Jewish World Review Jan. 28, 2003 / 25 Shevat, 5763
Bush address a chance to bolster confidence
http://www.jewishworldreview.com | Preemptive strikes seem to be the order of the day. This time it's Sen. Tom Daschle and newly inaugurated Pennsylvania Gov. Ed Rendell leading the attack on the president's economic policies, ahead of his State of the Union message on tonight.
Daschle last Friday announced his own economic "stimulus" plan that, if passed, likely won't do much except preserve the status quo. Rendell said: "In America's hometowns, no one believes the president's stimulus plan will help the economy and create jobs." Rendell obviously doesn't even speak for all of Pennsylvania, let alone the tens of millions of Americans who don't happen to live in his state and who have given the president a sky-high approval rating.
Even former President Bill Clinton has gotten into the act. He blasted President Bush's proposed tax cuts, calling them "bad ethics and terrible economics." This is the same man who as president said he didn't understand the bond market. Now he wants to counsel us on economics. And Clinton must have a twisted sense of irony to even raise the issue of ethics.
It would be easy for Bush and the Republicans to dismiss the Democratic ranting as a desperate attack from a political party devoid of ideas. Easy, but unwise.
There remain numerous challenges to the economy. With the prospect of war with Iraq overhanging the stock market, as well as continuing concerns about corporate corruption, investor confidence has actually diminished over the past year. The UBS Index of Investor Optimism has fallen from 88 last December to 52 a year later. Consumer confidence has also fallen. The Conference Board's Consumer Confidence Index has declined from 94.6 a year ago to 80.3.
And with their attacks on the president's economic policies, the Democrats are seeking to exploit voter concerns about the markets, the economy and the seemingly imminent conflict with Iraq. I'm sure the president Tuesday evening will deal effectively with the Democrats' broadside against his policies, and I hope he'll set the stage for a far more certain direction on the issue of Iraq - which will give us reason to have greater confidence in the markets and the economy. It's become increasingly clear for all of us that the relationship between markets, the economy, and the war on terrorism and Iraq is intricate and inextricable.
I'm sure the president will also deal effectively with the Democrats' charges that his economic plan would only benefit the wealthy.
"The dividend income tax exclusion will modify corporate CEO behavior such as we haven't seen in a hundred years," says former Federal Reserve governor Wayne Angell.
CEOs of corporations will want to be paid in dividends. So CEOs themselves will want to own stocks in the companies they run. And it means they won't be looking for every little deal to avoid paying corporate income tax, Angell says, because if they do that, then they won't be able to pass through dividends that are excluded from personal income tax. This plan will change corporate behavior. And when behavior changes, adds Angell, the market value of stocks will change. And when the market value of stocks changes, then consumers and businesses alike will spend more.
But, of course, underlying all of the economics are the fundamental politics. How well the president deals with Iraq Tuesday night will set the tone in Washington and hopefully give investors and consumers reason to feel more confident.
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01/22/03: Here we go again!