Greenspan says don't rush
Fed chief urges lawmakers not to rush an economic stimulus package
September 19, 2001: 8:38 p.m. ET
WASHINGTON (Reuters) - A senior administration official and Federal Reserve Chairman Alan Greenspan urged lawmakers on Wednesday to hold off on rushing to enact a new economic stimulus package, saying it will take time to assess the impact on the economy of last week's devastating attacks.
Republican and Democratic leaders of the Senate and U.S. House of Representatives, considering the merits of a bipartisan economic stimulus package that would include business tax cuts and other measures to shore up an economy badly shaken by the attacks, sought the advice of Greenspan and other top economic advisers.
"The chairman felt we needed to get a better assessment of the overall impact, while at the same time he understands how important psychology is in the performance of an economy," House Majority Leader Richard Armey, a Texas Republican, told reporters following the meeting.
In addition to Greenspan, lawmakers heard from White House economic advisor Lawrence Lindsey and former Treasury Secretary Robert Rubin in the closed-door session.
"It was mainly a discussion about the state of the economy and how it's been affected by the events," said House Democratic Leader Richard Gephardt of Missouri.
Greenspan, who is scheduled to testify publicly on Thursday before the Senate Banking Committee, was "typically vague on the issues," but was clear on the need to bolster consumer and investor confidence, said one Republican aide.
Although he was not at the congressional session, Treasury Secretary Paul O'Neill also cautioned against rushing a new stimulus package through Congress. He expressed concern about keeping government spending under control in light of a dwindling federal budget surplus.
"I think we should not rush to judgment about these important issues," O'Neill said in an interview with PBS' "News Hour with Jim Lehrer." He added that Greenspan shared that view.
"We need to watch over the next week or 10 days or two weeks and see if there's a recovery and people go back to normal spending patterns and assess how much stimulus we need," O'Neill said.
Aiding airlines primary economic concern
An economic stimulus package could include tax breaks for businesses to spur more investment and possibly a capital gains tax cut.
After meeting with the economic advisers, congressional leaders went to talk with President George W. Bush at the White House. Speaker of the House Dennis Hastert said no decisions have been made on the nature or size of a package.
"We haven't made that decision yet," the Illinois Republican said. "We've gotten together, talked to various economists and people ... who deal with this on a daily basis. We plan to continue that discussion and come up with a prudent plan."
Lawmakers said the first economic concern was helping the airline industry survive. The industry has warned of possible bankruptcies and announced massive layoffs following the hijack attacks. Lawmakers are considering a package of about $17.5 billion in direct cash payments and federal loan guarantees for the industry.
Lawmakers have set aside partisan bickering over the budget and what to do with Social Security surplus revenues in a show of cooperation to help bolster confidence in the world's largest economy. They are worried consumers and investors shaken by last week's attacks will sit on the sidelines and watch events unfold.
"We're trying to see if we can't get everybody on board with the idea of trying to do (a package) in a bipartisan way," Sen. Don Nickles of Oklahoma, the second-ranking Republican in the Democratic-controlled Senate said.
Nickles said he would like the package to include a capital gains tax cut and measures that would help businesses write off the cost of such things as software and computer purchases more quickly than under current law. Democrats have emphasized giving a bigger break for lower income people who may not have benefited from this year's income tax rebates that were part of the $1.3 trillion tax cut enacted earlier this year.
Armey said it may take time before lawmakers work out their philosophical differences and decide on a bipartisan package.
"I think there's a very good chance there will be one but that is going to take a lot of sorting out," Armey said.
"This is not the sort of fine-tuned fiscal stimulus package that was so popular in the mid-'60s, but a question of how do we restore structural confidence in the American economy and the American way of life and in the security of the nation," Armey said. |
