STEVE INSKEEP, Host:
David Wessel is economics editor of the Wall Street Journal and a regular guest here. David, good morning.
DAVID WESSEL: Good morning.
INSKEEP: Okay. Let's talk about possible solutions to economic problems that people have put on the table - tax cuts?
WESSEL: And Marty Feldstein, who was a Reagan adviser - like Mr. Summers, a Harvard professor - is also calling for fiscal stimulus. His idea is a little different. He thinks we ought to legislate it now, and then put it into effect if unemployment keeps rising.
INSKEEP: You know, when people used to say fiscal stimulus, they were talking about increasing government spending. Is anybody talking about that?
WESSEL: That seems to be off the table at the moment. You are absolutely right. These days, people look at President Bush's 2001 tax cut as kind of the accidental perfect fiscal stimulus. It was conceived before the economy weakened. But it turned out to hit just right. And some people would like to do that again now.
INSKEEP: What is President Bush proposing, if anything, to deal with the economy?
WESSEL: Well, last week President Bush started talking about considering options for fiscal stimulus. But in the speech that he gave yesterday and another speech that Treasury Secretary Henry Paulson gave, they didn't unveil any new initiatives. Instead, they emphasized that they are watching the economy. They are concerned. They're not ruling things out. But they continue to talk about the existing policies and how important they are to keep the economy going. And of course the president wants to make his tax cuts permanent and will position himself against the Democrats who want to raise taxes on upper income people if they win the election.
INSKEEP: Are they talking about the existing policies? Because in spite of a lot of turmoil and concern, the feeling at the White House is that things are not really that bad.
WESSEL: I'm certain that the White House is as worried about the economy as anybody else. And there's an awful lot of uncertainty. I think that when Congress and the White House try and fine tune the economy, they usually end up doing too much or too little or doing it too late. And so their inclination is to target their efforts on specific problems, as Mr. Paulson has talked about - dealing with foreclosures, avoiding them, and working on getting the banks to lend again.
INSKEEP: And let's talk about the guy whose job is to fine-tune the economy: the Federal Reserve Chairman Ben Bernanke. What might he do in the future?
WESSEL: Well, the conventional wisdom about economists is that this is best left to the Federal Reserve. And markets expect the Fed to continue to cut interest rates. They've cut interest rates a full percentage point already. Most people in the markets expect another full percentage point at least in rate cuts over the next year. And many people think that'll be enough to soften the blow of housing - probably not to avoid a recession, but to keep it mild.
INSKEEP: Anybody actually likely to pass a tax cuts, say, or some other proposal?
WESSEL: I was at the American Economic Association meetings over the weekend, and Paul Krugman, the economist and New York Times columnist, said one side will not accept tax cuts for rich people and the other side won't take action without tax cuts for the rich.
INSKEEP: David Wessel of the Wall Street Journal, good to talk with you again.
WESSEL: You're welcome.