- The Washington Times - Thursday, July 18, 2002

It was comforting to hear President Bush talking this week about the U.S. economy's fundamental strengths, especially at a time when fear and hysteria are haunting Wall Street and threatening to short-circuit the recovery.

The financial markets needed to hear some bullish, straight talk about corporate America to counter the deeply pessimistic mood among investors and Senate lawmakers who were in the midst of an orgy of regulatory overkill. Let's hope that the president keeps talking up the economy, something this column has been urging him to do for months.

In the darkest days of the 1981-82 recession, President Reagan never lost his faith and optimism in the resiliency of our free-market economy. His speeches on the economy the New York Times said he sounded like the nation's "psychology therapist" helped to restore America's depleted spirits and, with the help of his tax cuts, put the country back on a growth track.

This was no easy task. Mr. Reagan faced double-digit unemployment; double-digit inflation; double-digit interest rates; sharply declining consumer spending; falling productivity; factories closing their doors almost daily; and an economy that was shrinking before our eyes.

Compare what we had then to what we have now: America's gross domestic product, the measure of the economy's growth rate, soared to 6.1 percent in the first three months of the year and is expected to average between 3 percent and 3½ percent for the rest of this year.

The national unemployment rate stands at 5.9 percent, which is not exceptionally high by historical standards.

Consumption was up by 3.3 percent in the first three months, and June's 1 percent uptick in consumer spending shows no signs of wearing down. Retail sales were up year over year by 3.29 percent in June. Productivity growth was soaring at 8.4 percent in the first quarter, compared to an anemic 2.1 percent a year ago.

Payroll growth was up in June. Inflation, at about 1 percent, was virtually nonexistent. And interest rates are so low that one of the biggest growth businesses in the housing industry has been mortgage refinancing that is lowering monthly mortgage payments and boosting discretionary income for homeowners.

Even the moderate decline in the dollar will have a positive impact on the economy. A weaker dollar means lower prices for U.S. products overseas, which will boost exports and thus help the beleaguered manufacturing sector.

All of this is why Mr. Bush's chief economic adviser, Larry Lindsey, continues to be bullish about the future and dismisses scare talk from Democrats and the media about the possibility of the economy falling into another recession.

"The probability of having a double-dip recession is virtually zero," he told me this week. "Consumer consumption will be quite positive, real incomes are rising, and government spending continues to rise." Mr. Lindsey is advising the president that while the economy has slowed down from the fast 6.1 percent pace of the first quarter, he expects it will continue to grow at a more sustainable 3 percent-plus rate for the rest of the year.

Still, once it gets rolling, financial fear is something that can be very difficult to stop. In the kind of sell-off we've been seeing on Wall Street, such fears tend to feed on themselves and can quickly dry up capital investment, which is the lifeblood of our economy, business growth and job creation.

And it is this widespread fear, ignited by deep public skepticism about the honesty of corporate bookkeeping, that needs to be further addressed by the president in future speeches. A lot of the scandals we are seeing now were spawned in the get-rich-quick 1990s, a decade when the message from the president of the United States on down was that anything goes, that the rules were made for the little people but not for those at the top. Mr. Bush needs to keep hitting this theme, as he recounts the inherent strengths that have made America the richest economy in the world.

He will have a receptive audience. A recent Gallup Poll reported that Americans by a margin of 51 percent to 47 percent believe President Clinton was "at least partially responsible 'for the corporate abuses we are seeing' because of the climate he set in office with his moral failings." Fed Chairman Alan Greenspan told a Senate committee Tuesday that our entire market system depends on public trust. Thankfully, steps are now being taken on Wall Street and in corporate boardrooms to restore that trust. Companies such as Coca-Cola were redefining stock options as expenses and making other accounting reforms to rebuild investor confidence in corporate America.

Here is some more good news: When Mr. Greenspan looked at all the pluses and minuses in our economy this week, he concluded that "the U.S. was poised to resume a pattern of sustainable growth" over the long-term. That is a message that needs to be repeated again and again if we are to counter the irrational investor fears that threaten an otherwise healthy economy.


Donald Lambro, chief political correspondent for The Washington Times, is a nationally syndicated columnist.


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