WASHINGTON -- George W. Bush's magnificent call to arms last Thursday night did not include an element that Republicans and investors prayed for. He did not propose an immediate tax-cut package to revive the market. He let stand Federal Reserve Chairman Alan Greenspan's congressional testimony that day that better economic data was needed to decide whether the economy needs a boost.
"We're never going to have perfect data," Rep. Rob Portman, chairman of the House Republican Leadership and a liaison to the Bush White House, told me. Portman has been pressing for vigorous action, but what he said is about as far as any prominent Republican official will go in publicly criticizing Greenspan. While they don't speak for attribution, however, many privately admit they are appalled. "Greenspan is doing Bush just like he did his father (when he kept money tight leading up to the 1992 election)," said one GOP operative who is close to the White House.
The Fed chairman's performance last week was disappointing and aggravating -- Alan Greenspan at his worst. The former professional economic forecaster was looking at figures dancing across a green screen instead of empty stores, hotels and restaurants, ignoring $1.4 trillion of wealth disappearing in one week. He sounded gloomy about the economy without offering salvation.
Nevertheless, President Bush could have overridden the central banker at any time, especially Thursday night as part of his war address. A signal that help was on the way probably would have stopped the ruinous stock sell-off. As the Dow Jones Industrial Average continued to fall Friday morning, traders on the floor of the New York Stock Exchange regretted that the president's declaration of war was not accompanied by a declaration of war on the economy.
Early last week, quick action did seem at hand. Rep. Bill Thomas, chairman of the tax-writing House Ways and Means Committee, is one of the most skilled legislators in today's Congress. He was on his way to pulling together for an unveiling as early as last Thursday a bipartisan tax stimulus package, which is absolutely essential considering Democratic control of the Senate. Desperately needed tax help for investors (preferably a cut in capital gains taxes) would have been balanced by another tax rebate (this one to non-income taxpayers).
Hopes were punctured Wednesday, however, at a high-level, broad-based meeting convened by House Speaker Dennis Hastert. On hand were congressional leaders of both parties, Bush administration policymakers, Chairman Greenspan -- and one unusual participant: Robert Rubin, the Clinton administration's much-celebrated secretary of the treasury.
Hastert and Senate Minority Leader Trent Lott pressed for a cut in the capital gains tax rate that would immediately boost stock prices and restore investor confidence. Bush economic adviser Lawrence Lindsey still opposes such cuts but did push a package of business tax reductions (including a reduced corporate rate). Democratic leaders asked for "more infrastructure spending," but Lindsey called that the same plan that has paved over Japan but not averted 11 years of recession.
Then came the bad news. Greenspan, not exhibiting his usual self-confidence, urged a wait of up to three weeks until he had "better data." Rubin advocated a low-income tax cut to boost consumer spending.
One source who attended the meeting aggressively denied that Rubin had called for a tax increase. "Only a madman would want to do that," he told me. But later, at a meeting of House members, Rubin did just that -- advocating a rollback in the Bush tax plan's reduction of marginal tax rates.
Greenspan's Senate testimony Thursday, accompanied by Treasury Secretary Paul O'Neill, was a melancholy anticlimax. They spoke as one. "We should give ourselves 10 days or two weeks to assess what's going on," said O'Neill. Not to be outdone, Greenspan said it "may take a little longer."
A positive statement by so prestigious a figure as the Federal Reserve chairman would have galvanized economic markets. But Alan Greenspan is not president of the United States. Nor is Robert Rubin. At the peak of his popularity and with a nation yearning to follow him, George W. Bush could have told the nation Thursday night that he was bringing the same vigor to bear against the economy that he is against terror. Regrettably, he did not.