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Republicans can look at their party's chances in the 1988 presidential election with a degree of confidence. The underlying economy is good, unemployment is down, the country is at peace and the President has just signed a U.S.-Soviet nuclear weapons reduction treaty. Confidence-not cockiness-for we are not running Ronald Reagan.

Republicans should never be cocky; there are less of us than there are Democrats, who, if they ever get their act together, can give us a lot of trouble.

There are, however, problems that can make the Democrats look good come November. You can build all the strategic defenses you want, but remember what former baseball manager Earl Weaver used to say, "How do you defense a three-run homer?" It may take a three-run homer to make Democrats competitive in 1988 but a bad economy could be a grand slam for them.

Short of war, the economy is the controlling issue for most voters. Reagan asked Americans in 1980 if they were better off than they had been four years before. The answer to that question was the voters' decision to turn out Jimmy Carter and elect Reagan.

To many voters, the economy has more to do with jobs than Wall Street. A pundit once defined a recession as when "your neighbor loses his job" and a depression as when "you lose your job." Not a bad definition of the real economy. If the economy hits a snag, say a recession in the spring, things could grow dimmer for the GOP and brighter for the Democrats. By recession, I mean something affecting people's jobs-not gyrations in those roller coasters we call our stock markets. Wall Street had its October panic, and Mr. and Mrs. America-or at least the 95% not playing the market-still gave themselves and the kids a nice Christmas.

The last seven years have been pretty good economically for the vast number of Americans and the overwhelming majority of those citizens who actually vote.

The GOP has been in power while unemployment dropped and this year's candidates are promising a continuation of good news. This is a most credible strategy. It is also easier to promise carrying on something that's good than to promise to change a good thing.

Still, Democrats will attack Republicans on the economy. Since you don't go around knocking low unemployment and low inflation (remember Carter?), they will attack budget deficits and the increased national debt. The GOP answer is to give the Democratic Congress its share of the blame for deficits and debt increases. The voters, knowing it takes two to tango and more to legislate, will apportion blame accordingly and the issue will be a political "wash."

If their nominee starts attacking us for neglecting various segments of society and promises new programs, we must put price tags on those promises, asking voters to balance their natural compassion while reminding them that Democrats mean more taxes.

But if the economy significantly worsens early enough in the year to have a real impact on average people-all bets are off. The Democrats will raise the bad economic news; the incumbent party, knowing you lose arguing that things are not as bad as they look, will turn on the "fog machine" to raise other issues, unrelated to the economy, on which Democrats are vulnerable. Some such issues are: continuing need for a strong defense; crime and a more pro-victim justice system, and less government control over people's lives.

Now, the real economy is in at least the "pretty good" category. The election is less than 10 months away. Considering that we elect a President state by state, I say no lock-certainly no cockiness-but confidence.