Bush combats U.S. jitters

Critics say administration fails to reassure markets

Crisis of economic confidence

July 23, 2002|By David L. Greene | David L. Greene,SUN NATIONAL STAFF

WASHINGTON - As Wall Street's nose dive continued yesterday, President Bush again tried to calm the fears of ordinary Americans who are increasingly jittery about the impact of plunging markets on their lives, whether they are stock investors or not.

Calling himself an optimist, Bush insisted that "the fundamentals for economic growth are real" and predicted the markets would go back up. But he acknowledged: "I'm not a stockbroker or a stock picker."

While the president tried to counter a crisis of confidence on Wall Street, some economists said they are beginning to worry that the prolonged plunge in stock values will eventually drag down consumer confidence - and, with it, the economy.

In spite of Bush's repeated efforts to talk up the market, his administration has yet to give enough personal attention to the steep drop in share prices and eroding faith by investors that the economic recovery will continue, critics say.

For example, during the past two weeks, when stock prices were tumbling to their lowest levels in four years, Treasury Secretary Paul H. O'Neill was on a trip to Central Asia and Eastern Europe.

Since the treasury secretary is usually on the front lines of an administration's economic response, this fueled rumors that he might be leaving his job in the not-too-distant future.

Responding somewhat defensively, Bush told reporters during a trip to Illinois yesterday that he retains full confidence in O'Neill.

"He's doing a fine job," Bush said. "And when the market goes up, I hope they will give him credit. If they're going to hold him accountable for a market going down, they ought to give him credit when the market goes up."

But some analysts called O'Neill's absence another sign that the president and his team are showing weak leadership as economic worries deepen.

"The treasury secretary is off in Uzbekistan in the middle of a market meltdown? That's insane," said Stephen Moore, president of the Club for Growth, which promotes conservative economic policy.

"It is a problem. This administration seems to be, or at least there is a perception that they are, not taking the financial crisis seriously enough."

Moore added that "there are other things the president could be doing besides talking up the market." He predicted that if the stock market decline continues, voters would "lash out" at Republican candidates in the November midterm elections.

Recent opinion surveys show that the public is giving Bush lower marks for his response to recent business scandals than it does for his handling of his job as president overall. Americans think Bush hasn't done enough to deal with the problems of corporate wrongdoing that helped spark the markets' swoon, according to national polls.

Influence is limited

But while Bush, like any president, risks being blamed when the economy falters, there is relatively little he can do to influence financial markets or, for that matter, the short-run behavior of the economy.

"The underlying U.S. economy moves at a glacial pace and is not bouncing up and down like a roller coaster," said Bill Cheney, chief economist at John Hancock Financial Services in Boston. "The government's ability to steer it is pretty limited."

He also said Bush would be wise not to speak out too urgently about economic problems, such as recent accounting scandals at Enron Corp. and WorldCom.

"There is a downside if he does a full-court press, and the revelations keep flowing," Cheney said. "Then it is more likely that he'd look ineffective."

But some analysts say the White House could still do more to inspire investor confidence and keep the economy from slipping back into recession.

For example, Bush could articulate a clearer economic agenda and take steps to keep the government from spending itself deeper into debt, while at the same time aggressively fighting corporate malfeasance and perhaps even reversing, at least in part, actions that have concerned many investors - such as his decision to impose tariffs on imports of foreign steel.

In an apparent response to such criticism, White House officials signaled that Bush will now do more to pressure the Senate to give him Trade Promotion Authority. That authority would give him more flexibility to strike trade deals with other nations and, say analysts, boost investor confidence.

Democrats, who had muted their criticism of Bush in the aftermath of last year's terrorist attack, are turning up the volume.

House Minority Leader Richard A. Gephardt, a Missouri Democrat, noting that on three occasions this month stock market declines came on the same day as Bush's economic comments, told reporters in Miami Beach: "The president continues to speak - that isn't helping us. In fact, it may be hurting us because what people want is action, not words."

Gene Sperling, who was President Bill Clinton's chief economic adviser, said in an interview that Bush has been unwilling to make hard choices that could boost the economy in the long run.

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