(FORTUNE Magazine) – ARE YOU BETTER OFF than you were four years ago? Remember, that was the question with which candidate Ronald Reagan taunted -- and ultimately devastated -- President Carter a dozen years ago. You can bet the Democrats will revive that gibe this time around in hopes of achieving the same election result. They are likely to have a point. According to a CBS News poll taken in late January, 32% of Americans declared themselves worse off than in 1988, while just 24% felt better off. (The rest felt about the same.) True, if a decent recovery surfaces by summer -- as FORTUNE and most economists expect -- voters should be feeling a little cheerier when they go to the polls in November. Still, the picture right now is bleak. Since January 1989 growth in disposable personal income per capita has been flat -- OK, to be fair, it's up 0.00007% compounded annually. The unemployment rate is currently 7.1%, nearly two percentage points higher than when Reagan rode out of office. Even using the forecast in the White House's latest budget, U.S. GDP during the Bush tenure will be up just 1.2% annually -- the smallest four-year increase since Harry Truman's first term. What's different this election year -- are you listening, candidates? -- is that simply comparing 1992 with 1988 is too limited an inquiry for most voters. So, since Christmas, FORTUNE has interviewed scores of people in occupations ranging from asset manager and architect to salesclerk and unemployed electrician. They live in Baltimore, Chicago, Fort Worth, Pittsburgh, and Los Angeles, the kinds of places where the election will likely be decided. What these Americans are really worrying about is where they -- and the country -- are headed. In the 1950s and 1960s, U.S. GDP rose at a rapid clip and lifted all economic boats, the skiffs as well as the yachts. Those heady times ended abruptly with the oil shocks and stagflation of the 1970s. Reagan seemed to have the machine running again, but now it's sputtering. Was he on the right track, and is this just another recession? Or is it something worse -- the final curtain call for a whole set of postwar expectations about income growth and America's place in the world? Is there a political leader out there who can make sense of it all and point the way? Anxiety reigns. Consider the people pictured in this story. Probably no more than 20% or so of Americans will instantly identify with Donald Schwartz, 44, who declares, ''I'm unequivocally better off.'' Many who take that view undoubtedly come from the upper fifth of U.S. families. This group's pretax family incomes currently start at $67,000 and go up. Since 1976 the average after-tax earnings of this crowd, adjusted for inflation, have jumped 32.5%. That's a far steeper rise than in any other income category (see chart). Armed with a doctorate in agricultural economics from Purdue University, Schwartz took a job with a Chicago brokerage firm in 1980. He sure wasn't in the top fifth back then. Eight years later Manufacturers Hanover hired him to run its futures and options business. When Manny Hanny merged with Chemical Bank this year, Schwartz survived. He says, ''Of the 40,000 or so people in the combined banks, I was the only one who knew how to run the futures business.'' As president of Chemical Futures & Options, Schwartz earns more than $100,000 a year (he'd rather not be precise). He and wife Judy reside in the upper-middle-class suburb of Barrington, Illinois. That's outside Chicago, but it sounds like over the rainbow. ''My two daughters are getting a superior education in the public schools,'' he says. While most people have been forced to increase their workweeks to maintain their way of life, Schwartz has trimmed his by about ten hours to a maximum of 60. Almost as many citizens will identify with the downward career trajectory of Terry Biddle, 41 -- a definite ''no.'' Biddle graduated from high school in Elwood City, Pennsylvania, in 1969 and went to work for Babcock & Wilcox's steel tubing plant in nearby Beaver Falls. As a furnace tender, he earned $28,000 or so annually by the early 1980s, traded in his Pontiac every three years, and had health insurance for himself, his wife, Linda, and three children that covered everything from eyeglasses to brain surgery. But in 1987 the factory closed, largely because demand for oil well pipe had sunk. Biddle delivered pizza at $3.50 an hour for a time, studied auto mechanics at the community college, and took a job in the local Ford dealer's repair shop. He now earns about $18,000 a year, which after inflation gives him about half the purchasing power he once had. NOW MEET Ms. ''Maybe'' -- Su Obman, 29. Obman earns more than $35,000 a year as a field engineer for Vocollect, a small maker of hand-held, voice-activated computers in East Pittsburgh. Though she is better off than ever, she's scared. Failure surrounds her. Not far from Vocollect's offices are abandoned red-brick factories where Westinghouse once made electrical equipment. Vocollect shares an office building with the state employment commission, where more and more job seekers appear daily. Says Obman: ''Every day it seems I have to park farther back in the lot.'' In their minds tens of millions of Americans drive with Obman every morning