News Digest Edited by Jana Pedersen
National economy faltering, Greenspan says
WASHINGTON - Federal Reserve Chair
man Alan Greenspan told Congress on Wednes
day that the Persian Gulf crisis has piled c ‘new
and substantial risks” on an already faltering
national economy.
In a generally gloomy assessment of U.S.
economic prospects, Greenspan said the jump
in oil prices since Iraq’s Aug. 2 invasion of
Kuwait had increased the threat of both higher
inflation and a recession.
But the chairman of the central bank re
jected suggestions that U.S. economic policy
makers were in effect being held hostage by
Iraqi President Saddam Hussein.
While he conceded that the Fed’s job of
promoting non-in flationary growth has been
made more difficult by the unfolding events in
the Persian Gulf, he insisted the central bank
still had tools to mitigate the economic fallout.
But private economists said Greenspan’s
pessimistic comments reflected the tough choices
facing him. Normally rising unemployment
and other signs of sluggish growth would prompt
the central bank to slash interest rates in order
to spur demand.
But the oil price shock means that the coun
try is now in the grips of its worst bout of
inflation in nine years with consumer prices
climbing at an annual rate of 6.2 percent.
Financial markets had been eagerly await
ing Greenspan’s first report on economic con
-4 4--—
Regrettably, events in the
Middle East have introduced
new and substantial risks to
the outlook.
Greenspan
Federal Reserve Chairman
-,
ditions since the Persian Gulf turmoil began.
But for the most part they reacted with disap
pointment as the Fed chief seemed to dash
hopes of a quick move to lower interest rates.
The Dow Jones industrial average was down
almost 10 points in late afternoon trading.
Greenspan’s comments represented a set
back for the Bush administration as well. The
administration has been lobbying for months
for the Fed to lower interest rates in order to
avert the First economic downturn since the
1Q81.89 rprpssion
Greenspan said at present the economy was
still growing, although at a very slow pace. But
he ticked off a number of negative impacts
stemming from the more than $10 per barrel
rise in oil prices since Aug. 2 and said prospects
of a future downturn could not be ruled out.
“Regrettably, events in the Middle East
have introduced new and substantial risks to
the outlook,’ ’ Greenspan told the congressional
Joint Economic Committee.
While refusing to say whether the chance of
a recession was now above 50 percent, he did
say, “The oil shock has clearly increased both
the probability of inflation and recession.’’
Greenspan did not signal that the Fed either
had eased credit already or was planning any
immediate easing moves.
Instead, he merely repeated comments made
in the past that financial markets would re
spond favorably to a credible deficit reduction
package by pushing long-term rates, such as
mortgage rates, lower and the Fed would do its
part by helping to lower short-term rates.
The Fed chairman said that if crude oil
prices average around $30 per barrel over the
next year, about $10 above the price before
Aug. 2, the higher oil prices would likely lower
economic growth by a full percentage point
over a year’s time w-hile boosting the inflation
rate by up to 2 percentage points.
A Fed report released Wednesday on condi
tions in various parts of the country empha
sized the weak economy. The report, known as
the “beige book,” said economic activity in
the Fed’s 12 regions was either expanding
more slowly at present or actually declining.
“Weakness is most apparent in the North
eastern and Mid-Atlantic districts,” the report
said.
Asked about the regional disparities during
his testimony, Greenspan said that clearly the
East Coast was in worse shape at present than
the West Coast.
Ordinary Iraqis resist economic sanctions
BAGHDAD, Iraq - Although Iraq
is beginning to feel the impact of
economic sanctions, ordinary people
in the capital seem determined to
resist outside pressure.
Bread, powdered milk, sugar, rice,
macaroni, chicken and rice arc in
short supply. Other food is available,
but prices have skyrocketed since the
United Nations imposed the trade
sanctions Aug. 6.
The sanctions were ordered to force
President Saddam Hussein to with
draw the troops he sent into Kuwait
on Aug. 2.
“The West believes we will kneel
to their will when they impose sanc
tions against us. But we have stored
for all our needs,’ ’ said Salwa Bayali,
a mother of two who chatted with
neighbors over morning coffee last
week.
The coffee was served without
sugar.
Iraqi homemakers commonly keep
household food storerooms full and
refrigerators slocked, a habit devel
oped during the eight-year war with
Iran.
Bayali said she has enough food
on hand to feed her family for seven
months. Sugar, however, was in short
supply even before the trade embargo.
and it is one of the items not in her
cupboard.
The Iraqi government has closed
all fast-food restaurants and many
pastry shops because they would use
large amounts of sugar. Those re
maining open bake bread instead of
sweets.
Bayau and her neighbors compared
living conditions now with life dur
ing the 1980-88 war with Iran. They
said more food was available then,
but they still have managed to pile
shelves full of canned goods and pick
led food and to load refrigerators with
meat and frozen vegetables, despite
government warnings against hoard
ing.
