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<p>USA Today (12/22, McQuillan) reports, "In sharp contrast with the warm exchange between" President-elect George W. Bush and "President Clinton during a visit to the White House on Tuesday, administration officials are objecting to Bush's repeated warnings of an economic slowdown. They say Bush is undermining the strength of the economy to create support for tax cuts he says will help the economy." White House economic adviser Gene Sperling said yesterday, "It seems like a serious mistake for the president-elect to be continually sounding a drumbeat of economic anxiety," adding that he "risks creating a harmful economic anxiety that itself could have a negative impact." Sperling said "Republicans are trying to fuel fears about the economy to justify Bush's call for a $1.3 trillion tax cut over nine years, a proposal that was central to his campaign." Bush "said he is being practical." Added the President- elect, "I think people are going to find out that when I'm sworn in as the president I'll be a realist, " adding, "And if there are warning signs on the horizon, we need to pay attention to them, and we need to act in a positive way to make sure that our economy continues to grow." ABC News (12/21, Martin) added, "Republicans and Democrats fight all the time over all sorts of issues. This particular argument is whether George W. Bush is low-balling economic growth for political gain. Today, the President-elect defended himself against White House charges that he is playing politics about an economic slowdown." Bush was shown saying, "One of my responsibilities is to anticipate problems and be prepared to act, should they occur." ABC added that after Sperling's comments, Vice President-elect Cheney was also "quick to respond." Cheney was shown saying, "Both President- elect Bush and myself have tried to be cautious in that regard. But there does seem to be a lot of evidence out there." ABC added, "From the White House office he will soon vacate, Sperling argued back -- the new team should be cautious." Sperling was shown saying, "A president needs to show he's non- political and independent and objective when he talks about the economy. Because the risk is, in serving the short-term political objective, they will actually make the economy and confidence worse." CBS (12/21, Roberts) reported, "At a time when the President-elect should be focused on transition he find himself in a fight with the outgoing Administration -- a fight he feels he had to pick if he hopes to survive past his first four years." CBS added, "Democrats have accused Bush of acting more like a candidate than an incoming President, but Bush is all too well aware that if the economy goes south on his watch Democrats will beat him over the head with it for the next four years just like they did his father." CBS (12/21, Rather) reported last night, "All of this can be pretty confusing so for clarity a short time ago I talked to one of the world's best known economists, the Secretary of Treasury of the US, Larry Summers. I talked to him about the health of the economy as the Clinton Administration leaves office. I talked to him about a possible recession." Rather: "Is it smart politics to be talking about a recession at this stage?" Summers: "Well, that's a judgment for others to make. I think what's important is to try to focus on the underlying realities. The consensus forecast continues to be for moderate growth in the 3% range over the next four quarters. We'll have to see, but I think it's a mistake to lose sight of some very strong fundamentals." The Washington Post (12/22, Allen, Ricks) reports that Bush "stepped up his warnings about the state of the economy today, despite complaints from the White House that his bearish talk could become a self-fulfilling prophecy." Bush "said there are 'warning signs on the horizon'" even as "a variety of high-level Clinton administration officials worked the airwaves and telephones, charging that Bush is trying to promote his tax cut at the expense of market confidence, and is seeking to avoid blame for any future downturn." The Washington Times (12/22, Cain) reports, "The simmering dispute lent an undercurrent of friction to Mr. Bush's conciliatory meeting Tuesday with President Clinton in the Oval Office. " NBC (12/21, Brokaw) reported last night, "President-elect Bush says this is a dangerous time and his massive tax cut is the best course correction. The White House and Democrats countered that scenario is too radical, and it will only bring more trouble." NBC added, "In Austin, Bush dismissed the criticism, insisting he is just being realistic." Reuters (12/21, Edmonds) reported, " Fresh debate raged on Thursday as the George W. Bush team parried accusations it was trying to 'talk down' the economy for political ends, arguing instead that it was offering necessary 'straight talk' about an evolving slowdown." Clinton economic adviser Gene Sperling "accused Bush of undermining the economy for short-term partisan gain so as to bolster the case for his $1. 3 trillion tax cut plan." Sperling said, "What you're seeing is President- elect Bush and his team actually talking down our economy, actually probably injecting more fear and anxiety into the economy than is justified. And I think that's a serious mistake for him." CNN (12/21, Inside Politics, Woodruff) reported the rally on Wall Street yesterday "did not seem to take the heat off the President-elect, who has been speculating a good deal in public about the possibility of a recession." CNN (O'Connor) added, "The 'R' word. To the Clinton Administration, those are fighting words." Clinton economic adviser Gene Sperling was shown saying, "To talk down your own economy just because you think it might help your political positioning, or put a little more blame on your predecessor, or try to give you a little more credit, is really a very short-term strategy." CNN added, "So is President- elect Bush just trying to garner support for his tax cut?" Jim Miller of Citizens for a Sound
