A Chance for the Senate
Monday, October 29, 2001

The Senate still has an opportunity to do what the House did not and pass a serious bill to stimulate the economy. Whether it does so appears to depend, once again, on the weak reed of the self-styled centrists of both parties.

Their choice is between another tax cut masquerading as stimulus, such as the president has proposed and the House passed last week, or a bill that will indeed replace lost purchasing power. That's what a stimulus bill should be. But will the wobbly swing voters in the Senate stand up for it?

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Shame in the House
By BOB HERBERT
October 29, 2001

“Ask not what your country can do for you . . .”

It has been 40 years since John F. Kennedy, standing hatless and coatless in the bitter cold of a snow- covered capital, delivered the lines that turned out to be the most stirring and most famous of his presidency.

If you listened closely last week, you could hear an echo of that moment on the Senate floor. On Wednesday morning, in an address to his colleagues, Senator Edward M. Kennedy said: “Now we have seen, perhaps more clearly than ever before in our lives, how we are all in this together — how if even one of us is hurting, all of us hurt. Our first thoughts on September 11 were about others, not ourselves.”

Senator Kennedy, now 69 years old, spoke movingly of the acts of extraordinary bravery and selflessness exhibited by Americans both at home and abroad in this sudden war against terrorism. And he called on the nation as a whole to adopt that spirit of selflessness as the new standard “by which we measure everything we do.”

“The standard is clear,” he said. “To seek what is right for our country, and not just for ourselves.” He said it is essential that Americans not “strive for private advantage in a time of national need.”

Senator Kennedy’s speech was, specifically, a call for fairness and common decency as Congress moves ahead with its effort to help revive an economy that was faltering before Sept. 11, and has since been thrown into very serious trouble by terrorism and war.

But last week, as the House narrowly passed its version of an economic stimulus package, the dominant motive at work appeared once again to be greed.

The Republicans who control the House thumbed their noses at the ordinary Americans who will absorb the brunt of the economic downturn and shamelessly gift- wrapped yet another bundle of tax cuts for the very well-to-do.

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Keynes revisited
Gerard Baker and Ed Crooks, Financial Times, October 5 2001 19:47

This week, with little ceremony, President George W. Bush quietly brought to a close more than a decade of US economic policy orthodoxy. By signalling his support for lower taxes and higher public spending in the next year that could reach as high as $130bn (£88bn) - 1.3 per cent of gross domestic product - he threw the US administration's weight behind the proposition that a temporary deficiency in aggregate demand should be met by a shift in government finances from surplus to deficit.

This argument, the simplest distillation of the teachings of John Maynard Keynes, has been out of favour in much of the industrialised world for 10 years or more. But with the world's three largest economies - the US, Japan and Germany - all in recession or close to it, the conventional wisdom is up for re-assessment.

Keynes är stendöd SvD-ledare 2001-03-22

A Flawed Stimulus Plan
New York Times, October 6, 2001

Responding to the demands of Republicans in Congress, President Bush has laid out a stimulus package that relies in large part on ineffective, irresponsible and regressive tax cuts.

U.S. Lost 199,000 Jobs in September
Oct. 5 (Bloomberg)

U.S. payrolls plummeted in September, posting the largest drop in more than a decade, the Labor Department said in a report that doesn’t reflect job losses after the terrorist attacks. Unemployment stayed at 4.9 percent.

Payrolls fell by 199,000 last month after declining by 84,000 in August, as service businesses lost more jobs than factories did. The largest previous drop, of 259,000, occurred in February 1991, toward the end of the last recession.

A Stimulus That Stimulates
Wall Street Journal

That StimulatesWatching the debate over economic stimulus unfold on Capitol Hill, we keep remembering that the GOP has often been called the stupid party. So stupid, it seems, that it doesnt understand its own success.

Republicans emerged from a half-century as a minority party when Ronald Reagan discovered how to revive a troubled economy. He inherited inflation and stagnation, yet within two years sparked an amazing economic boom that still echoes today. The surging prosperity paved the way for Mr. Reagans Cold War victory and the rejuvenation of the American spirit. It also led to a GOP resurgence that culminated in control of Congress.

Alas, the Republicans seem to have forgotten their victory formula. Even in the Reagan years they never quite shook their accounting fixation on a balanced budget. They bought into an arbitrary concept of the deficitignoring the difference between capital and operating expensethat they would never apply to their own households. The Reagan program would have been even better without deficits, of course. But the plan was a historic success and the deficits (especially since much of it was defense spending) a price well worth paying.

Yet 20 years later we have Washington Republicans insisting not on the Reagan model, but preparing to give in to the model Democrats failed with in the 1970s.

The troubles with technical trends
Barry Riley, Financial Times, October 4 2001 19:35

Those eight years took in a stock market bubble. This in part reflected favourable economic trends, and especially growth in corporate profits. But the scale of the price rise also reflected uprating. When I started writing the column, the S&P 500 offered a dividend yield of 2.7 per cent and a price/earnings ratio of 23, falling to 16 in 1995:
at the market peak in March 2000 the yield was just 1.07 per cent and the p/e ratio had reached 35.

This bubble was often presented at the time as being created by day-trading amateurs, but it can be better viewed as a collective mistake by investment professionals. How did it happen? Here are a number of the themes I discussed during the late 1990s:

Stimulate With Care
By Robert J. Samuelson
Thursday, October 4, 2001

But what's justified in principle could be botched in practice. As Alan Greenspan warns, it is better "to be right than quick." The danger is that a stimulus package might become (along with anything labeled "anti-terrorism") a vehicle for all sorts of dubious tax giveaways or pork-barrel-spending increases.

Three guidelines suggest themselves: (a) any stimulus program should be simple and noncontroversial, something the White House and Congress could enact quickly; (b) because the need for "stimulus" is temporary, it should not result in new permanent cuts in taxes or increases in spending; and (c) it should be effective in supporting the economy.