Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (8820)	11/5/2002 5:25:13 PM
From: stockman_scott	Respond to of 89467

Bush's Blind Spot: The Economy By Howard Gleckman BusinessWeek Online Tuesday November 5, 12:01 pm ET Has the Bush Administration lost touch with the economy? Democrats certainly think so. Today's election will give the best possible reading of whether the public agrees. But with the economy unable to get the traction it needs for a new round of solid growth, the growing temptation is to ask: Why doesn't President Bush do something? The White House, of course, would answer: "We have already done plenty." A $1.5 trillion, nine-year tax cut in 2001. A $40 billion stimulus bill in early 2002. A stealthy, but powerful, effort to slash business regulation. All this is still working its way through the economy. OLD MISERY, NEW MALAISE. Besides, say White House insiders, it's hard to know what to do next. An economy suffering from a malaise driven by uncertainties about Iraq and the stock market requires much different medicine from one afflicted by high unemployment or inflation. During the Carter Administration, Republicans invented something called the Misery Index, a measurement of joblessness and inflation. In the early 80s, that index topped out at a staggering 20. Today, it's sitting at less than 8%, almost the lowest ever. People seem uncomfortable about the economy -- but not desperate. And unlike two decades ago, they're worried but not angry. Make no mistake -- that ambivalence is being felt within the White House. Some, such as chief economic adviser Larry Lindsey, are quite bearish, worrying about 7% unemployment and a 5000 Dow. Others, such as Council of Economic Advisers Chairman Glenn Hubbard, are more sanguine. Hubbard sees an investment turnaround by early next year. Treasury Secretary Paul H. O'Neill, who has spent much of the past month on the road talking to business execs and workers, is convinced that things are better than people want to admit [see BW Online, 11/5/02, "Is It Really Darkest Before the Dawn?"]. STANDARD RESPONSE. Despite Lindsey's gloom, however, the White House isn't enthusiastic about real stimulus. Instead, it sees the economy as an opportunity to enact tax cuts it would back anytime, anyplace. Bush's top advisers aren't Keynesian tinkerers. They're adroit politicians who'll happily agree to include some Democratic stimulus -- such as an extension of unemployment benefits -- if it means getting another tax cut. If Democrats want to call such a bill stimulus, that's O.K. with the Administration. That's pretty much what happened with the tax-cut measure in 2001 and another one earlier this year. The impact of those breaks is hard to measure. But very few were aimed at short-circuiting the downward spiral of the business cycle. While Bush sold the '01 tax cut as recession insurance, and while the final version did include a $38 billion tax rebate, the law was never intended to be a stimulus. More than 90% of the cuts will take effect in 2003 and beyond, and more than 70% of the $1.3 trillion in cuts aren't scheduled to happen until 2007-10, long after this economic slowdown will have ended. It was the same with the stimulus bill that Congress enacted in March, 2001. It's centerpiece was a provision that allows companies to write off an additional 30% of the cost of new equipment in the year it is bought. A real stimulus would have encouraged companies to buy the gear quickly, as a way to jump-start sluggish capital investment. But instead, the law gives the tax break to gear purchased anytime before September 11, 2004. Such a leisurely pace is hardly likely to boost investment today. POLITICAL TIMING. The White House's real goal is to turn this into a permanent business tax break. It wanted the write-off to continue as long as possible, not to stimulate but to create a feeling of permanence. It was no coincidence that the tax benefit is due to expire just two months before the 2004 Presidential campaign season -- hardly a propitious time for Congress to let a popular tax break disappear. Will the White House's unwillingness to get more engaged in the current economic slowdown hurt GOP candidates at the polls today? It might be enough to push a few Dems in very tight races over the finish line first. But thanks to Iraq and the Democrats' own unwillingness to confront the issues, Election 2002 won't be a referendum on Bush's economic stewardship. That's good news for both the Administration and the GOP. Now if they could just figure out what to do next. biz.yahoo.com