Bush Aide Admits Recovery Is Slow
The Bush Administration’s top economic adviser acknowledged Monday that the economic recovery is going slowly but attributed it to the mildness of the past recession.
The remarks by Michael Boskin, chairman of the Council of Economic Advisers, opening the annual convention of the National Assn. of Business Economists in Los Angeles, mirrored the results of an association survey finding that nearly 80% of the nation’s economic forecasters said the recession ended in the second quarter.
The economists also said the economy will grow at a slow rate of less than 3% next year.
Boskin agreed that the recession hit bottom this spring, adding that increased housing starts and industrial production since then are evidence that the economy is recovering. He said, however, that declaring the recession over--as Boskin has done publicly--does not mean that the economy is back to where it was before the recession started. Rather, he said, it means that conditions are improving.
Boskin noted several differences between the last recession and current recovery with previous recessions and recoveries.
One difference is that some businesses that historically have helped lead recoveries, such as commercial real estate and auto production, remain soft. In addition, the recovery has been hurt by such factors as tight lending and the “drag” caused by state and local government budget problems.
Separately, the conference featured a speech by Henry Kaufman, the former Salomon Bros. economist nicknamed “Dr. Doom” in the early 1980s for his bearish forecasts. Kaufman, now president of his own firm, left Salomon in early 1988, in part because of his objections to Salomon’s growing role in the risky junk bond market.
Kaufman did not mention by name his former employer, which is embroiled in a spreading government securities scandal. But he spent considerable time decrying recent financial scandals, which some at the conference interpreted as veiled references to Salomon’s problems.
“The shabby events of the recent past demonstrate that those engaged in the business of finance should not and cannot escape publicly scrutiny,” Kaufman said.
Kaufman said much of the lapses in conduct should not be blamed on lax regulators or arrogant “yuppies of Wall Street” as some people frequently do, but rather on “some of the senior management of my generation.”
Senior management, Kaufman said, should “hammer home the central truth of financial behavior. Breaking the rules and violating the law is not merely a breach of ethics. It is poor business.”