into a parking lot crowded with the jobless. The employed-but-jumpy reduce their spending. Three years ago Obman bought a three-bedroom ranch house for $65,000. ''I wouldn't make that kind of investment now,'' she says. Nor does she intend to replace her 1986 Buick before it drops dead. She is relatively sure her job is secure for the next six months, so she is using all her extra cash to pay off the debt on the carpeting and furnishings she bought to decorate her house. Even those who are flying high have the shakes. Some call the sensation ''wing walking'' after the air show stunt in which the acrobat edges along the lower wing of a biplane in flight. The first rule of wing walking is that you don't let go of one strut before grabbing the next. In this economy, no matter how unhappy you are, you don't quit one job without the next firmly in hand. Plenty of people hail this new caution as a welcome revival of old-fashioned common sense. ''It's time to get away from charity balls and designer jeans,'' says Lowell Duncan, 47, of Fort Worth, marketing vice president for Tandy Corp. ''Levi's work real well.'' Duncan is better off. His salary keeps growing at 6% or more a year, enough to keep him ahead of inflation, but asceticism is in the air. ''It's what I read, what I hear,'' he says. A few years ago Duncan would have thought about sending his son, Blair, 24, to top- of-the-line Stanford for his MBA (tuition: $17,757 a year). Now he's encouraging Blair to look at the very good University of Texas (tuition: $1,080). Even if a majority of Americans feel edgy now, are they really worse off than they were 12, or 16, or 20 years ago? First, consider the non-pocketbook factors, since well-being involves more than bank accounts. How do you value the end of four decades of Cold War? Though the economic gains from lower defense spending are still to come, this epochal change has already lowered the risk of Armageddon -- a definite improvement. But few celebrate the victory as enthusiastically as it deserves. People are inclined to shrug it off, observes Treasury Secretary Nicholas Brady, ''as if it were no more than winning the World Series.'' Medical care and the environment offer pluses and minuses. No, we can't afford to keep spending an ever higher share of GDP on health care, but don't forget that, AIDS aside, mortality rates have declined for almost all diseases -- and accidents as well. Former Senator Paul Tsongas of Massachusetts was stricken by lymphatic cancer in 1983. If that had happened a decade earlier he would most likely be dead now. Instead, he is running for President. As for the environment, rivers are cleaner by and large. A third less oil was spilled in U.S. waters in the 1980s than in the 1970s, the Exxon Valdez accident notwithstanding. There is less carbon monoxide in the air, but more ozone. So Los Angeles, Denver, and some other cities choke on smog more often. The quality of urban life in America has clearly gone downhill. Though Reagan and Bush both declared war on drugs, the enemy hasn't given up much ground and may have gained some. Says Terry Gould, a director of Action- Housing, a Pittsburgh social agency: ''A decade ago we didn't find babies in apartments where all the furniture and food had been sold to buy cocaine. Now we do.'' Violent crime has jumped 12% since 1980, a statistic that will surprise no one. In the 1970s, unless you were directly involved in the drug trade or some other risky business, you were likely out of harm's way. In 1992 you can be shot walking a high school corridor or driving a freeway. STILL, whatever the data show on these issues, the 1992 election campaign will likely focus on and be decided by paycheck issues. No one-size-fits-all set of numbers can describe how 250 million people have fared, of course. And these days the statistics are more mixed than usual. Get ready for speech writers and spin doctors for Bush and his Democratic opponent to chop the figures more ways than a Cuisinart. Want to make the case that the Reagan and Bush years have been great? Here are your ingredients: Even in recession 118 million people are employed, 97,000 fewer than when Bush took office but almost 17 million more than when Reagan started. Inflation is a trifling 4%. Since 1980 the income of the average American family, adjusted for inflation, has risen 11.4% to $33,722. That's $3,453 higher than when President Carter left office. The prime interest rate is back to where it was in 1977 -- before inflation took off. As a share of family income, mortgage payments for a median-price house have dropped from 33% in 1980 to 20% currently, which means that more people can afford to buy houses -- even without the new tax breaks Bush is touting. Individuals who invested $10,000 in Standard & Poor's basket of 500 stocks when Reagan took office in 1981 held shares worth $16,000, after inflation, at Bush's inauguration. Their value has since soared to $19,300 as of January 28, when the President made his latest State of the Union address. Now the rebuttal: Average income has risen mostly because it has been hoisted up by the huge gains of those on the top fifth of the pile. The wealthy profited handsomely from the tax cuts of the early Reagan years. Mergers and acquisitions that put lots of