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Running out of ammunition. Pushing on a string at this point.

The Bush economy continues to sputter and stall. What does Greenspan know?

At least the Republicans are in control now and will be able to take decisive action in the new term. What was the plan again?
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The Bush economy continues to sputter and stall. What does Greenspan know?

Half a point is a lot. Probably the falling industrial output and rising unemployment.

At least the Republicans are in control now and will be able to take decisive action in the new term. What was the plan again?

Tax cuts and lots of them. Increase the money supply, increase demand and increase prices.
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Tax cuts and lots of them. Increase the money supply, increase demand and increase prices.

Yep. Too bad Bush delibrately structured his plan so the really big cuts for the top earners don't kick in until past 2004 after, he hopes, he is re-elected. They may have to rethink that, or not. Up to them now.

Last I heard money supply is growing at about a 10% annual clip.
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I love it when people think that government has that much control over the economy. Revisit Macroeconomics. Only the Fed bank and the consumer (business, government <through spending>, or individuals) have any control over the economy. The consumer makes up 2/3 of the US economy. That leaves business and government to make up the other 1/3. The only thing Bush can do is spend more or give tax breaks that business or consumers can use. Which one do you prefer? Either way, it would be a small amount of cash.

Bush and the republicans can't win this one too easily. He spends more, the lefts and the media worry about budget deficits and the individual and small businesses worry about tax increases. He gives tax breaks, then lefts and the media worry about budget deficits some more.

This economy is going to take some time to recover. Business spending stays anemic and the consumer spending is starting to run out of gas due to jobs and credit concerns. Businesses have to pick up the relay baton from the consumer who has been keeping this economy above water for a long time. That means fear has to erode away and bad companies have to disappear. This is a slow process. Especially since capital was so abundant in the late 90's and 2000 that individuals purchased stocks that were not even making money. These individuals have lost a lot of money and no longer spend as much. Therefore, companies are afraid to invest in better equipment and personnel.

I think that Bush has done a fine job. Politicians whether Democrat or Republican do not help or hinder the overall economy all that much. The only gains or losses are made in sectors where the policies of each of the parties differ. Pharma, Defense and Energy will do well now that Republicans control congress. Individuals and businesses may spend a little more if more tax breaks are issued. But then that depends on the consumers willingness to spend that small amount.

Besides I am reminded that this whole economy thing actually stretches back to the Clinton era and a republican congress. Then there was a Democratic senate that didn't give too much insight when there was a Republican white house.

People make way too much about the economy when it comes to politics and the economic abilities of politicians.
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People make way too much about the economy when it comes to politics and the economic abilities of politicians.

Hi kjkraut,

That seems to be the perceived wisdom these days, except when Tinkershaw is arguing how essential the tax cuts are for investment and spending. I may be too cynical but I'm pretty sure if the economy was doing much better Bush and Ari Fleischer would be reminding everyone how great the Bush economic plan has been.

You mention the only thing Bush can do is cut taxes or increase spending. I don't believe that is really true. For example, telecom is in a depression. Huge job losses. What is Bush's plan to address that? What is his position on needed changes to the 1996 Telecommunications Act that would give the baby Bells the incentive to make the massive investment required to bring broadband the last mile to the masses? Surely that would be good for the economy. And it doesn't involve spending. It involves changing certain laws so that the incumbents have some assurance they will see an acceptable return on capital.

Bill Mann (TMFOtter) has written right here about why that is neccesary and how it might be accomplished. Others have written on the problem as well. Have you heard anything from Bush on moving a plan forward?

http://www.fool.com/news/foth/2001/foth010718.htm

There are many things like that that could be done but are not being done and that is why even Larry Kudlow type Republicans have lost confidence in the Bush economic team and why changes will probably be made soon. It simply isn't accurate to say that the only things that can be done are spending or taxes. Or nothing.

Mike

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Hi Mike,

I hear you. I even buy into a lot of it. However, I still do not think that the change in regulation to the 1996 Telecommunication's Act is going to be enough to kick start the economy. Nor do I think that a mere change in someother form of regulation is going to make companies spend more money right now. These ideas you mention are great ideas and should be implemented. However, these are just sector improvements. Not overall economy changing events.

Most company balance sheets are a mess. Most of the income growth is due to cost cutting. The balance sheets need to be cleaned up. Revenue needs to grow. These things won't happen until the fear is gone. That may take some time. I think we are on the right path, but I think this is going to be a long and painful growth path.

Regards,

Kevin
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Most company balance sheets are a mess. Most of the income growth is due to cost cutting. The balance sheets need to be cleaned up. Revenue needs to grow. These things won't happen until the fear is gone. That may take some time. I think we are on the right path, but I think this is going to be a long and painful growth path.

Hi Kevin,

You can see the lack of interest in any discussion that involves any ideas about what can be done. Bush has managed to completely convince the American public that little or nothing can be done except huge future tax cuts and overthrowing Saddam Hussein and who knows who else.

I agree that some of this is the business cycle and some of the depression in telecom is simply due to the effects of capital misallocation. But one of the reasons the balance sheets are a mess is because nobody is spending on telecom! The suggestion was nothing can be done, the Bush-created low expectations. How about

1. Change the Telecommunications Act so the hundreds of billions will be spent on broadband

2. The Bush Justice Department indicts the criminal enterprise that was WorldCom so it doesn't emerge from Chapter 11 free of debt and free to destroy pricing power of its competitors. The restatement of earnings is up to about 9 billion dollars and growing.

3. Adjust telecom equipment depreciation schedules and targeted investment tax credits.

Yes, it's just one sector but it's a big one and the one in the biggest trouble but it doesn't involve grandiose plans to save the free world so little interest from this administration.

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And if the economy fails to respond to these amazingly low interest rates, what's next? Where can you go?
The parallels between management of the American and the Japanese economies are getting disturbing.


CF
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The parallels between management of the American and the Japanese economies are getting disturbing.

But the causes are very different. So the parallels are likely to be illusory.
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