Will Rate, Tax Cuts Revive the Economy?

N E W  Y O R K, March 17 -- In Miami today, more than a thousand investors gathered at a financial seminar, to learn to survive some of the worst times in stock market history.

"It was pretty bad. I'm down 50 per-cent from where I was last year!" sighed one attendee, Anne Kashmir.

"People who were drawn into the hysteria of the technology boom, let their portfolios ride, and got caught up too much in tech stocks," said Scott Wells, an investment advisor at the conference.

All three of the major stock indexes plunged last week. The Dow and Nasdaq lost nearly 8 percent, and the S&P 500 index dropped nearly 7 percent in a broad sell-off triggered by a sharp decline in corporate earnings.

Bad News on Wall Street and Main Street

"I think that Main Street and Wall Street really move along the same path these days," says John Ryding, a senior economist at Bear Sterns.

Last year, when the economy was growing at about 6 percent, the Dow was worth 16 percent more than today. Now that economic growth has slowed to about 1 percent, some experts are pessimistic about the future.

"I would expect consumer confidence, the economy, and the stock market to get worse before they get better," says James Awad, who runs Awad Asset Management.

Will Tax and Rate Cuts Do the Trick?

The shaky economy has focused attention on Federal Reserve Chairman Alan Greenspan, who is expected to lower interest rates on Tuesday by at least a half percent.

Most analysts say, however, the stock market has already absorbed that and that other measures are also required.

President Bush has hammered away at his favorite solution — a tax cut.

"It would be good news for small businesses, good news for economic growth and job creation and consumer confidence," he said in his radio address today.

Many economists believe lower taxes and lower interest rates would help stimulate the economy, though it could take another six months before the impact is felt.

"The real issue is what are corporate profits going to do before the stimulus from tax reduction and lower interest rates take effect," says Awad.