ordinary people out of work made investment bankers -- and plenty of CEOs -- rich. Generous and tax-deductible corporate medical plans have helped doctors thrive. Among families in the next rung down the income tower -- those making $46,000 to $67,000 -- average after-tax incomes have inched up 0.5% a year since 1980. But that's mainly because Mrs. Rodriguez has gone to work three days a week as a bookkeeper to plump up the flattened wages of her husband, the utility company supervisor. Are such families happier now? Well, she hates leaving the kids with a babysitter, but the knowledge that Biloxi Boxes couldn't function without her is pleasing. In families whose main breadwinner gets paid by the hour, two wages have become essential just to keep from falling further behind. Ann Sessums, 45, of Boyd, Texas, is looking for clerical jobs because her husband, a carpenter, can find enough work to fill only four days a week. Meanwhile, says Mrs. Sessums, ''since 1980 the electric bill has gone from $50 a month to $225.'' Overall, weekly wages for private-sector workers who are not supervisors have fallen -- in constant dollars -- from $411 at the end of the Carter Administration to $369 at latest count. Those at or near the bottom of the heap -- the woman who vacuums the office at night for minimum wage plus a tad, say, or the person with no job at all -- may be doing slightly better than their incomes alone indicate. Low- or no- income women with children get quite a lot of assistance in the form of food stamps, Medicaid, and rent support that doesn't show up in government reports, and a larger share of low-income Americans qualify for those programs these days. Even so, in many cities the payments have recently been rising more slowly than inflation. In New York City a mother with three children receives up to $577 a month, 15% less in real dollars than in 1988.

If all that complexity still leaves you hungering for a simple answer to this endlessly debated question, here's the best we can do. Have a majority of American families seen their incomes improve since 1980? Yes; otherwise the median family income, by definition, could not have risen, and it has. On the other hand, it hasn't risen much. From 1980 to 1990 median family income, before taxes but adjusted for inflation, increased at a compound annual rate of just 0.67%. That's not much better than the 0.54% rate of the 1970s. Nor is a return to the heady pace of the 1950s and 1960s, when median family income rose at a 3% compound annual rate, anywhere in sight. WHAT'S ALSO CLEAR is that a distressing gap between the rich and the poor opened in the 1980s. But what's driving that division is not changes in tax policy, as some critics suggest, but differences in education. Simply put, the more schooling you have, the more you prospered in the Reagan-Bush years. That observation will bring bitter laughter from the MBA who just lost her middle- management job or the parents who are still feeding the recent law school graduate in whom they have invested $100,000-plus. Still, don't confuse a temporary recession with a long-term trend. Over the past dozen years the returns to education have been impressive. Education clearly underpinned much of commodity expert Schwartz's success. On average a 30-year-old with a college degree now earns 10% more in real dollars than his counterpart in 1980, says University of Maryland economist Frank Levy. Workers with degrees are mobile, or at least think they are. Tom Wittenschlaeger, 35, an Annapolis graduate, is a nuclear engineer and manager of corporate market research for Hughes Aircraft in Los Angeles. He is almost cocky. ''If things turn sour at Hughes, I don't think I'd have a terribly difficult time finding another job,'' Wittenschlaeger says. ''If you look at those who feel otherwise, you'll find people who came out of the education system with lower skills and a poorer work ethic.'' Even the fall in value of his four-bedroom house in Orange County -- from a high of $515,000 a couple of years ago to about $415,000 -- doesn't rattle Wittenschlaeger. Says he: ''If it were to drop below what I'd have to pay for the same house in St. Louis, I'd be shocked. But I don't see that happening in my lifetime.'' ( Female workers have enjoyed the same higher returns from higher education. In the 1980s the median income of all women in the workplace, including part- timers, rose $1,750 in constant dollars to over $13,250. The income of women with a college degree rose from $16,700 to $22,500. The median income of black women college graduates in 1990 was even higher, $26,700. (That's vs. $40,300 for all college-educated men.) In 1980, Betty Jean Murphy of Baltimore was a divorced black woman with four young children, the profile of a ghetto casualty in the making. But she also had a BA from New York City's Hunter College and a real estate license. ''I wanted desperately to make good,'' Murphy, now 50, recalls. ''I read everything I could about housing development and made 10,000 phone calls and thought constantly.'' She found her niche. Murphy buys Baltimore city property, such as an abandoned school she picked up for $75,000, and turns it into housing for low- income tenants, most of whom receive federal rent subsidies. (Nationwide some 4.6 million