ECONOMIC PANEL RAPS FED ON INTEREST RATE HIKES
Byline: Valerie Seckler
NEW YORK — Two “demons” posing the greatest potential threat to retail growth this year are higher interest rates and a consumption tax.
That was the view of Lawrence Kudlow, a participant in “The McLaughlin Group” Super Session held Sunday evening at the National Retail Federation’s annual convention here.
Kudlow, economics editor of The National Review, was joined in the group by Eleanor Clift, a contributing editor at Newsweek; Michael Barone, a senior writer at U.S. News & World Report; Morton Kondracke, executive editor of Roll Call, and host John McLaughlin.
Calling the Federal Reserve Board a “demon,” Kudlow said, “If the Fed keeps raising interest rates, we could be in a recession in the next 12-15 months.”
Answering a question about the outlook for inflation this year, Kondracke said, “I don’t think anyone sees any inflation but Mr. Greenspan. He seems to be fixated on the idea that any growth above 2.5 percent is too much.”
Further, Kondracke noted that Alan Greenspan, chairman of the Federal Reserve Board, is up for re-election in January 1996 and said, “One way President Clinton could get popular again would be to fire him.”
Kudlow asserted that a consumption tax “would be bad for the U.S. economy and bad for retailing,” and told retailers they “should keep tabs on it.”
However, McLaughlin quickly added that the entire Group believes a consumption tax “is an unlikely, implausible way for the country to be moving in.”
Similarly, the Group forecast that Americans won’t see a swing to a flat income tax — as proposed by House Majority Leader Dick Armey (R., Tex.) and Rep. Richard Gephardt (D., Mo.) — any time soon.
Changes to look for nearer term, said Kudlow, are reductions in middle income and Social Security taxes; a capital gains tax cut, which he gives a “99 percent chance” of passage, and a loosening of business regulations, which is expected to put substantial money back into the private sector. — Fairchild News Service