No Free Lunch--and No Easy Way Out : Bush needs a Camp David-style conference on the economy

There’s little to cheer about in this holiday season. Day after day the economic news is unsettling. The massive downsizing at General Motors is only the latest downer in a string of setbacks to an economic recovery. Jittery consumers need some reassurance. Once again The Times suggests that it’s time for President Bush to call an economic summit at Camp David.

THE TURNAROUND: The President has finally conceded that the nation is mired in a recession, abandoning his upbeat economic assertions that have cost him dearly at the polls. The turnaround is a welcome “reality check” and a significant move beyond the inane TV theatrics of the President’s recent $28 shopping spree at J.C. Penney to encourage consumers to spend.

Jump-starting the economy is not as simple as that in this climate. The big tab for the record 8-year stretch of go-go growth in the 1980s is coming due now. Government, business and consumers spent well beyond their means. The self-correcting free market is forcing everyone to pay down those hefty bills. There’s little to spend, so employers from the giant GM to small defense contractors are having to retrench, reorganize and lay off workers. That works against the normal forces of economic growth. No wonder there’s a Scrooge in this Christmas.

Now the President is said to be looking at a one-time tax rebate. That’s good political fodder, but does it make economic sense? Remember the last time Bush threw out an idea--cutting credit card interest rates? The markets went bonkers. An ill-conceived tax cut could fuel inflation and send interest rates back up.

The tricky challenge for the President and Congress is to come up with a growth plan that encourages long-term savings, investments and job creation, while providing short-term stimulus. As Federal Reserve Board Chairman Alan Greenspan said Wednesday, “Indeed, firm reliance on policies directed toward longer-term stability and incentives are likely to do as much or more for short-term economic expansion as a so-called quick fix.”

Adding flexibility to the system is further complicated by the budget deficit, which must be held in check or it will undermine future U.S. competitiveness in the global economy. The Bush Administration ought to renew attempts to overhaul the nation’s scared banks, which have been reluctant to make loans.

THE CHALLENGE: The President must consider incentives to pump up the savings rate. He must do the same to encourage investments in manufacturing, research and development and affordable housing. The incentives must be structured to reward long-term investments in productive, job-generating industries. The Bush Administration has quietly begun to support new technology by funneling money into joint research projects with the private sector.

Meanwhile, with domestic consumption in a slump, the President should work at boosting U.S. exports by resolving the impasse in the world trade talks and gaining greater access to Japan. That would help put workers back in U.S. factories.

Savings and investment are crucial to getting people back to work. New jobs must be created to accommodate not only those laid off but the thousands in the military who will return to civilian life with the end of the Cold War.

The President’s new world order means the United States must have a new economic blueprint. A simple tax cut that gives people less than $1 a day will do next to nothing to instill confidence or spur consumer spending. Americans are looking for assurance that they will have jobs, real gains in income and an improving standard of living. That takes leadership from Bush on the domestic front. That would be the finest Christmas present a President could give his country.