Economy in holding pattern

Bush administration needs to act swiftly to prevent further economic chaos

Posted: Wednesday, December 11, 2002

Back in July, I reported the White House was working with longtime GOP "pro-growth" political and economic leaders on a new, aggressive economic policy.

Now, as the situation with Iraq continues to keep the business and investment communities in a holding pattern, it seems time for the Bush administration to reveal whatever "secret" policy it might have to energize our ailing economy, and to prod investors to take out their wallets again. In fact, the phrase "holding pattern" is apt in illustrating the plight of one industry that's representative of the wounded state of corporate finances.

Consider the case of bankrupt United Airlines, which Congress has refused to rescue. It's true that federal government bailouts usually run counter to good fiscal policy. Why should Washington write a check for mismanaged corporations when they won't do the same for failed small businesses?

In the case of United, many more than just allegedly greedy mechanics and other overpaid workers were punished as a result of the government's refusal to step in with a taxpayer bailout for the nation's second-largest commercial air carrier. United's creditors and shareholders are among the most likely permanent victims of the company's demise.

Many an airline has gone the way of United, attempting to "reorganize" while under the protection of the bankruptcy courts. But most of those carriers -- including such notables as Eastern Airlines -- never really "took off" again. And their shareholders ended up with an investment as worthless as an Eastern round-trip boarding pass.

This country gives huge amounts of financial assistance to foreign nations and international organizations, not to mention outrageous tax breaks to a small cluster of large corporations. The government routinely pays farmers not to grow crops, or subsidizes them to leave their fields fallow.

For United, a federal assistance package -- which might have allowed the company the chance to revamp, and perhaps survive until the economy takes an expected upswing when Iraqi hostilities end -- just never got off the ground.

The government is not totally to blame. Several of United's unions have pushed the airline's back against the wall with confrontational, bullheaded decisions. Most recently, the mechanics union rejected a compromise proposed by their own leadership, only to later accept another negotiated settlement between management and labor. Meanwhile, valuable time ticked away, and United flights continued to be piloted by some of the industry's highest paid crews.

But head-shaking over the collective greed that ultimately grounded the airline doesn't address the question of whether the United States should allow a crucial company in a critical sector of the economy to face potential ruin. Is United the first domino to fall in the potential collapse of the entire industry, an industry that circulates billions of dollars throughout the U.S. economy?

Between the collapse of travel- and communications-based companies and the continuing decline of manufactured goods, the United States may be in danger of relying on a "nonessential," service-based economy that does more to redistribute wealth than to create it.

The Bush administration has its hands full in trying to manage upheaval among its own economic team, a downright hostile United Nations, and a never-ending terrorism threat at home and abroad. Support for war against Iraq is dropping in the polls as new surveys reveal growing public doubt about an economic recovery any time soon.

The president's financial and economic advisers must start dealing with problems in the same strong, swift and sure manner their boss used in response to Sept. 11. Since this column first reported the quiet White House plans to boost the economy, no such remedy has emerged, and now, another critical corporate giant has fallen.

The United Airlines situation was bungled. Let's hope a new pro-growth program won't meet the same end.

Matt Towery writes a syndicated column based out of the Florida Times-Union in Jacksonville, Fla. COPYRIGHT 2002 CREATORS SYNDICATE INC.

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