Thu, Apr 03, 2003 page12

• US eyes war's impact on economy

  WATCH GROUP Top policy-makers are meeting daily to monitor the world's oil and financial markets while Cabinet members try to sell the economic-stimulus package

  • AP
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  The White House has embarked on a campaign to keep the war in Iraq from pushing the country back into a recession.

  A "watch group" of the administration's top policy-makers began holding daily meetings when the war started two weeks ago in an effort to stay on top of developments in world financial markets, global oil markets and the US economy.

  Federal Reserve Chairman Alan Greenspan also has been a participant in the sessions, which have been chaired by Stephen Friedman, the director of the president's National Economic Council.

  In addition to these strategy sessions, the White House is dispatching various Cabinet secretaries around the country to sell President George W. Bush's economic-stimulus package. The Senate voted last week to cut the price of the package in half.

  "We are watching the economy through this period, keeping a close eye on energy prices and making sure that we are all talking to each other," Commerce Secretary Donald Evans, one of the participants in the White House meetings, said in an interview Tuesday.

  Friedman's staff has developed what they have dubbed a "dashboard" of key economic indicators. They update it throughout the day so all members of the team can keep apprised of any changes in economic or market conditions, according to a senior administration official.

  "We have been looking for any economic warning signs that might start to flow from developments in Iraq," said the official, who agreed to be interviewed on condition of anonymity.

  "The purpose of this group is to look for early warning signs," he said.

  Stock markets in recent weeks have been on a rollercoaster ride, soaring in the days immediately before the bombing -- when investors hoped for a short and quick US victory -- and then declining as those hopes were dashed.

  Even with all the administration efforts, analysts said the US could still end up in another recession if the Iraq war drags on.

  ``We will be in a full-blown recession if the war isn't effectively resolved in the next two to three months," said Mark Zandi, chief economist at Economy.com.

  ``Confidence is falling, layoffs are mounting and troubled industries like the airlines are gasping for air," said Sherry Cooper, chief global economic strategist for BMO Financial Group.

  The administration's watch group has been monitoring all of these developments, holding daily sessions at first as each of the Cabinet secretaries educated the others about particular areas of expertise, then cutting back to meetings several times each week.

  Besides Evans, other Cabinet members who have been participating include Treasury Secretary John Snow, Energy Secretary Spencer Abraham and Transportation Secretary Norman Mineta.

  The discussions have covered a wide variety of topics, from airline bookings to world oil supplies.

  Greenspan, who has weekly breakfasts with the Treasury secretary, has been attending many of the watch group discussions and met with Bush separately last week to discuss economic developments.

  While the Fed normally is very careful to protect its independence from political influence, economists said it was important for Greenspan to be fully informed of the economic data the administration is gathering during this period of war, especially since the Fed can provide fast-acting economic relief in the form of further cuts in interest rates.
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