- The Washington Times - Tuesday, March 18, 2008

When the housing crisis began to take shape last summer, President Bush told reporters at a press conference that the U.S. economy was “the envy of the world.”

That was not the case yesterday, as global markets recoiled at the sight of Bear Sterns Cos., the fifth-largest U.S. investment bank, flailing to grab hold of a government life preserver.

The president struck a vastly different note than he had seven months earlier, acknowledging that the country is facing “challenging times.”

But he also stressed that “the United States is on top of the situation.”

The president’s point man on the issue, Treasury Secretary Henry M. Paulson Jr., maintained that “we have capital markets that are the envy of the world.”

Mr. Paulson was repeating the White House bottom line — a constant since problems with the housing market emerged in August — that the U.S. economy is vibrant and resilient and will weather the crisis.

But the message wasn’t resonating.

One financial analyst said the Treasury secretary looked like a nervous parent whose demeanor betrays his true feelings to the child he is trying to comfort.

As Democrats criticized the White House for not taking enough action to stave off a recession, economics analysts generally gave negative reviews on how the Bush administration has managed events.

Stephen Hess, a presidential scholar at the Brookings Institution, assessed the president’s speech in New York last week and said Mr. Bush “was upbeat enough that it was beginning to border on unreality.”

“It worried me,” said Mr. Hess, who has worked for Presidents Eisenhower, Nixon, Ford and Carter. “When he starts to say something that may be out of sync with what people actually see with their eyes, it becomes counterproductive.”

William A. Niskanen, chairman of the libertarian Cato Institute and former chairman of the Council of Economic Advisers under President Reagan, said Mr. Paulson and his top staff are talented but appear to have been caught off guard by the growing economic problems.

As for the president, Mr. Niskanen said, “the one big action Bush is associated with is the so-called economic stimulus package, and that is an absurd package, absolutely absurd.”

Others still support the Bush administration’s handling of the economy.

J.D. Foster, a former Bush administration economic adviser now at the Heritage Foundation, said Mr. Paulson’s comments yesterday were effective, helping the Dow Jones Industrial Average manage small gains. Mr. Paulson is a former chief executive of Goldman Sachs and his experience is an invaluable asset in calming Wall Street, Mr. Foster said.

“For the first time in many years the financial markets need the steady hand of somebody they really respect and know,” Mr. Foster said.

The president, Mr. Foster said, has “reacted properly given the facts available, which are that we have serious problems in some areas of our economy but the rest of our economy is fine.”

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