It's Still the Economy, Stupid

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WASHINGTON, D.C.: New figures released Tuesday strongly suggest that the U.S. economy is slowing to a crawl. The Commerce Department reported that holiday sales rose only 0.3 percent, a huge disappointment to retailers who do up to half their business in December. Sales for the year rose 4.9 percent, the smallest advance since the last recession ended in 1991. At the same time, the Conference Board announced that consumer confidence is now at its lowest point in the past two years. The news could pose a new threat to President Clinton's re-election chances even as his stock rises on the strength of his well-received State of the Union address. "The theory is that there aren't any bad economies in an election year because governments will find short-term solutions to put off a downturn until after the election," says TIME's William McWhirter. "But this time the government might not be able to do this." Speculators are already counting on a dose of pump-priming. The Dow soared 76 points Tuesday on expectations that the Federal Reserve would lower interest rates in an attempt to jump-start the economy. (A decision is expected Wednesday.) "With consumer debt at an all-time high, people feel tapped out," notes McWhirter. "They aren't as optimistic, and they aren't going to be spending as much."