Hot off the Haywire:
Feb 2, 2001 - 07:25 PM
Dallas Federal Reserve President Implores Consumers to Spend More
By David Koenig
The Associated Press
RICHARDSON, Texas (AP) - The way Robert McTeer sees it, there's nothing wrong with the economy that couldn't be fixed with a little more consumer spending.
"If we all join hands together and buy a new SUV, everything will be OK," said the president of the Federal Reserve Bank of Dallas.
Speaking for the first time since the Fed's half-point interest-rate cut this week, McTeer told the Richardson chamber of commerce that the underlying "new economy" remains strong despite slower growth in the last two quarters. He also made a case for cutting taxes.
After roaring along at growth of better than 5 percent in the first half of 2000, economic output rose only 2.2 percent in the third quarter and 1.9 percent in the fourth quarter. The marked slowdown led the Fed to cut interest rates twice within the past month.
Faith in the technology-driven economy has been shaken as the Nasdaq Stock Market tumbled, many dot-coms went bust and blue-chip companies began announcing job cuts by the thousand. But McTeer said the importance of information and technology are here to stay.
"The new economy isn't dead," he declared. "It may have a hangover. It may have the blues, but it isn't dead."
Asked about the federal budget surplus, McTeer said he agreed with Fed Chairman Alan Greenspan that he favors using the surplus to reduce the federal debt. In Washington, pressure seems to be growing to use some of the federal surplus for tax cuts and possibly for additional government programs.
"If it comes to a choice, (Greenspan) prefers - and I do too - tax cuts to more government spending," McTeer said.
McTeer said reducing marginal tax rates and capital gains tax rates retroactive to Jan. 1 would help pump money into the economy more quickly. He acknowledged, however, that tax cuts are a slow, inefficient way to stimulate the economy.
"But federal tax receipts are at an all-time high," McTeer said. "And so there's some moral question, I think, how long you keep people's tax rates high if you're taking in more money than you need."
McTeer closed by telling the business leaders of a simpler plan to boost the economy: "Go out and buy something," he told them.
Have another beer, Bob.