Economy was shown saying, "They have an incentive, not only to have a tax cut as an inoculation against a recession, but also to have people recognize that the circumstances are not the best right now, and when they take over, it's not really on their watch that the economy was going down." CNN added, "And don't president-elects traditionally talk down the economy?" Brookings Institution analyst Alice Rivlin was shown saying, " It is unusual for a president to talk about recession. I don't ever remember that. And it seems to me it's a dangerous thing for a president to do." CNN added, "Dangerous because markets are influenced by psychology -- confidence - - which drives spending. And confidence can be quickly shattered when the word recession is used." But while "some say talk of recession is worsening a slowing economy, others say it's simply being realistic and prudent."</p>
<p> Sperling Interview. CNBC (12/21, Insana) interviewed White House economic adviser Gene Sperling. Asked about the Bush Administration's statements of concern regarding the possibility of a recession, Sperling said, "Let's remember that the blue chip forecast that just came out on December 10, had 49 out of 50 forecasters, 49 out of 50." Insana: "Can I stop you for one second? I know President Clinton talked about that a couple days ago. In the past, when it came to turning points in the economy, 49 out of those 50 economists have usually been wrong. Why should we listen to them right now?" Sperling: "Well, what's important is that if you let me finish there, that with 49 out of 50 or 98% projecting growth between 2.5% and 3.5%, that doesn't mean there's no chance things could get worse. But what it does mean is that a president and his new economic team should not be talking down the economy, should not be injecting more anxiety in the economy than the top private sector forecasters are projecting, because a new president and his team actually have an impact on market and consumer confidence and if they're projecting things are worse than others in the private sector are, they run the risk of both seeming political and actually hang a negative impact on consumer confidence." Insana: "Let's roll back the videotape to 1992, the Clinton Administration at a time when the economy was actually coming out of a recession by the time Bill Clinton got to the White House, was still suggesting that the economy was very weak, that people were underutilized, almost a malaise in the US that wasn't entirely evident in economic numbers. Aren't they doing what you guys did 8 years ago?"
Sperling: "Well, I think that as you make a transition from a campaign to governing, you have to move out of the role of just being a critic and you have to understand that what you say does actually have an impact on consumer confidence itself. I think one of the things we benefited in having Bob Rubin come on our team was an understanding that our words and our signals themselves were important: and that we needed to bend over backwards to be prudent and disciplined in our comments. And I think that I hope that Paul O'Neill has the same type of impact, I think he is someone with an excellent reputation. Right now what you see is almost on a day by day basis, members of the Bush team out talking up a recession or talking down our own economy around Christmas time. That doesn't make sense. That can only have a negative impact on our economy."
Insana: "Is it possible, though, Gene, the comments are realistic? Look what happened in the stock market this year. The NASDAQ has fallen 54% from its high, that had not happened in 30 years. We've seen the dot coms fall 90%, we've seen a change in consumer psychology that started on Wall Street and spread to main street. If they're being realistic about future prospects, might they not be more capable, then, of passing programs that could help to alleviate any problems in the future?" Sperling: "Well, I think that this may, talking down the economy, may serve short term political objectives. But I think in the long-term, it's better for an Administration to try to be disciplined and nonpolitical in their comments. It probably would have benefited President Clinton to rail against the Fed in 1994 politically, but it would not have been good for the long term confidence in this economy and in this Administration."</p>
<p> More Commentary. In its lead editorial (1/1), the New Republic said, "In the brave new world of GOP-controlled Washington, the 'responsible' position on tax cuts is completely irresponsible. America doesn't need the repeal of the estate tax and the marriage penalty. In fact, it doesn't need any tax cuts at all." It would be better to save "the money, using it to pay down the national debt, and then crediting it to Social Security." But "unfortunately, the candidate who proposed doing that isn't the one getting ready to move into the White House. His opponent is. And it looks as if he's already succeeded in moving the political landscape to the right, tainted victory and all."