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Thursday, 4 January, 2001, 16:57 GMT
Bush backs rate cut
Mr Bush and Lawrence Lindsey listen to the CEOs
Mr Bush and Lawrence Lindsey listen to the CEOs
President-elect George W Bush has moved swiftly to confront the main problem facing his new administration - the slowing US economy.

Mr Bush has been holding an economic summit of business leaders who have been meeting at his Austin ranch to discuss his plans for keeping the economic boom - the longest in US history - intact.

His hopes received an unexpected boost when the US central bank, the Federal Reserve cut interest rates by 0.5%.

Mr Bush swiftly backed the Fed's action, but said he still believes that his tax cut plan is also necessary to stem off a recession.

"I am pleased the Fed has cut the interest rates. I think the cut was needed. It was a strong statement that measures must be taken to make sure our economy does not go into a tailspin," he said.

"The tax-relief plan I put forth is an integral part of economic recovery," he added.

It is important for us to ensure against any economic slowdown by a responsible tax relief package

George W Bush

The two day meeting, which began on Wednesday, has being attended by the bosses of some of America's biggest companies. Among those meeting the President-elect are John Chambers of Cisco Systems, Michael Dell of Dell Computers, Jack Welsh, the retiring chairman of GE, the world's largest company, and Ivan Seidenberg, president of Verizon, the huge telecoms company that faced a damaging strike earlier in the year.

Mr Welsh was among the chief executives applauding the tax cut.

"We all think it was a step in the right direction and none too soon," he told reporters.

The summit is being chaired by Lawrence Lindsay, Mr Bush's economic adviser during the election campaign who was named as assistant to the President for economic policy.

"The president-elect wants to listen to those who are at the heart of job creation, listen to how they think the economy is performing," a Bush spokesman said.

However, unlike President Clinton, who held a televised economic summit before his inauguration, the meeting was private.

Tax cuts and lower interest rates

The business leaders overwhelmingly endorsed Mr Bush's proposals for a $1.3 trillion tax cut over the next 10 years.

Mr Bush argues that the looming recession makes his proposal even more urgent, whatever happens to interest rates.

"I'm worried about an economic slowdown, and I believe it is important for us to ensure against any economic slowdown by a responsible tax relief package," he said on Tuesday.

The businessmen - many of whom contributed to the Bush campaign - were unlikely to argue against a tax cut, but they are also expected to press Mr Bush for more deregulation and measures to psh forward free trade- and many agreed that the rate cut would be too little, too late, to stimulate investment and growth on its own.

Mr Bush has gone out of his way to cultivate the Federal Reserve, meeting with Mr Greenspan in Washington when he first arrived and appointing an economic team who had been on good terms with him.

He is hoping to avoid the conflict between the Fed and his father's adminstration that helped contribute to the 1992 election of Bill Clinton.

Signs of a slowdown

Under the Clinton adminstration, the US economy has enjoyed the longest boom in history up to the middle of this year.

Since then, there have been growing signs of a dramatic slowdown in US growth.

On Tuesday, an important survey of manufacturing confidence reached a nine-year low, and other figures showed the overall growth rate of the economy slowing sharply in the third quarter of 2000, while a number of big companies have announced plans for job cuts.

The Nasdaq index of high-tech stocks has dropped by half over the past year, as investors worry that demand for computers, the internet, and other high-tech products has slowed.

Mr Bush will devote the second day of his economic summit to the issues of high-technology, which he has been accused of ignoring during the campaign.

He put his case for free trade, improved education, and a smaller role for government as the keys to boosting that sector of the economy, which has been hard-hit by the fall in demand.

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See also:

20 Dec 00 | Business
Bush economics team
14 Dec 00 | Business
Tax cuts and free trade
18 Dec 00 | Business
Bush courts Mr Greenspan
07 Nov 00 | Business
Boom fails to boost Gore
27 Oct 00 | Business
How to spend the surplus
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