Alan Greenspan has a message of caution, too, warning Congress recently that "with price inflation at a low level, substantial further disinflation would be an unwelcome development, especially to the extent it puts pressure on profit margins and impedes revival of business spending." When Greenspan gets cautious, investors and markets get nervous.
Caution, though, can be self-fulfilling. State of mind has a lot to do with how people and markets react. To the extent we all agree that caution is called for, caution is called for, and the cycle is difficult to break.
The easiest way for the president to win the election in 2004 is to talk more about security. Talking about security, however, is a double-edged sword; it may scare the voters to the Republican side, but it also may continue to scare away investors and delay capital spending. As Greenspan also said: "... we need to remain mindful of the possibility that lingering business caution could be an impediment to improved economic performance."
And maybe it is. Sen. John Edwards, D-N.C., a candidate for president, recently spoke to technology executives in northern Virginia. The Washington Post headlined its story about the speech "Edwards Brings Revival Message to N. Va.; Presidential Hopeful Pledges New Opportunities For Dot-Com Industry." What was important wasn't so much what Edwards said but the fact that he recognized there's an opportunity in the tech sector for a candidate who wants to try and take the dialogue in another direction. That's what the sector needs--fervor to return to the hunt for the next "New New Thing." Edwards gets it.
The administration is banking on the tax cut to get the "soggy" economy moving faster. We think the president needs to start talking about how we jump-start investment and get companies buying capital goods and creating more jobs. If he continues to create an environment of caution because of political effectiveness, he may just talk the economy out of a bold recovery, with or without a tax cut.
David Post is a Temple University law professor and senior fellow at the National Center for Technology and Law at the George Mason University School of Law. Reach him at [email protected]. Bradford C. Brown is chairman of the National Center for Technology and Law at the George Mason University School of Law. Reach him at [email protected].
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