Mixed messages

Even as the White House urges consumers to start spending confidently again, it is warning that more terror lies in wait.


Eric Boehlert
October 2, 2001 11:35PM (UTC)

For an administration desperate to boost consumer confidence and protect the economy from recession, the White House was hardly reassuring during this week's Sunday morning talk shows: Senior officials said Americans should be prepared for still more terrorist strikes at home, including biological, chemical and even nuclear attacks.

Was the doomsday message a case of chaotic circumstances creating mixed messages? Not necessarily. Instead, the White House's conflicting themes in recent days (America remains at risk but the country, and the economy, should return to normal) highlight the difficulty of fighting war and recession at the same time.

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"The administration has a very difficult tightrope to walk," notes Mark Zandi, chief economist for Economy.com. "They want to impart the seriousness of the situation, yet they risk completely undermining consumer confidence."

Tireless shoppers had been the one bright spot for an already sluggish economy this year. But as consumers scramble to make sense of the terrorist attacks, wallets have been slammed shut.

Just ask those in the travel, entertainment, car sales, new home construction, restaurant, car rental, catalog sales, personal computer, advertising and airline industries. The sudden consumer retrenchment has been a crushing blow: Retail spending represents nearly 25 percent of the economy's activity.

And that, says Zandi, is why "we're in the middle of a recession right now."

But the White House has at least one other immediate goal besides boosting the economy: getting sweeping anti-terrorism legislation passed that would allow the government to detain suspected terrorists indefinitely, deport immigrants more easily, determine e-mail identities with only a warrant instead of a court order, conduct roving wiretaps on multiple phones and seize assets of suspected terrorist organizations.

The proposals have run into some opposition from both ends of the political spectrum, with critics concerned the new laws would grant the government too much power. So on Sunday, White House operatives made their case by upping the rhetoric a notch.

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White House Chief of Staff Andrew Card on "Fox Sunday": "I'm not trying to be an alarmist. But we know that these terrorist organizations, like al-Qaida, run by Osama bin Laden and others, have probably found the means to use biological or chemical warfare."

Attorney General John Ashcroft on CNN's "Late Edition": "Very frankly, we are in a very serious situation. We believe there are substantial risks of terrorism still in the United States of America. I think there is a clear, present danger to Americans."

And Secretary of Defense Donald Rumsfeld on NBC's "Meet The Press": "It doesn't take a leap of imagination to expect that at some point, those [terrorist] nations will work with those terrorist networks and assist them in achieving and obtaining those kinds of [chemical, biological and nuclear] capabilities."

By broadcasting such a precarious picture of American security, the White House's offensive may succeed in winning a final vote on anti-terrorism legislation by Oct. 5. But will the open and unprecedented talk of pending biological warfare simply add to consumer anxiety and push the economy into an even deeper recession?

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"Of course, consumers are quite concerned about safety at home and that will continue to lead to a high level of apprehension," notes Richard Curtin, director of the University of Michigan's closely watched monthly consumer confidence reports.

The university's index for September fell more sharply than at any time since the oil embargo in the early '70s and when Iraq invaded Kuwait in 1990. Those findings were mirrored by consumer confidence data released by New York-based research group the Conference Board; its confidence index dropped from 114 in August to 97.6 in September.

And that was before administration officials spelled out the possibilities of chemical attacks.

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Economy.com's Zandi says most observers expect the consumer confidence numbers to fall gradually (assuming there are no more terrorist attacks) during the rest of this year.

During the Gulf War, President Bush's father had to balance the same concerns as the current administration: getting Americans ready for war while trying to nurse consumer confidence.

"That administration tried to prepare us for the worst. There was a lot of talk about body bags and casualties. That was intentional on their part," notes Zandi. Not surprisingly, consumer confidence dropped dramatically leading up the U.S. military action in January 1991. But once it became clear that a military victory was going to be relatively easy, the stock market and consumer confidence bounced back immediately, and the economy, which had entered a recession during July 1990, took off on a record-setting surge of expansion.

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Unlike Operation Desert Storm, however, it's unlikely the current war on terrorism will enjoy such a clear-cut battlefield victory. And perhaps more important, the casualties this time have already been suffered, at home of all places.

"That's the biggest negative effect," says Zandi. "There is a much higher level of uncertainty. It's more pronounced, it's personal and it's closer to home."

That uncertainty may help the White House in getting new anti-terrorism laws passed. But it's not likely to loosen consumer wallets anytime soon.


Eric Boehlert

Eric Boehlert, a former senior writer for Salon, is the author of "Lapdogs: How the Press Rolled Over for Bush."

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