Six Months of Bush Jude Wanniski July 23, 2001

ECONOMY & STOCK MARKET: Equity indices continue to slide from their levels of January 1, the date from which we should begin to count the influence of President Bush. (S&P 500 down 9%, NASDAQ 18%.) Bush did inherit a monetary deflation from the Clinton watch, but there is no sign he is doing anything about it or knows it is undermining the economy. The next several weeks may change that, if continued weakness persists despite the tax rebates working on consumer demand and the Fed’s rate cuts. The deflation story is on the private radar scopes of the administration heavies, at least, although they are silent on it. My small reservoir of remaining optimism that a policy change could come before rather than after a serious market decline has faded further in recent days. Senate Minority Leader Trent Lott decided to ignore the topic of deflation after I had counted on him raising the issue in a serious way, which would have opened the discussion to financial and political journalists. He did insert Jack Kemp’s WSJ op-ed in the Congressional Record, but without even saying what it was about. On "Face the Nation," Lott waved a sample tax rebate at the audience. On "FoxNewsSunday," Treasury Secretary Paul O’Neill was all happy talk, prosperity being just around the corner now that the checks are in the mail.

RUSSIA AND CHINA: I had expected foreign policy to be Bush’s strong suit, and it has, with Colin Powell at State and Vice President Dick Cheney backing him up. So far, Defense Secretary Don Rumsfeld and his Cold War Deputy, Paul Wolfowitz, have been contained in their determination to blow up the ABM Treaty and go full speed ahead with the missile-defense boondoggle. We should be pleased that Russian President Vladimir Putin is so adroit in the diplomatic game, in Genoa persuading Bush to negotiate security issues instead of imposing them unilaterally, as our hawks desired. The Moscow-Beijing friendship accord, which would have seemed super scary a generation ago, now strikes me as a stabilizing force in the geopolitical world. With China now preparing for the Olympics in 2008, opportunities abound for progress on the sticky leftover issues of the Cold War, i.e., Taiwan, Korea, Iran, even Iraq. Of course, failure to deal with the effects of dollar deflation on the world economy cuts in the opposite direction. Our superhawks actually need a more dangerous world in order to sell their services.

ENERGY/GLOBAL WARMING: Every time the President seems to be caving to the greenies on this leftwing boondoggle, he pulls himself together and holds his ground. Thank goodness for Dick Cheney, who has played the issue masterfully. The Kyoto Treaty is most sincerely dead. Giving a bit of ground to the greens on wildlife/pollution issues is no big deal. The science behind global warming is so bad that the issue should now fade, opening the discussion of serious energy issues involving nuclear waste, nuclear power and growing evidence of almost limitless sources of natural gas. Bush has taken lots of heat for loading up his administration with Texans and energy folks, but he has been well served by them and so has the country.

NEXT: It’s too early to be grading the President, but it is about time he makes some corrections on economic policy, before it gets too messy. In the months ahead, Secretary O’Neill has to be more creative than he has been so far, or the President will own the deflation he inherited. It shouldn’t be too hard, but my optimism is fading. There may have to be a personnel change.