the principles which we followed during the 1990s and which saw such prosperity in the 1990s for all income classes — sound budgeting, a tax policy that focuses on the middle classes, an interest in health care and really stepping up funding for education,” Altman said Friday.

The 10 Nobel economists who weighed in this week with an endorsement of Kerry took particular exception to the Bush tax cuts of 2001 and 2003, saying they worsened the long-term deficit outlook without doing anything to spur job growth.

“What is truly remarkable is to create such a large change in the deficit and not have an economy that is truly booming — and we do not have an economy that is truly booming in terms of jobs,” said George Akerlof, economics professor at the University of California. Akerlof, who is advising the Kerry campaign, shared the 2001 Nobel prize in economics.

Major Market Indices

While the Kerry team may have sound economic reasons for focusing on fiscal issues, not everyone is convinced that concern about the deficit will resonate with voters.

“John Kerry is being the most responsible kid in the class,” said Dan Carol, a Democratic strategist not working with the campaign. “But the focus on fiscal responsibility is crowding out optimistic, exciting investment programs that will pay economic dividends and more importantly will appeal to voters.”

And it remains to be seen whether voter concern about the future of federal government finances and the economy in general outweighs interest in national security issues that have been dominating the campaign in recent weeks.

Kerry chose to make national security his top issue in July with a Democratic National Convention that focused on his Vietnam War credentials. Then in mid-August a group of Vietnam veterans launched an attack on Kerry’s war record that overshadowed other issues for more than a week.

The attack “has obscured everything,” said Greg Valliere, chief strategist for Schwab Washington Research Group. He said Kerry has made a strategic error in failing to focus sufficiently on the economy, but the campaign might be in the process of redressing that, especially if the recent the recent spate of weak numbers continues with next week’s employment report.

“Frankly I think Kerry and Edwards should spend more time on the economy,” said Valliere. “I think they have more potential talking about the middle-class squeeze and job losses.”

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