WASHINGTON -- While Tuesday's elections have left most Americans feeling unsatisfied, the ambiguous results seem to be playing well with at least one group: the business community.
From Wall Street to Main Street Wednesday, there was an audible sigh of relief over the fact that -- regardless of who becomes president -- neither party had gained the mandate and working majority in Congress necessary to push through a bold and ideologically-driven agenda.
"What we have, in effect, is a coalition government," said Thomas Donahue, the president of the U.S. Chamber of Commerce, addressing his board of directors meeting in Washington. "On the things that really count, it will require compromise and coalition-building to get anything done -- and, by the way, we prefer that."
"This is a moment for pragmatism and bipartisanship," agreed Jerry Jasinowski, president of the National Association of Manufacturers. "Big tax cuts, huge spending increases, wholesale reform of Social Security and Medicare -- these things are now out of the question."
On Wall Street, analysts said the declines in the broad stock averages Wednesday reflected concerns about profits, not politics. With financial markets in midst of a year-long slump and nobody exactly sure how much U.S. economic growth is going to slow in the coming year, the feeling is that this is no time for bold experimentation from Washington from either party.
"The market loves gridlock -- that way there aren't any surprises," said Robert W. Bissell, who helps manage $80 billion of other people's money at Wells Capital Management. In the end, he says, "it probably doesn't matter whether its Bush or Gore. ... You kind of get a toothless lion."
"Wall Street doesn't like extremes," explained Charles Geisst, author of a history of the stock market. "It likes the middle ground."
Of course many in the business community would have been thrilled with a big Republican sweep that would have given Texas Gov. George W. Bush and GOP congressional leaders the mandate to pull back on environmental regulation, privatize Social Security, cut tax rates and open new markets to trade and investment.
But compared to the other possibilities -- four more years of bitter partisan battles over tax cuts and trade or a Gore administration beholden to organized labor and hellbent on environmental regulation -- a couple of years of quiet stalemate looks like an attractive second choice to many business types.
"What we have is a victory without a mandate, gridlock without rancor," said Neal Soss, chief economist of Credit Suise First Boston. "On balance, I view that as a bullish outcome for the economy."
Business lobbyists Wednesday acknowledged that, without bigger Republican majorities in Congress, there is likely to be no push toward trade liberalization in the next two years, either by launching a new round of global trade talks or extending the North American Free Trade zone to the rest of Central and South America. That's because there has been little progress in accommodating demand by labor unions and environmentalists that new any treaties include guarantees that trading partners adhere to minimal environmental and labor standards.
"We are probably into a period where the U.S. is going to cede its leadership in free trade," said one discouraged business lobbyist. "Whoever is president still has a lot of work to do to make peace with the blues and the greens."
Others warned that it is now the slowing economy, not trade liberalization, which will "set the policy table" for the incoming president and Congress.
In a speech to a business audience in Washington Wednesday, Lawrence Kudlow, a former Reagan administration official and economists with ING Barrings, spoke at length of the increasing difficulty faced by business in obtaining the capital they need to invest and expand. Kudlow and other analysts now expect that corporate profits will be growing at less than half the 20 percent rate of the past year. At the same time, banks are tightening up on their lending, new stock and bond issues have slowed to a trickle and venture capitalists have turned stingy with first-time investments. It all adds up, he said, to a serious "liquidity squeeze" that threatens to choke off the economic expansion.
In that environment, Kudlow and others Wednesday were predicting that the new president and Congress could rally around a modest set of intiatives that could help cushion the economy against a precipitous fall by encouraging consumer spending and business investment. Such a package might include a modest and immediate tax cut for the middle class and acceleration of depreciation rates for corporate investments in new plants and equipment.
While such a program falls far short of the ambitious programs outlined during the campaign by George Bush and other Republican candidates, a number of analysts said it may be perfectly in keeping with the new economic and political realities.
"For the last seven years, we've believed that we had an economy that was working so well that it didn't matter much what economic policies you had. The economy was essentially on autopilot," explained Robert Hormats, vice chairman of Goldman Sachs International and a former Treasury official in the Carter administration. "Now, we're at a point where you can't rely on the autopilot. The president and the Congress have to take an active role again." Up to now, it has been widely assumed by many in business that big tax cuts, which would significantly reduce the growing budget surplus, would be opposed by Washington's most important economic policy-maker, Federal Reserve Chairman Alan Greenspan. In speeches, Greenspan has hinted that if tax cuts or new spending got too big, the Fed might have to respond respond by raising interest rates to prevent the economy from overheating.
But Kudlow, Hormats and other analysts said Wednesday that if the nation's economic growth rate continues to fall, Greenspan might be persuaded to accommodate a modest and well-tailored package of tax cuts.
Former Treasury Secretary Robert Rubin, among others, considers such talk simply premature. He said Wednesday he prefers the current policy of using virtually all the budget surplus to pay down the national debt. That, he argues, provides the best boost to the economy by lowering longterm interest rates.
But others warn that while debt reduction is, in general, a good thing, it is unwise to invest it with a political religiosity that denies the government a proven tool for managing the ups and down of the economic cycle.
"I agree that we need to abandon all this talk about huge tax cuts," said Lawrence Chimerine, a respected economist who recently left Washington to start a consulting firm. "But its also clear now that we have to be open to using small doses of fiscal policy to cushion the economy against a hard landing."
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