Top US policymakers say 'wait'

Congress is weighing economic responses to the attacks

By BBC News Online's North America business reporter, David Schepp

As layoffs and profit warnings mount among US businesses, many Americans are left wondering what sort of response Congress will craft to deal with the crisis.

We cannot say at this very preliminary stage exactly how these events will affect the economy

Treasury Secretary Paul O'Neill

But just as it has been suggested that hasty military retaliation is not the proper response to the attacks on the World Trade Center and the Pentagon, top US officials have also told Congress not to act too quickly in passing economic measures.

In testimony on Thursday before the Senate, top US officials offered their assessment of the US economy that was thought to be in recovery prior to last week's terrorist attacks.

The solutions ranged from further tax cuts to investment in energy infrastructure to direct cash infusions for the embattled airline industry.

Tax cuts

While he offered a few suggestions to spur economic activity, Treasury Secretary Paul O'Neill said it was too soon to know what to do.

Greenspan: "It's far more important to be right than quick."

"We cannot say at this very preliminary stage exactly how these events will affect the economy," he said.

Mr O'Neill said he favoured a capital-gains tax cut as one way to deal with the economic impact of the attacks.

Capital-gains taxes are fees imposed on profits made from the sale of stock or property. A reduction in the tax was being mulled prior to the 11 September attacks, in which nearly 6,000 people died or are still missing.

Mr O'Neill also said he favoured giving federal cash aid to beleaguered US airlines, which have been greatly affected by a fearful flying public.

"I think we should give it to them directly," Mr O'Neill said, adding that financial backing by the government would aid in soothing a jittery public, now fearful of air travel. He added that the nation has "got to get people flying again".

Greenspan speaks

In addition to Mr O'Neill, Alan Greenspan, head of the US central bank, and Harvey Pitt, chairman of the Securities & Exchange Commission, spoke before the Senate hearing on the state of the US financial system.

New York Mayor Giuliani opened Thursday's Nasdaq market trading

Mr Greenspan expressed concern about the economy but said the attacks would not have a long-lasting impact. He told lawmakers more time was needed to assess where the economy is headed.

"The shock of 11 September, by markedly raising the degree of uncertainty about the future, has the potential to result - for a time - in pronounced disengagement from future commitments," Mr Greenspan said in his first public appearance since the attacks.

"Indeed, much economic activity ground to a halt last week," he said, adding that he "would strongly suggest that while there is an obvious, strongly desired sense to move rapidly, that it's far more important to be quick than right."

Looking long term

He also said that spending by Americans would go a long way in helping stimulate the besieged economy and also suggested that vast improvement in energy infrastructure was needed to avert further energy crises.

"Our infrastructure is clearly in difficulty," Mr Greenspan said. "We have to focus on looking at the longer term because these take years to do."

Undertaking a programme of vast infrastructure improvements is just one possible way the government could spur economic activity.

Senators also inquired how they and other lawmakers might aid small businesses impacted by the attacks.

Senator Debbie Stabenow, a Democrat from Michigan, asked members of the panel what could be done to aid automakers.

Stricter border security

In response to the attacks, security at US borders with Canada and Mexico have been severely heightened, leading to extensive cross-border-shipment delays.

That has caused problems for the nation's car makers, which rely on just-in-time inventory levels to keep production lines rolling.

Delayed deliveries have caused many auto makers, such as Ford and General Motors, to idle plants while awaiting deliveries.

Mr O'Neill expressed hope that the temporary screening measures now in place would be replaced by more streamlined processes that are both secure and expeditious.

There was universal agreement among Mr Greenspan, Mr Pitt and Mr O'Neill to wait and see what economic-aid programmes - if any - should be devised.

It was a sentiment also expressed by Senate banking member Christopher Dodd, a Connecticut Democrat, who said that in crafting a response to the nation's economic ails, it is possible to do as much harm as good.