(FORTUNE Magazine) – President Clinton plans to submit the first balanced budget since the Nixon years. Inflation is below 2%. Unemployment is at quarter-century lows. Now it looks as if interest rates will tumble too. And the recovery is entering its 82nd month. But amid the anthems of the strong economy comes a discordant worry: Establishment Republicans and Administration officials are troubled about a dangerous downdraft of populist sentiment.

"I'm starting to get the kind of questions that worry me: Why do we pay all this money for the United Nations? Why are we bailing out Korea? The populism is rising, and I'm very concerned about the groundswell that I'm feeling," says Republican Sen. John McCain of Arizona.

All the elements of a populist rebellion are here: Concern about jobs flowing abroad. Fears about American companies and policies being controlled by international organizations. Worries about American taxpayer dollars being used to bail out foreign countries. Resentment about the special treatment big companies and big banks get in Washington. Hesitation about committing American resources--and American soldiers--abroad. "It's just waiting for the fuse," warns Kevin Phillips, the Republican political theorist.

Administration officials acknowledge privately that last year's defeat of fast track (which lets the President negotiate trade pacts that Congress can simply approve or disapprove, but not amend) indicated a shift in the political climate--that is, a departure from a half-century-long commitment to free trade. Add in the scare of the Asian economic collapse and the House's stubborn reluctance to support the International Monetary Fund, and you have the beginnings of a populist assault on internationalism.

For business, this new populism poses a major threat: A reluctance to sign new trade agreements could bring higher barriers for American companies seeking markets abroad. And it could spur a new drive by trading rivals like Canada, Mexico, and the European community to squeeze out American competition--as they have in the past two years in the telecommunications and auto sectors in Chile.

The next few months will bring two tests of a populist resurgence: a new Administration effort to win fast-track authority and then, this spring, a battle over increasing the funding and borrowing power of the IMF--"the Super Bowl of '98," says Pat Buchanan, who is already stoking the anti-IMF fires. Indeed, Buchanan is complaining that a bailout of Asian economies is really "a grandiose scheme to make the world safe for Goldman Sachs."

Much of this populist sentiment grows out of public worries about loss of security and loss of control--loss of security about jobs, particularly in the manufacturing sectors, and loss of control over taxpayer dollars, loss of control over the flow of labor and investment, and most of all, loss of control over America's power to govern itself and to regulate its own businesses and industries. These fears are troubling in a robust economy. They'd be incendiary in a weak economy, where they would provide a fresh opportunity for a conservative crusader on the Buchanan right and for Rep. Richard A. Gephardt, who is sharpening his appeal to traditional Democrats as he girds for a new presidential campaign. "A lot of the fears right now are inchoate," says Michael Kazin, an American University historian and author of The Populist Persuasion. "If they're attached to a downturn, all the potential is there for a populist rebellion."

In this atmosphere, a downturn could reshape politics as drastically as it reshaped the economy. The populist forces that were a strong current in the past three presidential primary seasons never went away. The great irony may be that in the robust economy, they grew even stronger.

DAVID SHRIBMAN is the Washington bureau chief of the Boston Globe and a Pulitzer Prize-winning political reporter.