NEW YORK – President Bush preached optimism and Republican orthodoxy of minimalist government intervention Friday as the best approach to an increasingly troubled economy.
The president chose the nation’s financial heart as the backdrop – and titans of business as the audience – for his most high-profile attempt to date to calm nerves from Wall Street to Main Street.
His main message, aside from displaying confidence in the U.S. economy’s underpinnings and historical resilience, was to caution against overreaction by policymakers that could damage the economy’s short- and long-term prospects, something he did about a half-dozen times in 40 minutes of remarks.
“Our economy obviously is going through a tough time,” Bush told a gathering of The Economic Club of New York. “The challenge is not to do anything foolish.”
The Bush administration has been trying to find a balance between acknowledging leaner times and forecasting that better ones will come soon. White House officials predict that things will turn around by summer as the effects are realized from a series of aggressive interest rate cuts by the Federal Reserve and an economic stimulus package that will send tax rebate checks to 130 million households starting in May.
But those actions face off against a series of blows; the dollar has dropped to new lows, while oil and gold are hitting new highs. The economy is now shedding jobs, rather than adding them. Retail sales have dropped.
Some economists believe the economy may already be in recession – a milestone that generally requires at least two consecutive quarters of negative growth.
At the root of the troubles is a two-year slump in the housing sector that has seen sales and prices plunge and created a severe credit squeeze that is rippling through the economy. In the race to elect Bush’s White House successor this year, economic worries have now replaced the Iraq war as the No. 1 concern of voters.
Presidents can do little to alter the economy’s course. Perhaps the most effective tool of the Oval Office is the bully pulpit, from which presidents try to keep up people’s spirits – and their trips to the mall.
In that mold, Bush emphasized that this is not the first time the economy has been rattled and that he remains certain it will ride out this period as others. He said low unemployment, strong productivity, high exports and a deficit that is small compared with economic output are proof of the economy’s fundamental strength.
“Every time, this economy has bounced back better and stronger than before,” the president said.
Delivering this message before the economic club’s exclusive, wealthy, largely homogenous membership of top executives had Bush preaching to the choir: the 101-year-old group’s new chairman is Glen Hubbard, Bush’s first head of the White House Council of Economic Advisers.
He said his administration is staying abreast of the economy’s developments. Bush even made a special point of hailing the Fed’s recent actions, including moves this week to add liquidity to credit markets and on Friday to endorse an arrangement to bolster troubled Bear Stearns Cos.
Bush said he opposed several measures aimed at the housing crisis that are pending on Capitol Hill. They included proposals to allocate $400 billion to purchase foreclosed-upon and now-abandoned homes, to change the bankruptcy code to allow judges to adjust mortgage rates, and to artificially prop up home prices.
“The temptation of Washington is to say that anything short of a massive government intervention in the housing market amounts to inaction,” Bush said. “I’m deeply concerned about law and regulation that will make it harder for the markets to recover – and when they recover, make it harder for this economy to be robust. And so we’ve got to be careful and mindful that any time the government intervenes in the market, it must do so with clear purpose and great care. Government actions have far-reaching and unintended consequences.”
He also said it would be a mistake to block trade agreements that could generate new growth or fail to extend the tax cuts passed during his presidency.
“It’s important not to overcorrect, because when you overcorrect you end up in the ditch,” Bush said.
He appeared to be counseling a certain amount of acceptance of economic difficulties.
“In a free market, there’s going to be good times and bad times, that’s how markets work,” Bush said. “The market is in the process of correcting itself; markets must have time to correct.”