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 ast
month while testifying before the Senate Budget Committee, I offhandedly
observed
that the U.S.
economy is in recession. I might as well have said that Ted Kennedy
wears panty hose, so horrified was the reaction. There ensued a
furious counterassault by the Democrats on the Committee. Sen. Clinton
of New York sat smugly perched on her high horse and fumed: “Mr.
Moore, do you even know what the definition of a recession is?”
A recession
is, of course, two consecutive quarters of negative economic growth.
Many times recessions are over before we knew we were officially
in one, and my strong suspicion is that that’s the case now. The
manufacturing and high-tech sectors have been in recession for at
least eight months now. The Federal Reserve Board reported last
week that Americans lost some $2 trillion in the stock market in
the fourth quarter of 2000. Any way you cut it, the economy is very
weak.
My sin that
morning was “talking down the economy.” George Bush is alleged to
be doing this. Tom Daschle complains that Bush’s negative vibes
are “very harmful to the economy.” Apparently, what we need from
Washington now — to bring jobs back and rally the stock market
— is happy talk. When Bush refers to the slump in the economy
or mentions the dreaded “R-word,” he is accused of torpedoing the
economy for his own political gain. The Left is still stewing over
a statement made by Dick Cheney right after the elections, when
he urged passage of the Bush tax cut because “we might be on the
verge of recession.”
Goodness,
how reckless of the vice president. After all, this was only the
consensus opinion of virtually every economist in America at the
time. The allegation that the Bush administration has been exaggerating
the weakness of the economy is absurd on several fronts. First,
how in the world does George W. benefit from economic pessimism?
Let’s assume for a minute that Bush’s critics are right: that Bush’s
mere utterances can cause a crisis in confidence and that a gloomy
outlook from the White House can become a self-fulfilling prophecy.
If that’s the case, then the administration’s incentive is to be
as Pollyannish as possible. After all, it’s Republicans, not Democrats,
who are going to get thrown out of office en masse in 18 months
if the economy continues to tank.
Second, Bush
hasn’t been talking down the economy at all; if anything, he has
been too slow to acknowledge the recession, err, slowdown. He’s
refused to capitalize on the ailing economy to boost the case for
a bigger and faster tax cut. (In fact, he should be doing
what he is wrongly charged with: linking the need for tax cuts to
the economic slump. See my article, “Killed on Taxes,” criticizing
the White House on this very point in the most recent print version
of NR). In fact, it’s the Democrats, not the White House,
who have proposed an $80-billion tax-rebate stimulus this year to
get money into the pockets of consumers quickly. What for, if we’re
not in recession?
Third, when
George W.’s father was president, the very same liberal critics
skewered Bush Sr. for his failure to acknowledge and respond to
the recession. Papa Bush was said to be insensitive to the plight
of the working man — out of touch and unable to “feel the pain”
of real America. Now the son is attacked for being overly sensitive
to laid-off workers and for paying too close attention to the stream
of negative economic news. The Bushes can’t win.
But here’s
the most preposterous allegation of all. In an April 13th commentary
in the National Journal, called “The Power of Negative Thinking,”
reporter John Maggs says that George W.’s economic pessimism is
nearly unprecedented. He quotes Andy Kohut, director of the Pew
Research Center, who says that he’s never heard a President be so
consistently dour about the economy. According to Kohut: “We're
in new territory here. Presidents usually say 'everything is great,
and I'm responsible.' Now we have one saying 'everything is lousy,
and I'm not responsible.’”
Mr. Kohut,
I would like to introduce you to someone. His name is Bill Clinton.
There has arguably never been a president who talked down the economy
more persistently for political gain than Mr. Clinton. His mantra
as president was that “we have the worst economy in 40 years.” When
he announced his record tax hike to the American people he said
that it was necessary because the budget outlook was “much worse
than I thought.” This was all utter hogwash. The economy had grown
at a brisk pace for a full year before Clinton became president.
The budget outlook did not change much before and after Clinton’s
election. Clinton was aided in this canard by a compliant media,
which throughout the 1992 presidential campaign portrayed the U.S.
economy in the most dire terms, even though the recession ended
in mid-1991.
One last point.
Can presidents successfully steer the economy just through
their words of confidence or malaise? Perhaps a bit. Jimmy Carter
just exuded doom and gloom; every time he opened his mouth, the
country seemed to take a turn for the worse. Reagan’s optimism and
can-do attitude was clearly contagious and buoyed investor confidence.
But let’s face
it, there’s only one politician in this New Economy age who can
magically move markets with a mere gesture, facial expression, or
brief utterance. And his name is not George W. Bush. It’s Alan Greenspan.
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