Budget balancing

Budget balancing
Americans would be more comfortable if the president were more realistic

Sept 1, 2001

The president has returned from his vacation. Some Americans have been wondering why a man who worked so hard, and spent so much money, to win the office would want to take a vacation just a few months into the job. His month off was a luxury few people could afford, even with the generous tax prebate check Bush arranged for us to have. Those who could manage the finances realized that it might not be a good idea, in the face of an economic slowdown, to let the boss know how expendable they really were.

Now that he’s refreshed and energetic, the Associated Press says, the president hopes to sell the American people on increased defense and education spending, protections for HMO patients, and Medicare coverage for prescription drugs. Democrats argued that he can’t pay for all of those programs and his tax cut without taking money from Social Security reserves. During his campaign, Bush pledged not to do that, and plundering Social Security certainly would not be a good way to solidify support for his other policies. Perhaps now that he’s back in Washington, his advisors can get that through his head.

Bush said he would continue to put his faith in a slow but eventual economic recovery, driven in part by the spending habits of Americans as they cash their tax rebate checks. Some wise taxpayers have been banking those checks rather than cashing them, though, hedging against the slowness of that eventuality.

The Federal Reserve’s seven rate cuts this year have made big-ticket spending a little more palatable, but consumers know they also need a continued ability to make payments on the principal, and that’s hardly a sure thing until this wobbly economy decides which way to trend. The president needs to remember the logic behind those rate cuts and the spending they were intended to promote: to avert a recession, or at least prevent the economic trough from growing quite so deep.

Federal Reserve Chairman Alan Greenspan, in a speech yesterday, said that while stock prices have gone down, down and farther down, the value of real estate and business assets has not dropped precipitously and, in some cases, has increased. To consumers and businesses, that means that their fixed assets may have gained value but their liquid assets have shrunk, and that has to translate into slower spending.

Consumer spending accounts for two-thirds of all economic activity, and so George W. Bush needs to understand that fears about the stability of Social Security, even years down the road, can torpedo any chances of immediate economic recovery. Many Americans would feel much more comfortable right now if they were convinced the president was being realistic about the federal government’s income potential for the next year.