NABE Policy Survey, August 2001
NABE Panel Says Overcapacity is the Economy's Biggest Headache; Gives Qualified Support to Current Monetary and Fiscal Policy
COMMENTS: What a difference a year makes! Twelve months ago, the NABE policy panel thought the top problems menacing the economy were a shortage of skilled labor and the stock market bubble. Today, overcapacity and excessive indebtedness top the list. "Crafting policies to fit these rapidly changing economic and financial circumstance confronts America's policy makers with incredible challenges," says Richard Berner, NABE President and Chief U.S. Economist, Morgan Stanley. "Still, NABE panelists generally agree with the current direction of both monetary and fiscal policy. Over two-thirds believe monetary policy is 'just right,' while 56 percent are in favor of the recently signed Bush tax cut." Importantly, according to the analysts surveyed, we are nearing the end of the Fed's easing cycle. Only 10 percent expect interest rates to fall below 3.25 percent. The survey was taken before the Fed's August 21st meeting when the FOMC lowered the Fed Funds rate to 3.5 percent.
Survey Highlights
- New Problems Facing the Economy. Overcapacity and excessive indebtedness of consumers and business jumped to the top of the list of economic worries. Concerns about labor market shortages and the stock market bubble have receded dramatically. Though energy costs remain stubbornly high, only 3 percent of NABE panelists cited them as the major threat for the economy, down from 12 percent five months ago.
- Monetary Policy and the Fed. Comfort with monetary policy has grown somewhat during the last six months. The proportion of the NABE panel believing that policy is "just right" edged up from 56 percent to 67 percent. Those who don't agree with current policy are more evenly split about what's wrong than they were last March; 17 percent think policy is too restrictive (down from 34 percent, a five-year high) while 11 percent find today's policy too stimulative (up from 7 percent).
- Has the turbulent year dented Fed credibility? Given the Fed's policy moves during the past year, 45 percent of the NABE panelists are more confident in the Fed's ability to manage the economy and the financial markets. But almost as many (41 percent) are less confident.
- Rating the new President. On a scale of 1 to 10, the Bush Administration gets a mean score of 6 for its economic policies. On the most visible legislation to date, the tax cut, 56 percent supported it, 24 percent were neutral and only 20 percent were outright opposed to it.
- Free Trade Vital. Over 90 percent of NABE panelists believe the U.S. should pursue yet lower tariff and nontariff barriers. This does not mean our members are deaf to the issues driving anti-globalist protestors. About a third believe freer trade should be linked to human rights and environmental issues.
- Data Quality of Concern. The significant recent
revisions to national income and product data have
clearly complicated policy makers' jobs. While our
survey did not include a specific question on this
issue, several NABE members volunteered their concern
that it was hard to have correct policy decisions when
data accuracy was flagging.
National Association for
Business Economics
1233 20th Streen NW #505
Washington DC 20036
Phone 202.463.6223 Fax 202.463.6239
nabe@nabe.com
© 2001, NABE
