The way Robert McTeer sees it, there's
nothing wrong with the economy that couldn't be fixed with a little
more consumer spending.
"If we all join hands together and buy a new SUV, everything
will be OK," said the president of the Federal Reserve Bank of
Speaking for the first time since the Fed's half-point
interest-rate cut this week, McTeer told the Richardson chamber of
commerce that the underlying "new economy" remains strong despite
slower growth in the last two quarters. He also made a case for
After roaring along at growth of better than 5 percent in the
first half of 2000, economic output rose only 2.2 percent in the
third quarter and 1.9 percent in the fourth quarter. The marked
slowdown led the Fed to cut interest rates twice within the past
Faith in the technology-driven economy has been shaken as the
Nasdaq Stock Market tumbled, many dot-coms went bust and blue-chip
companies began announcing job cuts by the thousand. But McTeer
said the importance of information and technology are here to stay.
"The new economy isn't dead," he declared. "It may have a
hangover. It may have the blues, but it isn't dead."
Asked about the federal budget surplus, McTeer said he agreed
with Fed Chairman Alan Greenspan that he favors using the surplus
to reduce the federal debt. In Washington, pressure seems to be
growing to use some of the federal surplus for tax cuts and
possibly for additional government programs.
"If it comes to a choice, (Greenspan) prefers and I do too
tax cuts to more government spending," McTeer said.
McTeer said reducing marginal tax rates and capital gains tax
rates retroactive to Jan. 1 would help pump money into the economy
more quickly. He acknowledged, however, that tax cuts are a slow,
inefficient way to stimulate the economy.
"But federal tax receipts are at an all-time high," McTeer
said. "And so there's some moral question, I think, how long you
keep people's tax rates high if you're taking in more money than
McTeer closed by telling the business leaders of a simpler plan
to boost the economy: "Go out and buy something," he told them.