Bush Praises Cut in Rates (Wouldn't you have LOVED to be in the room with the company leaders and Bush with the economy being discussed???)
Bush Praises Cut in Rates
By Scott Lindlaw
Associated Press Writer
Wednesday, Jan. 3, 2001; 4:07 p.m. EST
washingtonpost.com
AUSTIN, Texas –– President-elect Bush praised a reduction in interest
rates Wednesday as one of the steps necessary to "make sure that our
economy does not go into a tailspin." But he said it will not do the job
alone, and his tax cut plan remains vital.
Bush received the surprise news of the Fed's interest rate cut while
meeting about three dozen business leaders to talk about the economy.
He said he interprets the Fed's surprise move as an indication bold
action
is needed "to make sure this economy stays vibrant."
To that end, he said, his 10-year, $1.3 trillion tax cut plan, far larger than
many Democrats in the divided Congress want, remains an "integral part
of economic recovery."
Bush felt compelled to explain why he was speaking of a recovery when
the economy is not in recession. Surrounded by executives of companies
hit by the slowing stock market or slumping sales, he said he used the
term
because "a lot of folks in this room have brought some pretty bad
news."
Bush named Larry Lindsey, chief economic adviser in his presidential
campaign, to lead the economic team in the White House.
The president-elect is using the slowdown to soften ground for his wider
economic agenda, with tax cuts at the core. Liberalized trade and
regulatory relief are also part of his platform.
"It's going to be important for the president to work with the Congress to
do what's right to make sure that our economy grows," he said. "And tax
relief, meaningful, fair tax relief, will be a stimulus."
As well, "We need to make sure our nation is a nation of free trade and
less regulation."
Andrew Card, Bush's incoming chief of staff, said Lindsey will oversee
what is now called the National Economic Council, led in the Clinton
administration by Gene Sperling.
Most of the executives who sat down with Bush were political or
financial
backers of his campaign, and they were supportive of his economic
plans
as well.
"It really has been a significant slowdown in the fourth quarter," said
General Electric CEO Jack Welch. "We are going to need the bold
action
that you're proposing to get this economy back on track."
A little earlier, Lindsey had bolted from the closed economic meeting at
a
hotel to catch a TV report on the interest rate cut news.
"Great! The Fed is always right," Lindsey said after asking reporters the
size of the cut and before returning to the meeting to inform Bush.
The Fed, in an effort to boost a slowing economy, said it was cutting its
target for the federal funds rate – the interest banks charge each other on
overnight loans – to 6 percent from 6.5 percent, a nine-year high. It was
the first decrease in the rate in two years, and the stock market
immediately rallied.
The Fed also cut its mostly symbolic discount rate by a quarter point to
5.75. It said it stands ready to cut the discount rate by another quarter
point on the request of Federal Reserve banks.
"I think the cut was needed," Bush said. "It was a strong statement that
measures must be taken to make sure that our economy does not go into
a tailspin."
But he said a half-point reduction "is not enough to serve as a stimulus to
encourage capital formation, economic growth, job creation."
Bush aides deny that he has been focusing on the slowdown for the
purpose of laying blame on the outgoing Clinton administration.
But Bush is clearly laying down a marker in the weeks before he takes
office, Jan. 20, making sure Americans know about the "troubles that
we're inheriting," as his spokesman Ari Fleischer put it.
"The warning signs are real," Bush said. "Bottom lines are being
affected."
Fleischer said Tuesday's report suggesting another decline in
manufacturing "indicated that the economy is performing at its worst
pace"
since the recession in 1991.
"So there is plenty of new evidence to buttress President-elect Bush's
statements and the statements issued in the private sector about the
weakening in the economy, the troubles that we're inheriting," Fleischer
said.
As the 107th Congress convened Wednesday, House Minority Leader
Richard Gephardt said that, because the economy is slowing, Congress
may need to pass a larger tax cut than many Democrats have favored.
However, Gephardt predicted Democrats will continue to resist Bush's
plan, which would cut all income tax rates but give the largest savings to
the wealthy.
"I think we need a tax cut," Gephardt, D-Mo., said on NBC's "Today"
show. "I don't know the exact size. It may be that it has to get bigger
because the recession is looming and we've got economic worries out
there."
Gephardt added, "I think we can work out a compromise where
everybody gets some of what they want" from a tax cut.
White House spokesman Jake Siewert said Bush's emphasis on the
slowdown was merely a tactic to justify his proposed tax cuts.
"This is not really about whether the economy needs a tax cut," Siewert
told reporters. "This is largely about whether or not they want a tax cut,
and how strong it is."
He said, "They want a tax cut whether it's raining out or snowing out or
it's
80 degrees and sunny."
Iowa Sen. Charles Grassley, the new chairman of the Senate Finance
Committee, talked Wednesday with Treasury Secretary nominee Paul
O'Neill about Bush's tax-cut proposal as well as about setting up
commissions to study Social Security and Medicare.
The tax-cut plan would likely flop in the Senate, divided 50-50 by party,
if
a vote were held today, Grassley said.
"I don't think it would fly right today," said Grassley, who favors more
specific cuts, such as pension reform and elimination of the marriage
penalty. However, he added, changing economic factors might persuade
senators to support the plan.
–––
On the Net:
Bush transition site: bushcheneytransition.com
© Copyright 2001 The Associated Press
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