families get such help, compared with 3.1 million in 1980 and 4.2 million in 1988.) Murphy drives a battered 1984 Volvo and still lives in a cluttered, four- bedroom house. She declines to reveal her income, but she has no trouble paying her bills and has made other lives better along with her own. ''My buildings are super-clean, which has an impact on those around them,'' says Murphy. ''A guy across the street told me the other day he was getting rid of junk to make his place look better.'' Who has lost ground over the past dozen years? The dismal corollary to education equals prosperity is this: The less schooling you have, the farther you are likely to have fallen. Levy calculates that the incomes of those with only a high school education, Terry Biddle and his friends, have dropped 16% since 1980. In the 1950s and 1960s blue-collar workers were closing the pay gap that separated them from those with pricey diplomas. Well into the 1970s, manufacturing jobs were so plentiful that a lathe operator who was let go in the morning could pack his calipers and be hired somewhere else in the afternoon. But in the 1980s the gap widened to a chasm, opened up by the crowbar of global competition. Computers and telecommunications have multiplied the value of Donald Schwartz and his colleagues by making it easy to gather and sell information anywhere. At the same time low-wage toilers from Mexico to India have underbid the labor of workers like Biddle, who have no special skills to peddle. (For more on where the good jobs will and won't be, see the following story.) According to Marvin Kosters, an economist at the American Enterprise Institute, an American college graduate with ten years in the workplace made 30% more than a high school graduate with similar experience in 1980. By the end of the decade that spread had grown to 60%. ''This country isn't going anywhere with people like us making these wages,'' says Biddle. ''We can't afford to buy new cars. About 70% of what we sell at the dealership is used.'' To supplement their income, Linda works a few hours a week at Burger King. How will individual experiences translate into votes on Election Day? ''Anybody but Bush,'' snaps Linda Biddle, predictably. Nor is it surprising that Terry Roberts of Fort Worth may break with long habit and vote for a Democrat. In 1980 Roberts owned a very profitable executive search firm that scouted talent for oil field equipment companies. When energy prices crashed the following year, Roberts's business collapsed. He soldiered on in less rewarding jobs. Last month, with the Fort Worth economy sagging, Roberts lost his $36,000-a-year position managing promotional events for Miller beer. At 51 he is nervously groping for the next strut on the wing. ''I'm a Republican, but the party isn't helping those that put them in office,'' he says. ''It could be that we need some New Deal programs.'' Still, many who have struggled through the decade -- or are just worried now -- aren't necessarily going to punish George Bush for their troubles. A lot of them are inclined to spread the blame around -- on the Democratic Congress, on themselves (for dropping out of school), and on inept business leaders. The stumbling of the mighty -- such blue-blooded titans as Citibank, General Motors, IBM, and Macy's -- has convinced many Americans that huge corporations are not too big to fail but too big to succeed. ''We let the troubles of companies like GM and IBM flavor our feelings about everything,'' says Pittsburgh architect John E. Kosar, who is buoyant even though the lack of office construction in the past several years has shrunk his firm from 300 employees to 250. ''There are tremendous opportunities in this country. Our future is entrepreneurs.'' MAKE THAT well-educated entrepreneurs, and you've identified the key to ensuring that more Americans will be able to answer yes to the real question $ facing the country -- will you be better off in 1996, in 2000, and beyond? The message is getting through. ''When my brother graduated from college 11 years ago, it was mostly partying,'' says Brian Bair. Bair is student body president at Washington and Jefferson College, a small liberal arts school outside Pittsburgh where the unemployment rate among last year's graduating class is 12%, up from 5% or less a few years ago. ''Do I envy my brother?'' he asks. ''No. I like the world the way it is now. It presses us more, but that's not bad.'' Brian's right. If millions of Americans study and train to be a little better off -- and if political and business leaders forge policies that encourage them to do so -- the country will get richer too.

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART/SOURCE: CONGRESSIONAL BUDGET OFFICE CAPTION: THE RICH DEFINITELY GOT RICHER

CHART: NOT AVAILABLE CREDIT: SOURCE: BEA; FORTUNE PROJ. CAPTION: THREE MEASURES OF WELL-BEING -- AND THREE DIFFERENT ANSWERS Better than in '80 at least MISERY INDEX

CHART: NOT AVAILABLE CREDIT: SOURCE: NATIONAL ASSN.OF REALTORS CAPTION: THREE MEASURES OF WELL-BEING -- AND THREE DIFFERENT ANSWERS Better than you think HOUSING COSTS

CHART: NOT AVAILABLE CREDIT: FORTUNE CHARTS:/SOURCE: BEA; FORTUNE PROJ. CAPTION: THREE MEASURES OF WELL-BEING -- AND THREE DIFFERENT ANSWERS Never been worse HEALTH SPENDING