Bush Optimistic Economy Will Regain Strength
Trying to calm jitters about the economy, President Bush conceded on Friday that the country "obviously is going through a tough time" but expressed confidence about a rebound.
In a speech to The Economic Club of New York, Bush said this was not the first time the economy has been rattled and that he is certain that it will ride out its troubles. "These are uncertain times," he said.
CNBC's Larry Kudlow will interview President Bush at 7 pm New York time on Friday.
The president spoke as evidence of an ailing economy piled up. The dollar fell, oil and gold hit record highs, the economy is shedding jobs, retail sales saw a big drop and the effects of a severe credit squeeze linger. Economic worries have replaced the Iraq war as the No. 1 concern of voters in this presidential election year.
Bush acknowledged that prices are up at the gas pump and grocery stores and housing values are down -- leading to worries among everyday "hardworking Americans." But he said low unemployment and strong productivity are proof of the economy's fundamental strength and resilience.
"Every time, this economy has bounced back better and stronger than before," Bush said.
The president also praised the work of the Federal Reserve. After cutting interest rates several times, the Fed said Friday it has voted to endorse an arrangement to bolster troubled Bear Stearns and stands ready to provide add liquidity to a combat a serious credit crisis.
"It was strong action by the Fed and they did so because some financial institutions that borrowed money to buy securities in the housing industry must now repair their balance sheets before they can make further loans," the president said.
"Today's events are fast moving, but the chairman of the Federal Reserve and the secretary of the treasury are on top of them and will take the appropriate steps to promote stability in our markets," Bush assured his audience.
The president chose American's financial center as the backdrop -- and the titans of finance and commerce as the audience -- for his attempts to calm nerves from Wall Street to Main Street.
The Economic Club of New York is an exclusive, wealthy, largely homogenous group of top executives. Speaking before the gathering had Bush somewhat literally preaching to the choir -- the 101-year-old group's new chairman is Glen Hubbard, the first head of the White House Council of Economic Advisers for Bush.
He even drew a laugh when he opened his remarks with a not-so-veiled reference to the economy's ills. "It seems like I showed up in an interesting moment, a very interesting time," Bush said.
His main message, aside from optimism, stuck to Republican economic orthodoxy: warning repeatedly against too much government intervention.
For instance, while insisting his administration has an "active plan" to deal with the problems, Bush said he opposed several measures pending on Capitol Hill. They included proposals to allocate $400 billion to purchase abandoned and foreclosed homes, to change the bankruptcy code to allow judges to adjust mortgage rates, and to artificially prop up home prices.
"It's important not to overcorrect, because when you overcorrect, you end up in a ditch," Bush said. "It's important to be steady."
He said his administration would address the crisis "in a way that respects the ingenuity of the American people, that bolsters the entrepreneurial spirit and ensures that when we make it through this rough patch, that the driving will be smooth."
Bush took a veiled shot at Democratic presidential candidates Hillary Rodham Clinton and Barack Obama for their criticism of trade agreements that they say put American workers at a disadvantage.
"When times are tough, it's much easier to find somebody else to blame," the president said, without mentioning either candidate by name. "Sometimes that somebody else to blame is somebody in a distant land. It's easy politics. It's easy to go around and hammer on trade."
In a brief question-and-answer session, a member of the audience, noting that consumer prices are rising and the dollar is weak around the world, asked Bush whether the United States has an inflation problem.
"I agree that the Fed needs to be independent and make considered judgments and balance growth versus inflation," Bush said without answering the question directly.
"We believe in a strong dollar and I recognize that economies go up and down, but it's important for us to put policy in place that sends the signal that our economy is going to be strong and open for business."
He said the United States should not do "something foolish" during this economic period that will make it harder to grow, such as blocking capital from coming into the nation or failing to extend the tax cuts.
He said he had cautioned Saudi King Abdullah that he "better be careful about affecting markets" with high oil prices and that soaring fuel costs would prompt more investment in alternative sources of energy.
But, Bush said, "Our energy policy hasn't been very wise up to now." He avoided further discussion of prices, saying, "I'm going to dodge the rest of your question."