Bush Cheers Rate Cut

A U S T I N, Texas, Jan. 3 -- President-elect George W. Bush today applauded the Federal Reserve’s interest rate cut, but cautioned it’s “not enough” to stop an economic “tailspin” that he says requires a massive tax cut to boost business.

Emerging from a closed-door meeting with nearly three dozen corporate chiefs, Bush complimented the Fed’s surprising “bold step” of cutting short-term interest rates by one half of 1 percentage point.

“I am pleased that the Fed has cut the interest rate,” Bush said. “It was a strong statement that measures must betaken to make sure our economy does not go into a tailspin.”

But Bush challenged Congress to take another “bold step in the halls of Congress” and act quickly on his three-year plan to cut income taxes by $1.3 trillion.

Warning Shot

While Bush viewed the Fed move as a message to Congress that supports his case for tax cuts, some analysts picked up a different signal.

“The message is also for the Bush administration, that the Fed can take care of the economy, thank you very much,” Economist Diane Swonk at BancOne in Chicago told ABCNEWS. “Tax cuts are not necessary. This is something [Federal Reserve Chairman Alan] Greenspan has gone on record as saying, that he prefers debt-reduction over tax cuts.”

But Bush said he does not think the Fed’s move, and the resulting rebound of the stock markets, will stem the desire for his tax cut package. “Not in the least,” he said when asked.

Bush was in Austin, Texas, presiding over a two-day economic summit with executives from Boeing, Verizon, General Motors, Eastman-Kodak, Wal-Mart, General Electric and other industrial giants.

In part, Bush was hoping to gauge the state of the economic union from the view of those on the ground, rather than from government statistics.

Near the end of 1992, then-President-elect Clinton held a similar economic summit, a rather splashy public affair. In contrast, Bush is holding his meetings behind closed doors, giving him a chance to candidly talk and listen to the business leaders without distraction.