The New Year opens with Americans on the edge of war in the Mideast and on the brink of the first recession to engulf the county in eight years. The President may be doing a skilled job of crisis-managing the Persian Gulf problem, but the economy is another matter.
In fact, the President seems oblivious to the nation’s mounting economic woes. Not once has he acknowledged the deepening slowdown that is throwing men and women out of work by the thousands. As the unemployment lines grow, so does the credit squeeze on business and consumer alike. But dare the President utter the verboten “R” word? So far, it’s not in his vocabulary. And the only major economic initiative Administration officials are planning is banking reform.
Surely the President is preoccupied with matters of Saddam Hussein and the prospect of war come Jan. 15. But the fragile economy that is growing weaker by the day is fast becoming the most pressing domestic problem. Americans for the most part are standing firm with the President on the Persian Gulf crisis. Now he needs to stand tough by Americans and lead them through the economic crisis.
Addressing the economic problems will not be easy for a President facing reelection. It will take political will, some tough calls and retrenchment from some campaign promises, like cutting the capital gains tax. But then he’s already retreated with his no new taxes pledge. Certainly no one expected the eight years of economic prosperity to last forever. But the crunch setting in is even more problematic given the nation’s ballooning deficit and weakened banks. The government can’t spend its way out of this recession. And the economy is not responding to recent moves by the Federal Reserve Board to stimulate activity by cutting interest rates. This is worrisome.
The outbreak of war is likely to throw the fragile economy further out of kilter, especially with the worsening economic news:
--November’s 1.2% plunge in the Commerce Department’s Index of Leading Economic Indicators was worse than October’s. It was the fifth consecutive monthly decline and the worst since November, 1987.
--Factory orders of big-ticket durable goods plunged 10.5% in November to their lowest level in 2 1/2 years.
--Tight-fisted lending practices are crimping new construction contracts, which fell again in November to a five-year low.
--Consumer confidence about the economy continued to weaken in December. Americans are increasingly worried about both their personal finances and the state of economy. So their spending plans will remain weak during the first half of 1991.
--Rep. Lee Hamilton (D-Ind.), chairman of the congressional Joint Economic Committee, predicted that the nation’s unemployment rate could rise to nearly 8% from the current 5.9%. “We will, in fact, have a recession,” he said in his 1991 outlook.
The President should read his lips--then move to acknowledge the recession and set out an agenda to ease us out of this mess.