Bush Cheers Rate Cut

A U S T I N, Texas, Jan. 3, 2001 -- 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.

Bush broke the news of the Fed’s action himself at the economic forum, and the participants reacted unanimously, raising a toast to Greenspan.

In a parade of chauffeur-driven town cars, business leaders from around the country arrived at Bush’s summit this morning with a blunt message for the president-elect: Times are tough.

Most of the participants were staunch supporters of Bush during the campaign — and many run companies that are among the hardest hit by the slowdown. The president-elect clearly felt their pain.

“I thought the president-elect was terrific in his willingness to listen to business leaders across the country,” said venture capitalist Gerry Parsky of Aurora Capital.

Power Play

But there’s also an agenda, as Bush was using the forum to solicit support for tax cuts, the centerpiece of his presidential campaign.

Bush is hoping that winning support from these titans of industry can help him overcome considerable Democratic opposition to his tax cut plan. For months, Democrats on Capitol Hill have scorned Bush’s proposals, but this morning — before the Fed moved — House minority leader Richard Gephardt signaled a new willingness to support a bigger tax cut than the $500 billion package Democrats proposed last year.

“Obviously, we are now looking at larger amounts than that because of the enlarged surplus projections and because of the slowing in the economy,” Gephardt told NBC.

But some Republicans hope to seize the economic moment and push for even more.

“If anything, we ought to be talking about doing the tax cut sooner, implementing it quicker or doing a bigger tax cut,” said Sen. Phil Gramm, R-Texas.

Bush also announced today that Lawrence Lindsey, one of his top economic advisers during the campaign and a former member of the Federal Reserve board, would join the White House staff as assistant to the president for economic policy.

Bush Meeting Roster

Business leaders meeting with President-elect Bush today and Thursday:

Today: Craig R. Barrett, president and chief executive officer, Intel Corp. J. T. Battenberg III, chairman, president and CEO, Delphi Automotive Systems Stephen Brobeck, executive director, Consumer Federation of America Daniel A. Carp, president and CEO, Eastman Kodak John T. Chambers, president and CEO, Cisco Philip M. Condit, chairman and CEO, The Boeing Company Richard K. Davidson, chairman and CEO, Union Pacific Michael S. Dell, chairman and CEO, Dell Computer Thomas J. Donohue, president and CEO, U.S. Chamber of Commerce Stanley Druckenmiller, chairman and CEO, Duquesne Capital Management Jack Faris, president, National Federation of Independent Businesses Donald V. Fites, former chairman and CEO, Caterpillar Steve Forbes, president and CEO, Forbes Inc. Raymond V. Gilmartin, chairman, president and CEO, Merck & Co. Carlos M. Gutierrez, president and CEO, Kellogg John M. Hennessy, chairman-private equity, Credit Suisse First Boston Kenneth Langone, chairman and CEO, Invemed Associates, LLC Harvey Karp, Mueller Industries Nancy Lazar, executive vice president and partner, International Strategy & Investments Chuck Knight, CEO, Emerson Electric Bruce Kovner, founder and chairman, Caxton Corp. Floyd Kvamme, Kleiner Perkins Caufield & Byers Ken Lay, chairman and CEO, Enron Terry Jorde, Independent Bankers Association of America Jim Morgan, CEO, Applied Materials Gerry Parsky, Aurora Capital Robert E. Rich Jr., chairman, Grocery Manufacturers of America H. Lee Scott, president and CEO, Wal-Mart Ivan Seidenberg, president and co-CEO, Verizon Communications John Snow, chairman, president and CEO, CSX Corp. Solomon D. Trujillo, chairman, president and CEO, graviton Inc. G. Richard Wagoner Jr., president and CEO, General Motors Darcy L. Walker, senior vice president, Discover FinancialServices John F. Welch Jr., chairman and CEO, General Electric Co. Miles D. White, chairman and CEO, Abbott Laboratories Mike Wright, chairman, president and CEO, Super Valu Inc.

Thursday: Michael Dell, Dell Computer Corp. Jim Barksdale, The Barksdale Group Craig Barrett, Intel Corp. Carol Bartz, Autodesk Inc. John Chambers, Cisco Systems Dick Egan, EMC Corp. Carly Fiorina, Hewlett-Packard Lou Gerstner, IBM Dave Hanna, Hanna Capital Floyd Kvamme, Kleiner Perkins Caulfield & Byers Scott McNealy, Sun Microsystems Jim Morgan, Applied Materials Steve Papermaster, Agillion Len Pomata, Oracle Gregory Slayton, ClickAction