Financial Gurus Give Thumbs Down to Economic Stimulus Package

By: Kent Hoover

A panel of financial industry economists gave poor reviews to the economic stimulus package passed by the House.

"It actually doesn't have much stimulus to it", says Richard Berner, senior U.S. economist for Morgan Stanley. Berner and Diane Swonk, chief economist for Bank One Corp., say the House package lacks the one step that would do most to stimulate the economy - a payroll tax cut. Such a cut would reduce costs for businesses and immediately put more money in the hands of consumers, particularly low-income Americans who would be most likely to spend it. A payroll tax cut also has been endorsed by the Small Business Legislative Council.

The economists spoke at a Washington summit sponsored by the Financial Services Forum, a group of CEOs from 21 large banks, securities and insurance companies.

The House bill aims to encourage businesses to invest in new equipment by increasing expensing limits and accelerating depreciation. But Berner says he "is a little skeptical that even temporary expensing would have a significant impact on capital spending" given "the big investment bust" corporate America is experiencing.

The Senate has yet to pass an economic stimulus package. Its version is expected to include fewer business tax cuts and more government spending.

Berner and Swonk agreed the war on terrorism means government will play a bigger role in the economy, leaving fewer resources for private investment and making the economy less efficient. The result, Swonk says, will be "an economy that looks more old than new".

David Orr, chief economist for Wachovia Corp., says the federal government "should spend whatever it takes" to develop fuel cell technology or other alternatives to Middle East oil. Orr says economic models "seem pretty useless right now" given the uncertainties over future terrorist attacks and the war in Afghanistan. "My intuition is the fog of war will plague all of our attempts to forecast", he says.

Swonk offered one piece of good news related to small business. "There's no credit crunch there", she says. In fact, she says a real estate broker in Indianapolis told her "the only thing moving in real estate right now is small business expansions".

Bond to OMB: See that women get 5 percent of contracts

Sen. Kit Bond, (R-MO), the ranking Republican on the Senate Small Business and Entrepreneurship Committee, has asked Office of Management and Budget Director Mitch Daniels for a "firm commitment" that federal agencies will award at least 5 percent of their contracts to women-owned businesses. The 5 percent goal was established by Congress in 1994 but has never been met. Instead, women-owned businesses have received only 2.2 percent of federal contracting dollars. "Congress has passed resolutions. We've gotten executive orders", Bond says. "Now it is time just to get the job done." In a letter to Daniels, Bond asked the OMB director to put agency heads "on notice that you will hold them accountable to do their part to make the 5 percent promise to women-owned businesses a reality".

Terry Neese, president of Women Impacting Public Policy, says her nonprofit lobbying group "applauds the actions of Sen. Bond and are assured he will do all within his power to follow through with the OMB".

Tourism Policy Council meets for first time since 1997

Secretary of Commerce Don Evans reconvened the Tourism Policy Council Oct. 29 for its first meeting since 1997.

Tourism industry officials had urged the Bush administration to reconvene the interagency committee, which will coordinate administration programs and policies affecting travel, tourism and recreation. Four other Cabinet secretaries and the heads of the Small Business Administration and the Immigration and Naturalization Service joined Evans for the council's first meeting, where the impact of the Sept. 11 terrorist attacks on America was discussed.

"This administration is committed to getting rid of the terrorists and bringing back the tourists", Evans says.