By: Mary Mostert, Analyst, Banner of Liberty (www.bannerofliberty.com)
March 7, 2000
Trying to figure out what, if anything, the U.S. economy is doing is like treading through a minefield these days. From the very day that Al Gore conceded, finally, that he lost the election, we've been bombarded with dire warnings that we are in a "recession." Bill O'Reilly on Fox News is at odds with Neil Covuto, Fox's business commentator over the issue. O'Reilly has declared a mini-war against Alan Greenspan for not reducing interest rates earlier to "prevent the current recession." Covuto disagrees.
Meanwhile, on Capitol Hill we have the Republicans and Democrats using the "recession" theme to support their positions. The Democrats say the country can't "afford" the Bush tax cut because the "recession" is going to "wipe out" the current budget surplus. The Republicans are working at "breakneck speed," to quote today's news, to implement the $1.6 trillion tax cut in order to "stimulate the slowing economy."
I've been quiet on this subject for a while because I couldn't really see why we are suddenly supposed be in a recession merely because a Republican is now in the White House.
Treasury Secretary Paul O'Neill seems to have some of the same suspicions that I have. In an effort to bolster his viewpoint on the economy, Bill O'Reilly had O'Neill on his show and demanded a response to the question of Greenspan's "slowness" is reducing interest rates to halt what O'Reilly calls "the current recession." O'Neill pointed out that not all the indicators were indicating a "current recession." The car industry, for example, had a very good month in February in which about half its inventory shrank. If that continues, in a few weeks they will have bring back laid-off auto workers to replenish the car inventory.
It might be interesting to find out how many working people decided in February that they would be getting a tax cut and therefore could take advantage of the bargains in the auto industry during February. It is fear that drives recessions. If people stop buying, as they did in the early 1930s, no government action will reverse a downward spiral.
In the early morning hours of Wednesday, as the stock markets for the day closed in Japan, a rally in the Nisei stocks was what a commentator for the South China Morning Post in Hong Gong, the world's most avid stock-market watchers, said was due to:
"investors snapping up blue-chip technology issues such as NEC on a steadier outlook for the battered sector. On the inkling the Nasdaq may have bottomed out, investors are taking a hard second look at some of the tech leaders, including Murata and Rohm, and deciding they are undervalued,'' said Nobuaki Kurisu, chief fund manager at Sumisei Global Investment Trust Management.
George W. Bush is not alone in the world in trying to stimulate the economy by cutting back on government, which is the opposite approach to stimulating the economy than traditional liberal approaches. For decades American presidents, following the lead of Franklin Delano Roosevelt, believed INCREASED government spending and growing deficits were needed to stimulate the economy.
In the Washington Post today we learn that: "- In a key five-year economic blueprint unveiled this week, Beijing's Communist leaders promised to scale back government, dismantle unprofitable state-owned enterprises, make way for private firms and investors, and welcome competition from foreign multinational corporations."
Donald Tsang, Bush's counterpart in Beijing, predicted in introducing his new budget, that the Chinese economy "will continue its expansion" and announced that the 2001-2 economic forecast would see the "GDP will grow by 4 per cent in real terms;" That's exactly the same percentage of growth that George Bush hopes to keep the US budget at. Last year the US Republican congress approved an 8 per cent budget growth.
During the Clinton Administration, far more dramatic swings in the stock market were summarily dismissed by the media as temporary stock market "adjustments." For example, on January 10, 2000 the Dow-Jones average hit 11,572.20. That, mind you, was because of Bill Clinton, or so the media told us. By March 7, 2000, the Dow Jones average had dropped to 9,796 - a 15% loss in two months. The word "Recession" never was mentioned by the very pundits, including Bill O'Reilly, who today are announcing a full-blown recession, which requires immediate government action.
In contrast, on January 10, 2001 the Dow Jones average closed at 10525.38. It closed yesterday at 10591.22, approximately a 1% GAIN in two months and the media tells us we are in a Bush Recession.
Unemployment has risen in this so-called "Bush Recession" from 4.0 to 4.2. This compares with the "full employment" figure of 5.6% unemployed workers in 1995 when Clinton was in office.
Now, I'm not saying we won't ever HAVE a recession. Frankly, I thought that we would have a recession, especially if the Clinton Administration had succeeded in dismantling Microsoft. The sharp drop in the Dow average was led by Microsoft in the year 2000, when Judge Jackson let it be known he was determined to break it up. Microsoft lost about 50% of its stock value in the year 2000.
However, so far that has not happened and so far the economy seems, to me, to be in pretty good shape, compared with years gone by, such as the recession in the Carter years that led to 7.2% unemployment by the time Ronald Reagan entered the White House. When Reagan left the White House it was 5.2% unemployment.
Maybe there WILL be a downturn. There certainly will be a downturn if the public BELIEVES their jobs are in jeopardy and stop buying. That has not happened yet, at this point. I'm with Secretary of the Treasury Paul O'Neill. I don't see a recession, much less a depression developing at this point, in spite of all the best journalistic efforts of those desperate for something to write about now that Clinton's gone.
To comment: mmostert@bannerofliberty.com
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