Newspaper article The Evening Standard (London, England)

Echoes of Reaganomics in Bush's Costly Wish List

Newspaper article The Evening Standard (London, England)

Echoes of Reaganomics in Bush's Costly Wish List

Article excerpt


US PRESIDENT George Bush's State of the Union speech last night was well crafted to build global support for the war on terrorism but it failed in one key area - assuring the world this White House will not ambush the US economy.

Bush spent the first 40 minutes of his speech on America's international obligations and defence before outlining his "third" priority, an economic agenda that would set the US on the wrong track.

Despite Federal Reserve chairman Alan Greenspan's warnings that further stimulus is not needed for America to shake off recession, the President asked Congress to speed up tax cuts, increase spending for a host of programmes, double the so-called homeland security budget and boost military spending by the largest amount in decades. And all this on top of an additional $1 billion ([pound]708 million) a month in war-related spending.

Some people on Wall Street reckon the speech killed any chance that the Fed will cut interest rates by another notch when it concludes its policy meeting today.

Some of Bush's desired outlays are unavoidable and necessary for global safety but with a projected budget deficit this year of at least $106 billion, America must show fiscal restraint. In Ronald Reagan's day, the threat from the Eastern bloc nations led to massive increases in US spending and a soaring deficit that took years to unwind, forcing global interest rates to stay higher for longer than necessary.

Normally, the President's annual speech does not rock Wall Street's financial markets because everyone knows there is a huge divide between his wish list and what Congress will approve. However, Bush is riding a wave of unusually strong public support - his job approval ratings are above 80% -and Congressional elections loom in November. His legislative agenda has a far better chance than we typically expect from America's divided system of government. …

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