Markets Vote 'No' on Bush
Tuesday, January 22, 2008; 1:00 PM
When it comes to his ability to forestall a recession, President Bush appears to be getting a vote of no confidence from the world and domestic financial markets.
You can follow all the latest here, on washingtonpost.com. After massive world-wide sell-offs yesterday -- and despite an emergency interest-rate cut by the Federal Reserve -- the Dow Jones industrial average dropped more than 450 points in its opening minutes, before starting to recover.
The markets could bounce back today or in the coming weeks, of course, but the pressure is now on the president and it's not at all clear how he'll stand up to it.
Bush will speak about the economy this afternoon, when he holds a photo op with congressional leaders. White House Press Secretary Dana Perino said this morning that Bush hasn't ruled out an even larger stimulus package than the one he proposed on Friday.
As Peter Baker and Neil Irwin wrote in Saturday's Washington Post, Bush on Friday called for "a $145 billion stimulus package centered on tax breaks for consumers and businesses to rejuvenate the lagging U.S. economy, a move that drew unusual bipartisan praise on Capitol Hill but did not boost confidence on Wall Street."
Sheryl Gay Stolberg wrote in the New York Times that "Bush laid out his ideas for an economic rescue package only in broad strokes, saying the plan must be 'built on broad-based tax relief' and 'big enough to make a difference in an economy as large and dynamic as ours.' He did not use the word recession, but acknowledged that 'there is a risk of a downturn.'"
The unusual bipartisan comity over the idea of a stimulus package was due not only to a shared sense of urgency, but also to Bush's agreement not to link it to his longtime quest to make his tax cuts permanent.
Yet Sarah Lueck and Greg Hitt write in today's Wall Street Journal (subscription required) that a final agreement is more than a month away, at best: "Several big differences remain between Democrats and Republicans, including who should receive tax rebates, and how much cash should be devoted to additional spending items favored by Democrats. . . .
"A sticking point is who would receive rebates. Republicans prefer to limit them to people who pay income taxes. Democrats insist others with lower incomes should be eligible, and that especially people who pay payroll taxes to Social Security and Medicare should be included."
Lueck and Hitt write: "Lawmakers had hoped to emerge from the meeting with a framework for a deal that could move through Congress by mid-February. Now, however, aides said the chance of a detailed breakthrough today is slim, and the timetable for passing a measure has slipped by at least a couple of weeks."
'Feel Good Economics'?
If Republicans and Democrats agree, then it must be right -- right?
Not necessarily. Bruce Bartlett, a Treasury Department official from Bush's father's administration, writes in a Wall Street Journal op-ed: "[T]here is virtually no empirical evidence that tax rebates are an effective response to economic slowdowns. The increased personal saving doesn't help the economy because the federal budget deficit, which can be thought of as negative saving, offsets all of it in the aggregate. The main benefit of a tax rebate would seem to be political -- giving politicians a way of appearing to be doing something about the nation's economic problems that is superficially plausible.