U.S. Executives Say Bush Tax Cut Plan Needed to Protect Economy
By Heidi Przybyla and Siobhan Hughes
Austin, Texas, Jan. 3 (Bloomberg) -- Executives of companies including General Electric Co. and Cisco Systems Inc. urged the U.S. Congress to act on President-elect George W. Bush's tax cut plan to help ward off an economic slowdown.
Many of the executives said today's Federal Reserve rate cut isn't enough to safeguard the nation's record 10 years of economic growth, calling the half-point cut a ''first step.''
The Bush ``tax proposal will turn this economy around,'' Forbes Inc. President Steve Forbes said after he and 35 other executives met with Bush. ``This is the time to take action,'' said Forbes, who briefly challenged Bush for the Republican presidential nomination. ``The sooner we get this tax cut the better.''
During the campaign, Bush proposed a 10-year, $1.3 trillion tax relief plan that would cut the marginal rates paid by individuals. Since the election, Bush has promoted the plan as necessary to head off a slowdown.
The prospect of a slowdown is real, said GE Chairman Jack Welsh, citing slowing U.S. retail sales. ``We're not afraid of scaring people. We're trying to lay out what we're seeing.''
The strong show of support from the executives -- who also were among Bush's biggest financial supporters during his campaign -- came just as the Fed slashed the benchmark U.S. interest rate a half-point to 6 percent. Bush said the Fed action doesn't make his tax cut plan unnecessary.
Rate Cut `Not Enough'
``A rate reduction of one-half percent is not enough to serve as a stimulus'' to the economy, Bush told reporters. ``It's going to not only require monetary policy reform, but fiscal policy reform.''
Bush asked the executives to lobby for the tax package, according to Gerry Parsky, chairman of Aurora Capital Partners in Los Angeles.
Still, some U.S. consumers are concerned about the tax package, said one conference participant.
Steve Brobeck, executive director of the Consumer Federation of America, said he was ''a little more pessimistic'' about the economy's short-term prospects after the meeting. Some of his members support the package while others have reservations, he said.
Bush needs to look out for the nation's less affluent citizens, Brobeck said. According to a survey his group conducted, one-third of respondents said they have ''great difficulty'' making their monthly debt payments, he said. A typical U.S. household only makes $40,000 per year and has net assets of less than $100,000, he said.
Typical Household
``We also urged the president to consider the welfare of not just these typical households, but the 50 percent that are less affluent than the typical household.''
During the presidential campaign, Bush's opponent, Vice President Al Gore, criticized the tax cut plan as primarily benefiting the wealthy. He also said that such a cut would sap the federal budget surplus. Gore said the surplus should be used to pay down the debt and expand programs. Bush said the country could afford both a tax cut and debt reduction.
The nation's prosperity has pushed the budget surplus to at least $250 billion this year alone.
Economists are divided on the need for the tax cut Bush proposed.
Rob Scott, an economist with the labor-backed Economic Policy Institute in Washington, said ''we ought to be careful before spending the (nation's) surplus,'' which is now estimated to total at least $250 billion this year alone. He said investing in the nation's schools and highways, among other projects, should take precedence over a large tax cut.
Nancy Lazar, an economist at International Strategy and Investments in New York, disagreed, saying the economy needs further stimulus. ``My biggest fear is that the slowdown is more prolonged and more pronounced than people thought,'' she told reporters. The rate cut ``is a good start. It takes time for that to work.''
Cisco Chief Executive John Chambers, who attended the meeting with Bush, said ''there is an understanding across industries'' that the nation is experiencing an economic slowdown.
Tomorrow Bush will meet with leaders of computer, software and internet companies, including Chambers, Michael Dell, of Dell Computer Corp., and Carol Bartz of Autodesk, Inc.
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