Treasury Secretary says economy fundamentally sounds, takes on critics of his travels abroad
Sunday, July 28th 2002, 12:00 am
By: News On 6
WASHINGTON (AP) _ Treasury Secretary Paul O'Neill said Sunday the economy is fundamentally sound despite the stock market's troubles and the business scandals that have shaken consumer confidence.
``I'm a deep believer in the potential and the reality of the greatest economy ever conceived,'' said O'Neill, making high-profile appearances on the talk shows following criticism of his travels abroad during the recent economic volatility.
The Bush administration is trying to ward off potential political damage in the midterm elections this fall by talking up signs the economy is well positioned for growth despite the increasing reports of companies' accounting problems, which have caused market jitters.
``Out there in our economy, out there in Main Street, the real growth in our economy is moving just as we thought it would,'' O'Neill said on NBC's ``Meet the Press.'' Citing reports on productivity growth and second-quarter earnings, O'Neill said ``there is good news out there'' drowned out by ``the steady amplification of the negative stuff.''
He said Americans should look at investments over the long term and have faith in the market.
``People who are invested in the American economy over time are going to win,'' O'Neill said. ``There has never been an extended period of time in our history where investments in the U.S. economy didn't win.''
Over the past 10 weeks, investors drove down Dow prices to five-year lows, although Wall Street last week posted its biggest weekly gain since May.
``I think we're reaching for a bottom, if we're not there now,'' said John Bogle, founder and former chairman of The Vanguard Group of mutual funds, which manages $590 billion in assets for 17 million clients.
He did not think that a bill Bush is expected to sign this week that makes sweeping changes in accounting practices and imposes new penalties for corporate fraud was a big factor in changing investors' opinions about the future.
``I think investors' confidence has been shattered, and it's going to take a lot more than some congressional action to rebuild it,'' he said on ``Fox News Sunday.''
O'Neill said the administration is working with Congress on several bills _ trade powers for the president, pension protections, terrorism risk insurance, for example _ intended to ``assure that our economy will continue to be the envy of the world.''
Bush wants the Democrat-controlled Senate to finish those bills by week's end before its monthlong vacation. The trade bill, passed Saturday by the House after Bush visited Capitol Hill to seek support, is the most likely of those to be considered this week.
The Senate came under criticism from the White House economic adviser for what he said was excessive spending that could undermine the economy. Lawrence Lindsey said senators want to spend at least $14 billion more than Bush supports for the budget year beginning Oct. 1.
``We do have to monitor the deficit. We have to spend money on defense. We have to spend money on Social Security. We have to make sure that our economy is sound. But we cannot afford to have wasteful spending here,'' he said on CNN's ``Late Edition.''
While O'Neill tried to focus on the economy's strong points, he spent considerable time answering questions about his recent travels around the world at a time critics said he should be at home reassuring worried Americans.
O'Neill went to four former Soviet republics to gather information on how to bolster their economic growth, private investment and living standards, as well as to discuss terrorists' financing. He planned to go to South America this week but postponed the trip.
``I think it is important, in my role of secretary of the treasury, that I don't make the mistake that I think many people do, who think the sun only sets and rises in Washington and New York,'' O'Neill said.
``In order to protect our own security, both militarily and economically, we need to pay attention to the world.''
He said he did not think that one person ``can say words that will cause the market to go one direction or another for any sustained period of time.''
That view was supported by chairman Pete Peterson of the Blackstone Group, a privately held investment group. Both the president and the treasury secretary, ``and I don't care who they are, really cannot have a huge influence on the stock market, in my opinion,'' Peterson said.
Some economists said O'Neill's absence and lack of reassuring words in a time of economic turmoil at home underscored the perception that he, as the administration's chief economic spokesman, is disconnected.
O'Neill he was never out of touch with the markets and Washington during his trip.