Two weeks ago, the White House noted that June was the 43rd month of the current economic expansion, that the unemployment rate fell from 7.3 percent in May to 7.1 percent, and that consumer prices actually declined, on average, in the first five months of this year.
But last week, chief of staff Donald T. Regan indicated the Reagan administration's actual growing worry over the state of the economy, with congressional and state elections only four months away, by publicly pressing the Federal Reserve to cut interest rates.
The central bank, concerned that the economy has shown no sign of a long-predicted second-half pickup, reduced a key lending rate from 6.5 percent to 6 percent, its lowest level since January 1978.
Forecasters in the administration, at the Fed and throughout the private economy have been expecting that the nation's output of goods and services would be increasing by now at an annual rate of 4 percent, at least. Instead, many of them think growth in the second quarter was at about a 2 percent rate, and the private economists making public predictions are increasingly saying the remainder of the year may not be much better.
During the last two years, the economy has had exactly the same problem: growth has been only half as fast as predicted, 2 percent instead of 4 percent.
As a result of that modest growth, national income is running about 4 percent, or $170 billion, lower than expected. Among other things, since mid-1984, the growth that has not materialized has cost the federal government more than $60 billion in foregone revenue and made the national debt larger. Director of the Office of Management and Budget James C. Miller III acknowledged last week that because of the slow growth and other factors, the fiscal 1986 federal budget deficit will top the 1985 record of $212 billion.
"We are going through a troublesome, uncertain time," Miller told a group of Washington Post editors and reporters.
With such slow economic growth, the 7.1 percent civilian unemployment rate of last month, while down from May's 7.3 percent, was only one-tenth of a percentage point lower than it was in June 1984.
But that unemployment-rate average masks some remarkably diverse economic movements in different parts of the nation. In Texas, where falling oil and gas prices have had a devastating impact, the unemployment rate hit 11.1 percent last month before seasonal adjustment, almost 2 1/2 percentage points higher than at the bottom of the 1982 recession. The rate also is higher in neighboring Louisiana than it was then.
At the other end of the scale in the six New England states, unemployment averages about 4 percent. In some of areas, particularly in Massachusetts and Connecticut, economic growth is being held back by labor shortages.
In midwestern farm states, unemployment rates are not particularly high because a farmer losing money or going bankrupt is still counted as being employed. But there, the economic problems are obvious and a major political liability. Moreover, most farm experts believe the situation will get worse before it gets better.
Throughout the country, people who work for many goods-producing industries continue to be squeezed. While consumers as a group are stepping up their spending, much of their money is buying imported products, rather than those made in the United States. In consequence, employment in goods-producing industries has been stagnant for more than a year, and so have real hourly earnings.
Manufacturing hourly earnings in June were only about half a percentage point higher than they were two years earlier, after adjustment for inflation, according to Labor Department figures. And all of that gain has come as a result of falling oil prices this spring.
However, most Americans still seem to share the administration's view that all basically is going well. Consumer confidence isn't rising, but it doesn't appear to be falling, either. At the moment, consumer spending is the strongest feature of the American economic landscape.
This attitude also shows up in polling data that indicates that the public, by a very wide margin, believes Republicans will do a better job of keeping the nation prosperous than will Democrats. That is a complete reversal of the public view a decade ago, when the Democrats scored high on questions of prosperity.
The shift probably reflects the loss of confidence in Democratic management of the economy that followed the high inflation years at the end of the 1970s, and the renewed sense of stability that has followed the reduction of inflation that has occurred since. Meanwhile, memories of the severe 1982 recession, which helped achieve that reduction, continue to fade.
Also, some other major economic problems, such as the continuing high budget deficit, are blamed at least as much or perhaps more on big-spending Democrats as on Reagan or the Republicans. Both parties' members in Congress generally have been pushing hard to build a record of deficit reduction efforts to which they can point this fall.
The same sort of effort is behind the overwhelming political support for the sweeping tax bill now before a House-Senate conference committee. Even members who have not been enthusiastic about many of its features, such as higher business taxes and reduced investment incentives, do not want to take the political risk of being blamed for killing the measure.
The Democrats' biggest initiative is in the trade area, with a House-passed bill that would seek to force several countries with which the United States has a large bilateral trade deficit to reduce that deficit quickly or face much higher tariffs on goods they ship to this country.
Whatever the merits of that bill -- many economists oppose it on the grounds that it would hurt the U.S. economy as other nations began to take retaliatory moves -- it is clear that the huge U.S. trade deficit has become a central feature of both the economy itself and the debate over how best to improve its prospects.
An increasing number of economic forecasters who had been expecting much stronger economic gains in the second half of this year than in the first half now are having second thoughts. Lower interest rates, lower inflation and a lower value of the dollar on foreign-exchange markets were supposed to combine to get growth back up to the administration's long-promised 4 percent rate or perhaps even higher.
But so far, the lower value of the dollar has had only a small impact on the trade deficit. Many foreign exporters in Japan and other countries whose currencies have gone up in value relative to the dollar have increased their selling prices only slightly, absorbing the rest of the change in currency values by accepting lower profit margins. In addition, the dollar has not gone down in value compared with the currencies of several other nations that are major trading partners of the United States -- including the biggest of all, Canada.
George Perry of the Brookings Institution is one forecaster who is lowering his expectations about what the second half of this year will bring, and he has done so largely because there is little sign the trade deficit is shrinking.
"The second quarter is sharply worse than the first" in terms of the trade deficit, Perry said. Consumer spending and new housing construction are strong, but business investment is not. "Outside of housing, construction is turning into a basket case," he declared.
Other economists expect cuts in federal spending that will be coming when the 1987 fiscal year begins on Oct. 1 to reduce economic growth in the short-run, even though reducing the budget deficit will help the economy in the longer run, they say.
Meanwhile, the continuing uncertainty on the tax bill's provisions -- and the certainty that some investment incentives, such as the 6 percent to 10 percent investment tax credit for purchases of business equipment, will be repealed -- also is hampering business capital spending, these economists say.
Against this background, Senate Majority Leader Robert J. Dole (R-Kan.) had been appealing to Federal Reserve Chairman Paul A. Volcker for just such a cut in interest rates as delivered by the Fed last week.
"You and I both know that whenever someone advocates lower interest rates, the accusation of 'politics' rises up almost immediately," Dole said in a letter to Volcker, which the senator made public. "Of course, politics is nothing to be ashamed of: and political considerations are hard to avoid when so much of the modern economy is subject to government interference. But I know you agree that there are much higher stakes involved here than mere politics."
Dole argued, "In a lower interest rate environment, we can deal more effectively with the debt problems of the Third World, the deficits in budget and trade that threaten the U.S. economy, and the difficult challenges that confront American farmers and manufacturers."
With both the tax and deficit-reduction measures before Congress likely to produce a tighter, less stimulative fiscal policy in the short run, any added boost for economic growth had to come from the Federal Reserve. However, a number of private economists expressed skepticism that the small additional rate cut would have much effect on the economy anytime soon.
In addition, financial analysts said they do not expect the Fed to lower rates again unless the economy remains stalled six weeks or two months from now. Fed officials would like to be accommodative, but they also are worried that lower rates could cause another large drop in the value of the dollar if rates are not also reduced in Japan and West Germany. A big decline in the value of the dollar could, they fear, lead to more inflation and even higher interest rates if foreign investors became less willing to place their money in the United States.