- The Washington Times - Wednesday, December 5, 2001

White House economic adviser R. Glenn Hubbard said yesterday that if a weak stimulus bill with few tax-cut incentives emerges from congressional negotiations, he would advise President Bush to veto it and let the economy recover on its own.

"I think it depends on the package. If the package was a failure as an economic package, I would urge the president not to sign it," Mr. Hubbard said in an interview.

"I think we need a stimulus package, but that means we need a real stimulus package. I don't think the president should sign any old thing that comes to his desk. It needs to have genuine stimulus, and the best ones are the elements that he outlined himself," said the chairman of the President's Council of Economic Advisers.

Mr. Bush has offered an olive branch to Democrats, agreeing to accept additional expansion of unemployment benefits and health care payments. But Mr. Hubbard made it clear yesterday that the bulk of the package had to have the president's tax-cut incentives to stimulate investment and economic growth.

"We think accelerating the tax cuts is a really important part of the package. My concern would be that if you got a package that contained that but added a great deal of new spending, on balance it would be difficult to ask the president to consider it seriously," he said.

"If what the president were presented here was a whole set of proposals that on net had very little stimulus, he may be well advised simply to let the economy recover on its own," he said.

Mr. Hubbard said "sure, of course," when asked if he could see the economy recovering on its own. "We can help shape the contours of the economy, but in a $10 trillion economy, the private sector remains the main engine of growth," he said.

His blunt remarks clearly were intended to pressure Congress to come up with a bill that Mr. Bush could sign, and to lay down some markers that the president would not approve any stimulus bill that did not focus on accelerated income-tax rate cuts for individuals and offer businesses incentives to invest and expand.

He said the Senate Democrats' stimulus plan, which Majority Leader Tom Daschle of South Dakota said must be a part of any package, would have little if any effect on the economy.

"The investment incentives in the Democratic alternative are so minimal that they would likely have very little stimulus effect, and arguably a negative effect," Mr. Hubbard said.

Pointing to several positive signs in the economy, Mr. Hubbard said he believes the recession will be "shallow and short," and that the economy will begin to rebound in the first three months of 2002, leading to "robust growth in the last half of the year."

The consensus forecast among blue-chip business economists is that the economy will begin growing again by half a percentage point in the first quarter. Mr. Hubbard said, "I think that's a reasonable forecast.

"The financial markets are relatively optimistic. I think there is reason to believe that the capital overhang, on balance, is unwinding, so that investments should pick up next year. Consumer spending remains robust. So on balance there is a reason for optimism," he said.

"There is still reason for caution, too. There are still layoffs, the unemployment rate is still rising, so I still think there is a reason to do a genuine stimulus [package]," he said.

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