Matt's Sauna
What Would You Do?

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April 9, 2001

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Just curious what changes you would make if you had the opportunity

Assessment: You cannot have as much new capital infusion into the economy like we had from 96 to 99 and then just cut it off without serious reverberations throughout the economy. It's like as if we tried to build all the railroads built in the 1880's to 1900 in three years and then just quit and never started another new one for 5 years. Sure, some of them failed and JPM & the boys had to consolidate them, but that didn't stop them from raising new money for the "Great Northern" to Seattle etc. It was the new money that kept the country (and the steel mills, etc.) growing.

There is nothing that destroys an economy faster than uncertainty. And that's what we have now. The consumer may have not felt it big time yet, but they are living in a fairyland as they don't understand the risk (Haven't been there - haven't felt that). The business people from my generation understand it and they are the most uncertain and therefore the least likely to risk. Enough of them will hunker down, conserve cash, and await developments just like the MBA schools teach and exacerbate the problem.

Wow, if I were President! I'd coordinate the following scenario with the Fed.

Tell Greenspan to go ahead and only reduce interest rates by only 1/4% or 1/2% at the regular May meeting to keep inflation in check if that's what he feels is right (remember I'm not his boss). Tell him to have a thick skin for all the screamers from Congress & Wall Street and I won't publicly criticize it (as if he would care anyway). In the meantime, I'd tell him I will buy off the Democrats and old Republicans in close districts by letting them spend within their own districts some Federal money (about 100 Billion over 2 years should be enough) on public works (in the name of pump priming) and move some more of a reduced tax cut up front into 2001 & 2002. Make, as part of the deal, to only reduce, not eliminate estate & capital gains tax. Tell the Congressional leaders to announce "their" consensus agreement to moving the country forward a week before Memorial Day recess (so they'd have a week to pass it) and appeal publicly to me as President that this is the best deal for the country that they can come up with and would I please, please sign it. I would agree publicly. As the tax agreement will only calm uncertainty, but do little to stimulate the economy this summer to stop the slide, I'd ask Allan to then step in (first week of June) with a between meetings 1/4% to 1/2%. The shock of an April cut, a tax deal, and another cut whatever size all coming within the space of 45 days should be enough to kick start the economy again and not be enough of a rate cut to have foreign money flee America or create too much inflationary pressures. And the seeming consensus would reassure the world's rich, the bankers, and venture capitalist to start investing in the future again.

Then I'd say I've got work to do in the foreign policy area and sponsor a whole bunch of business & higher education "exchange" trade shows overseas and invite China, Israel, Arabs, etc. to do the same here. And I'd use those (I'd be invited to open every show) as an excuse to develop a personal relationship with other world leaders to allay their "uncertainty" about me and the outlook in the USA. I'd jawbone the Arabs into lower oil prices or threaten them with depressing the market by pushing alternative fuels publicly. (they'd have to guess whether I'd ever do it)

Then (in summer 2002), I'd take a month off and go play golf in Maine, Northern Wisconsin, and Colorado with a side trip to the Alaskan oil fields to show both support and a personal concern for the environment surrounding ANWR. And just throw out a few quotes on how careful we have to be with such a pristine resource leaving everybody guessing on what I really mean.

Then I'd start running for 2004.

I'm afraid that's all the tools I have at my disposal. Your generation will have to come up with more economic tools to deal with a "weightless" (read the term somewhere & we have little heavy manufacturing left - almost everything we are good at & produce now in this country is without weight - software, entertainment, telecommunications, law, engineering services, etc., etc.) economy. I mean we don't make anything in this country with any weight to it anymore.

We need new economic tools (beats the heck out of me what they are) to deal with (Keigan will have to develop) a "new" kind recessionary pressure caused by not being able to get a handle around tech growth or lack there of.

wb$$ Dennis