Debate Rages Over Bush's Economy Warnings...
Thursday December 21, 1:36 pm Eastern Time
By Sarah Edmonds
WASHINGTON (Reuters) - Fresh debate raged on Thursday over whether warnings from President-elect George W. Bush and his team of rough economic times ahead constitute ``talking down'' the U.S. economy or necessary ``straight talk'' about an evolving slowdown.
Early on Thursday morning, the head of the National Economic Council and President Clinton's economic adviser, Gene Sperling, accused Bush of undermining the economy for short-term partisan gain so as to bolster the case for a Republican tax cut plan.
``What you're seeing is President-elect Bush and his team actually talking down our economy, actually probably injecting more fear and anxiety into the economy than is justified. And I think that's a serious mistake for him,'' said Sperling.
``I think it sends a signal that he's willing to be political in describing the economy instead of serious and disciplined and not political,'' Sperling added in an interview on ABC's ``Good Morning America'' program.
SLOWDOWN SIGNS CLEAR
That the U.S. economy has slowed from the breakneck pace of early 2000 is undeniable. The government on Thursday revised down its estimate of growth in gross domestic product -- the measure of total goods and services produced within U.S. borders -- to an annual rate of 2.2 percent in the July-September period from 2.4 percent reported a month ago.
That was less than half the second quarter's 5.6 percent rate of expansion and was the most sluggish for any quarter since a 2 percent rate during the third quarter of 1996.
The issue is whether, in a bid to clarify that the economic slowdown cannot be laid at its doorstep, the Bush team risks turning a dramatic downturn into a self-fulfilling prophecy, said Wayne Ayers, chief economist at FleetBoston in Boston.
Negative sentiment, which has helped take the markets down sharply this week -- although they recouped some lost ground on Thursday -- can often feed on itself in an ugly spiral.
``Clearly they have a clear political incentive to shift the blame or to put the blame, if a recession there is to be, on the outgoing administration,'' Ayers said.
``He does not want the Bush family to be the bookends, so to speak, on 10 years of prosperity,'' he added, referring to the recession that ended in 1991 under Bush's father.
Vice President-elect Dick Cheney, who earlier this month came under fire from the White House for uttering the R-word -- warning that the United States might be on the ``front edge of a recession'' -- on Thursday softened his rhetoric and said he and Bush were not trying to talk down the economy.
``We don't want to talk down the economy, clearly, and I think both President Bush and I have tried to be cautious in that regard,'' he said.
``There does seem to be a lot of evidence out there that in fact the economy has slowed down some,'' he told reporters. ''Whether or not this ultimately results in a recession, that is negative real growth, nobody knows at this time.''
Economists define a recession as two straight quarters of economic contraction, as measured by the GDP data.
In recent weeks, Republicans allied with Bush, who will be sworn in as the 43rd U.S. president on Jan. 20, have predicted economic trouble ahead in what some analysts say is an effort to justify sweeping tax cuts opposed by Democrats. They may also be attempting to clarify publicly that the seeds of a slowdown were sown in the Clinton administration.
OPPORTUNISTIC, NOT ALARMIST
Douglas Lee, president of economic consulting firm Economics from Washington, said nothing he has heard from the Bush team so far has qualified as alarmist, although it certainly could be characterized as opportunistic.
``I will say that I think it's a little bit disingenuous to try and use these circumstances to justify a tax cut package,'' Lee said, adding that the long phase-in of the $1.3 trillion package means it will have little impact on the current situation.
On Wednesday, Bush said he saw ``warning signs of a possible slowdown'', tying economic prospects to his proposed 10-year tax cut. ``I believe strongly that tax relief is part of the prescription for any economic ill that our nation may have,'' he told a news conference.
A Bush transition aide also weighed in on Thursday, saying the admission that a slowdown appeared to be underway was not a move to hurt the economy
Bush transition spokesman Ari Fleischer said financial markets have been losing ground for months, ``before the president-elect said a word'' about the possibility of an economic slowdown.
``It's not how markets work, and investors are a little more sophisticated on that score,'' Fleischer told reporters, disputing Sperling's suggestion that this was a calculated move to make tax cuts more palatable.
Fleischer repeated Bush's concerns. ``We are worried about a potential slowdown, and we want to make sure that steps can be taken to avert it,'' he said.
``It's very important to look long-term, to think long-term, and to be forthright with the American people,'' Fleischer added. ''The American people welcome straight talk.'' |
