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Choice of Words

In late 1992, the federal government released a series of upbeat economic reports. Among other things, the numbers showed durable-goods orders were at the highest level in a year, consumer confidence had posted a sharp rebound and economic growth was stronger than it had been in four years.
All this good news came three or four weeks too late to help President George Bush defeat his Democratic challenger, Bill Clinton.
Now, the former president’s son seems determined not to suffer a similar fate of unfortunate timing. For nearly a month, President-elect George W. Bush and Vice President-elect Dick Cheney have been issuing downbeat assessments of the economy they soon will inherit from the Clinton administration.
“We may well be on the front edge of a recession here,” Mr. Cheney said early this month. Since then, Mr. Bush on several occasions has echoed that view.
Mr. Bush and Mr. Cheney, of course, are not the only ones who think the economy is losing steam. With new data showing third-quarter growth was the slowest in four years, Treasury Secretary Lawrence Summers said that “some deceleration in the economy from where it had been was an inevitable thing.”
But slower growth and recession are not the same thing. Since the last recession ended in 1991, the nation has enjoyed a remarkable period of growth.
At several points this run of good fortune threatened to derail. In particular, the Asian financial crisis in 1998 cast a long shadow, triggering a dramatic stock market retreat.
Yet the U.S. economy stayed out of negative territory and soon was growing vigorously again.
Several factors have made it possible for this country to achieve the lowest unemployment and inflation rates, and highest productivity growth, in decades. One that should not be discounted is psychology.
Perception can shape reality, and confidence in the economy’s ability to grow has helped enormously to keep the record expansion on track.
Whether Mr. Bush is “talking down” the economy to improve the odds of enacting his $1.3 trillion tax-cut plan, as critics suggest, or simply urging a cautious stance, his words will help define future reality.
It can be a very thin line between preparing for an economic downturn, and precipitating one.

12/29/00–Rochester Business Journal


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