Excerpts from a Monitor breakfast discussing war and the US economy.
Mitchell Daniels Jr., director of the Office of Management and Budget, was the guest at the Monitor breakfast last Friday. Mr. Daniels is a key member of President Bush's economic team.
Daniels received his bachelor's degree from Princeton University and his law degree from Georgetown University. Before joining the Bush administration, Daniels was a senior vice president at Eli Lilly and before that chief executive of the Hudson Institute, a think tank. He also served on the staff of Senator Richard Lugar of Indiana.
"The president has us watching the economy on literally a daily basis to see what effects, if any, can be discerned. Up to this point, you would have to say the effects are neutral to positive. Oil prices are down very sharply, markets are up. Spreads, which is a market's measurement of risk in the economy, are narrower, not wider. There is no grounds for over claiming. It is just to say that so far the signals are neutral to positive. We will just have to keep watching that."
"That is our intention, that is our expectation. But one can't know and the president reserves the right, if there is any doubt about keeping our troops well provisioned and safe, ... to go back (to Congress)."
"... It is always enormously valuable when he does. No one has a deeper grasp of the real word implications and trends. He came in and visited one on one with the president (early last week.)
We are deeply respectful of his independent mission. But he is, of course, an invaluable resource and we are glad he has been willing to share information and compare notes with us so we can do our job of allowing the president to stay right on top of economic events.
... I will just say as I did, everyone respects the separate role that he has, but this is war. This is an unusual time and since he judges it appropriate to at least confer informally with us from time to time, I know the president is very grateful that he is willing to."
"I don't favor any particular policy at this time. The president has asked us to listen, but listen cautiously. It would be a bad mistake to move beyond some reasonable reaction to the events and extra difficulty that the war may impose. ... The market will need to take care of this. The American taxpayer should not be asked to prop up businesses indefinitely. The market has various ways of doing that. Right now without liquidation, substantial changes are occurring. ... There are other options, right, merger and other processes which could lead finally to supply and demand coming into balance."
"As to the [security] costs, there may be some merit in the idea that recognizing that the war may further aggravate the airlines' situation, some temporary alleviation of the additional security costs that they have been incurring could have certain logic to it."
"We still are very hopeful of securing enough room (in the budget) for a full-growth package from the conference. If that proves not to be, ... it will be the job of the Secretary of the Treasury to work with the tax-writing committees and see what kind of program is best.
"The president's interests will be in having real economic impact. Someone might have noticed by now that the president clearly must believe, and he does, in the economic value of the dividend exclusion because it is certainly not calculated for broad political appeal and has drawn a lot of fire. It is there in the package because there is very strong evidence it would do important things for the economy."