A Void in Fiscal Leadership

President Bush’s televised forum in Waco, Texas, on Tuesday showed his determination to avoid repeating his father’s mistakes--and his fate. Bush’s meeting with everyone from chief executives to plain folks was a first step toward acknowledging economic woes that his father, in an earlier presidency, cavalierly dismissed. But it doesn’t take a doctorate in economics to see that far more than words will be necessary to begin mending the problems.

Even as Bush held his sessions, the stock market plunged 206.5 points. Retail sales increased only slightly in July, and productivity growth slowed to a 1.1% annual rate in the second quarter, from a 8.6% pace in the previous quarter. If consumer spending plummets, the potential exists for a so-called double-dip recession.

How much blame does Bush deserve? No president can fully control the economy. Despite the continued weakness in the economy, the Federal Reserve announced Tuesday it would not drop interest rates, in that existing rates provide sufficient stimulus--for now. The Fed’s decision offers a reminder of how much economic policy power is concentrated outside the presidency.

But Bush could at least help restore confidence. Upon entering office, he tried to pin any potential downturn on Bill Clinton. Though the Clinton era may not have been a true Golden Age--the dot-com collapse did not come out of nowhere--it holds important lessons. Clinton and his Treasury secretary, Robert Rubin, reined in spending, did not carry out massive tax cuts and, as a result, ran a budget surplus.

Bush has done the opposite. To be sure, as a wartime leader he has had to increase spending dramatically for homeland defense and the military. But he could display a different kind of leadership--backing away from the fiscally reckless tax cuts that he wants to make permanent. In total, permanent tax cuts, heavily weighted to the most affluent, would cost the Treasury about $4 trillion in the decade after 2012. Nothing would do more to show that Bush is serious about the economy than a return to fiscal discipline.

Unfortunately, Bush engaged in grandstanding at the forum, calling for a permanent repeal of the estate tax and rejecting $5.1 billion in new spending by Congress. Abolishing the so-called “death tax” would be extremely costly, benefiting only a relatively small number of large estates, and withholding $5.1 billion hardly can be compared with $4 trillion in future tax cuts.

The don’t-worry-be-happy message of the economic meeting is not enough; Bush’s tax cuts send no real message about fiscal responsibility. The longer the president dithers, the more it costs consumers and workers.