AG will cut rates regardless of what GWB does on taxes. In fact, he will probably cut rates prior to the FOMC meeting on 1/30/01. If not, they will definitely be cut on that date. Unlike his father, GWB has made a pre-emptory strike regarding the economy and the likelihood of recession. He has made it very clear that he expects at least a downturn in the economy next year and Cheney has publicly stated we may be on the leading edge of a recession. This rhetoric is no accident. They know the economy is headed for a hard landing, at best, and very probably, a recession and GWB has no intention of getting blamed for it.
The Clinton/Gore campaign succesfully painted his father with an imaginary recession in 1992 and GW learned an important lesson from that bit of Dem chicanery. He will not allow Easy Al and his band of pranksters at the Fed to undercut him as they did his father in 1992. What do you think GWB and Easy Al talked about when they met 10 days ago, the weather? Not hardly. The Fed chairman's independence is a figment of the public's imagination, as are a lot of other stock market 'truisms'. AG serves at the pleasure of the President, as do the other members of the FOMC. Technically, the Fed governors are appointed for 6 year terms, but if the President wants new Fed governors, they're gone. You can bet your house that Easy Al and GWB have an 'understanding' regarding the economy and interest rates. GWB may not get all of his $1.3 trillion tax cut, but he will get most of it and it will have nothing to do with AG.
Also, this is AG's last term, and he doesn't want to go out with a recession and stock market crash as his final legacy... interest rates will be cut, and damned fast if next month's economic numbers continue to show weakness in the economy. |
