As evidence mounts that the terrorist attacks have deeply wounded an already weakened economy, President George W. Bush on Saturday forecast "an improved business climate in America in the years ahead." But he did not commit himself to specific steps to achieve that goal beyond bailing out the airline industry.
The president's vagueness about how or even whether the administration would seek to re-energize the faltering economy reflected a debate in the White House, Congress and the Federal Reserve about acting quickly versus waiting for a clearer picture to emerge from the post-attack chaos.
Intense challenges
The policy and political challenges became intense in recent days, as airlines and other companies announced tens of thousands of layoffs, the stock market swooned, consumers grew jittery and the international outlook worsened. Though it will probably be months before it is made official, the economy may well have entered a recession this month, economists said, which would mean an end, after 10 and a half years, to the longest business expansion on record.
A survey of 44 economists last week by Blue Chip Economic Indicators, a research firm, concluded that the economy would contract at an annual rate of 0.5 percent in the third quarter, which ends Sept. 30, and then shrink at a 0.7 percent pace in the final three months of the year. The most broadly used definition of a recession is two consecutive quarters in which economic output falls.
On Friday, Northwest Airlines said it would lay off 10,000 workers, bringing to more than 100,000 the job losses in the last week just in the airline and aviation industries. And by the time trading ended on Wall Street on Friday, the Dow Jones industrial average had lost 14.3 percent for the week, its worst weekly performance since early in the Depression.
Radio Address
In his weekly radio address to the nation Saturday, Bush sought to assure Americans that the economy remains fundamentally strong and that its entrepreneurial spirit remains undimmed.
"The terrorists who attacked the United States on Sept. 11 targeted our economy as well as our people," Bush said. "They brought down a symbol of American prosperity, but they could not touch its source."
But if the rough patch the economy is sure to encounter in coming weeks and months should become something worse or go on for a long time, it could diminish the public's enthusiasm for the campaign against terrorism, undermine Bush politically and further reshape the nation's domestic agenda.
The administration and both parties in Congress are weighing a broad range of responses, including tax cuts for individuals and businesses and new spending programs that would pump huge sums of money into the economy. But the White House and Democrats on Capitol Hill are already beginning to stake out differing positions, suggesting that longstanding ideological clashes will complicate efforts to reach a unified bipartisan agreement.
Greenspan's warning
The debate has been shaped in the last week by Alan Greenspan, the Federal Reserve chairman, who counseled patience and warned that a hasty move to stimulate the economy through further tax cuts and government spending could backfire. But Greenspan does not have to run for re-election or maintain political support in the way that Bush and Congress do as they lead the nation into an open-ended conflict.
RSS