NCPA - National Center for Policy Analysis


July 17, 2006

Hank Paulson, the recently named Treasury Secretary, has inherited an economy that has grown at a 4 percent annual rate for three years and now has 30 months at the end of a second-term presidency to keep it that way, says the Wall Street Journal.

The task won't be easy, says the Journal, but there are areas Paulson should focus on to keep the economy steady:

  • Plug the leaks in the financial system that are inevitably going to pop as the Federal Reserve keeps tightening money to make up for its easy-money mistakes of 2004 and 2005.
  • Keep a strong dollar, ignoring current efforts promoting a dollar devaluation in order to reduce the trade deficit and boost domestic gross domestic product (GDP), to avoid complicating the Fed's task in breaking inflationary expectations.
  • Focus on the international economic front, especially on trade; the Doha global trade round may be teetering on collapse, but nothing will be lost by pushing to save the day.
  • Tax law changes are inevitable, given the growing bite of the Alternative Minimum Tax and the expiration in 2010 of the Bush tax cuts; with tighter monetary policy and $75 oil, another dose of supply-side incentives should be ready if needed.

Source: Editorial, "A Paulson Agenda," The Wall Street Journal, July 17, 2006


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