- The Washington Times - Thursday, March 15, 2001

It's time for President Bush to speak directly to the American people about the future of the U.S. economy and why lower tax rates lead to increased capital investment, job creation and economic growth.

With fear of recession in the air, the bears back in Wall Street, and foreign markets in turmoil and retreat, this is a time for the president to talk about growth economics and how tax cuts will lead us and the world into better days.

When Ronald Reagan was struggling to pull America out of its recession, he gave a number of major speeches and radio talks. They were optimistic economic tutorials that promised that better days were ahead of us. The New York Times said at the time that his talks sounded like "psychonomics" because he seemed to be administering group therapy to a worried nation. But Mr. Reagan believed there was an important psychological factor at work in the economy, and he patiently explained how his policies would start a flood of new business investment and lead to economic recovery.

"I remember saying, back when things looked worst, that too much pessimism could be deadly," Mr. Reagan commented later. "Well, some people criticized me for trying to sugarcoat the news. I merely wanted us to remember that there's a psychological factor in recession, and too much hammering at it makes recession worse."

We are nowhere near the gloomy days that Mr. Reagan encountered in his presidency, but we are facing an economy that has all but stopped growing. Layoffs are climbing, retail sales have sunk, manufacturing is in the doldrums, inventories are rising. Banks have tightened business loans.

The plunge in the Nasdaq and the Dow has evaporated much of the wealth of millions of American stockholders, weakened consumer confidence, and driven investors out of the markets.

Stock prices are predictors of the future, and this market is awash in a pessimism that feeds upon itself.

Mr. Bush has been traveling across the country, urging Americans to write and call their senators and congressmen to voice their support for his tax-cut plan. That is good, but he needs to do more. He needs to rebuild confidence in the economy's future. He needs to talk in more detail about its positive fundamentals and why, with the right tax-cut policies, investment capital is going to come pouring back into the markets, making this economy soar again.

And the fundamentals, which would not be present in an economy headed for a steep and lengthy decline, look pretty good.

New-home sales reached a record high in the fourth quarter. With mortgage rates continuing to fall, that seems unlikely to change anytime soon.

A sharp rise in inflation is another sign of a recession. The recessions of the '70s, the early '80s and the early '90s were all preceded by high inflation. But despite a spike in energy prices, core inflation in the past year has been a modest 2.6 percent, says an economic analysis from the Senate Budget Committee.

Finally, there is productivity. It remains strong relative to the nation's economic growth rate. As economic growth fell to 1.6 percent in the last six months of 2000, nonfarm productivity was growing at a 2.6 percent rate close to the 2.8 percent levels of the previous five years. "Productivity trends bode well for future economic growth," the analysis says.

No one expects business investment to pick up significantly for the remainder of this year. And the puny ($5.6 billion) fiscal stimulus from the first year of Mr. Bush's income tax cuts even if they are passed and signed into law by July are unlikely to have much impact anytime soon. The bigger tax cuts will come later.

So what does Mr. Bush do in the meantime? He needs to build political pressure on the Senate to accelerate its legislative timetable on the tax-cut bill and to make all of the tax-rate cuts retroactive in the first year.

He should call on Congress to move now to give him fast-track trade-negotiation authority, which would send a signal that the United States is going to move swiftly to break down barriers to the further expansion of global trade in this hemisphere and elsewhere. He should send a signal to the technology sector that the government is no longer going to be punishing it with harmful antitrust actions, and will further deregulate it.

And he should take a page out of Mr. Reagan's playbook and speak optimistically to the country and to Wall Street investors about why the future never looked brighter.

"What pulled us through that ordeal, I'm convinced, was our determination to stick to our program, belief in ourselves, and trust in our values of faith, freedom and hard work values that have never failed us when we've lived up to them," Mr. Reagan said.

Keep the faith. Better days are ahead of us.


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