Major Garrett: Fed move buoys Bush economic forum
CNN White House Correspondent Major Garrett is reporting from Austin, Texas, where President-elect George W. Bush met with corporate leaders about the nation's economy.
Q: How did the Bush team and corporate leaders react to the Fed announcement of interest-rate cuts?
GARRETT: The sense that the president-elect got from the invited guests here, about 30 CEOs from across the U.S. economy, was that there is really bad news out there. Right in the middle of these conversations of bad news on the horizon came the news that the
Federal Reserve cut the Federal Funds rate by half a percentage point, which brought smiles to all the corporate executives here and to the president-elect.
The president-elect said it vindicates what he has been saying for the last three weeks about the U.S. economy, that there were very ominous signs about sagging consumer confidence, about shrinking in the manufacturing sector and about rising energy prices.
And the Fed basically endorsed all of those concerns in its statement about why it lowered rates.
So, the Bush team really believes that this proves he was right about where the economy was heading and they hope it will increase support for what he says needs to be done to further help the economy: Have Congress approve his $1.3 trillion tax cut.
Q: Why did Bush call for this economic forum?
GARRETT: The gist of this economic forum was for the president-elect to hear first-hand, and in private, from leaders throughout the rather diverse U.S. economy. He had people from the high-tech sector. He had people from the venture capital sector. He also
had manufacturing representatives and retailers.
He wanted to hear from all of them about what they're seeing, what they're noticing and what their immediate plans are.
What he heard was that many of them may face layoffs, may face lower profits, may face shrinking stock prices. None of that is particularly good news.
It's worth pointing out that this economic forum was quite different than the economic forum called by then-President-elect Bill Clinton called in 1992. That one lasted a full two-days. It was all in public. There were labor leaders, business leaders, academic
scholars there, and it was an elaborate conversation about economic fundamentals.
This one wasn't. This was for President-elect Bush to hear first-hand about what real business leaders are facing in the immediate future and what he should do about it.
Q: Did they feel the Fed went far enough with its rate cut?
GARRETT: Several of the executives who emerged from the meeting said they clearly welcomed the Fed move, that they considered it very timely. They said it would have been much too late for the Fed to make this move at the end of January. They said many parts of the economy needed to know that interest rates were going to go down.
Having said that, many of them also believe the federal government with its tax policy could do things to continue to stimulate the economy. Many of them were supportive of the president-elect's call for tax cuts.
That's not too surprising because of the 32 corporate leaders invited to come here, more than 20 of them personally contributed to the Bush campaign and several of their companies sent large donations to Republican Party organizations.
So, in that regard, it's probably not fair to say the president-elect was preaching to the choir, but he was preaching to a largely converted audience.
Q: Were they critical of the Fed for possibly waiting too long to cut rates?
GARRETT: Certainly no one on the president-elect's team was critical of the Fed. As a matter of fact, part of the news that emerged from the economic forum was that Larry Lindsey was named to be the head of the Council of Economic Advisers. That's the No. 1
post from which a president receives economic advice.
Mr. Lindsey served on the Federal Reserve Board from 1991-97. Upon hearing of the Fed move, Mr. Lindsey said to reporters, "Great. The Fed is always right."
In that respect, the Bush team feels the Fed moved properly and in a timely fashion.
As for the corporate executives who were here, they know that whatever they say about the Fed makes precious, little difference. They were just happy that there is some relief coming concerning interest rates.