The women said the last war and
the current crisis have forced them to
economize. Those at the table in
cluded Christeen Yohan, a German
married to an Iraqi man, who has
lived in Iraq for 20 years.
“Iraqi women are quite capable of
overcoming difficulties,” she said.
The women said they have taught
their children to cope with difficult
conditions.
Elsewhere in Baghdad, life seems
to roll along without much change.
Some businesses, like travel agen
cies and airline offices, have closed.
Polish president announces
plans for early resignation
WARSAW, Poland - President
Wojciech Jaruzclski, the only
Communist leader to survive po
litically after democratic revolu
tions swept the East bloc, told
Parliament on Wednesday he will
resign early to help Poland com
plete its transition to democracy.
Jaruzelski’s announcement came
amid increased calls for his resig
nation to make way for a popularly
chosen head of state.
Solidarity chairman Lech Walesa
has already declared his candidacy
for president, and Prime Minister
Tadeusz Mazowiecki, Walesa’s
former adviser and ally, also is
considering running.
» As Communist Party leader in
1981, Jaruzelski imposed martial
law but peacefully transferred power
to a Solidarity-led government eight
years later. He was named presi
dent by parliament in July 1989 for
a six-year term.
Jaruzelski sent a letter Wednes
day to the Sejm, or lower house of
parliament, asking it to name a
date for ending his term.
Jaruzelski announced his planned
resignation after a six-hour meet
ing at which the nation’s feuding
political leaders agreed in prin
ciple to hold early elections for
both the presidency and parliament.
No date was set for what would be
post-Communist Poland’s first fully
democratic elections for president
and parliament.
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Editor Eric Planner Professional Adviser Don Walton
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Baghdad starts confiscating foreign assets I
Baghdad on Wednesday began
confiscating all foreign assets from
countries imposing sanctions on
Iraq, but it allowed another plan
eload of hundreds of American
women and children to fly to free
dom.
International support grew fora
proposed air embargo against Iraq.
So did worries about the economic
fallout from the Persian Gulf con
flict.
In other developments Wednes
day:
• The chairman of the KGB
offered to give the CIA intelli
gence about Iraq, where the Soviet
government still has about 5,000
specialists.
But people rarely complain. Grum
bling is frowned upon by the Iraqi
government, and the ruling Baath Party
has a wide network of neighborhood
intormers who watch for potential
troublemakers.
“We hope this crisis ends peace
fully, but in the meantime, we try to
live normally,” said the manager of
an Iraqi Airlines office.
• Defense Secretary Dick Ch
eney asked Congress to let the
Pentagon accept and spend billions
of dollars in allied contributions
for military operations in the gulf
without prior approval from Capi
tol Hill. The House approved a
nearly $1 billion package to assist
the U.S. military buildup in the
gulf,
• An Army paratrooper suffered
a superficial leg wound when struck
by shrapnel from a misguided artil
lery shell in live-fire exercises by
U.S. forces in the Saudi desert.
• Jordan’s King Hussein flew to
the Moroccan capital, Rabat, for a
summit with Moroccan and Alge
rian leaders aimed at solving the
He said he has cut the salaries ol
employees who have almost nothing
to do.
”1 have two employees who arc
now taking turns off work,” he said
“This is part of our struggle against
Western hegemony, and we will be
patient.”
Throughout the city, people stood
in lone lines outside bakery shops tc
Persian Gulf crisis.
• Iranian Foreign Minister All
Akbar Velayati indicated that
Tehran would open talks with Saudi
Arabia, its greatest rival in the
Moslem world, to seek a solution
to the gulf crisis.
• Japanese automakers agreed
to allow the United States to use
three auto transport ships to carry
vehicles and other goods to the
Middle East
• The flow of Kuwaitis into
Saudi Arabia slowed, four days >
after Iraq began allowing citizens
to flee. Only about 30 cars passed
through the Khafji border cross
ing.___J
get the daily ration of bread.
The only medicines on pharmacy
shelves are drugs bought before Aug.
2 or those made in Jordan. Prices have
increased dramatically.
Tarik A1 Sukooti, a leader ol the
accountants and auditors union, said
Iraqi people support their president
because they believe he is doing the
right thing.
Oklahoma voters limit office terms I
WASHINGTON - Oklahoma vot
ers enacted the nation’s first sweep
ing limit on how long politicians can
hold elective office, but in Massachu
setts they did it the old fashioned way
and threw them out.
In a primary election that was
reminiscent of the French Revolu
tion, heads rolled at all levels of the
Massachusetts ballot
"A lot of voters have been very
angry for a long time and they finally
got a chance to go to the ballot and
say so,’ ’ said Ralph Whitehead, ana
lyst at the University of Massachu
setts.
In the Democratic primary, John
Silber easily defeated former Attor
ney General Francis Belloui for the
nomination to succeed Gov. Michael
Dukakis. Silber,on leave as president
of Boston University, ran as the anti
establishment candidate.
Winning the Republican guberna
torial nomination was former U.S.
Attorney William Weld, who also ran
an outsider’s campaign against state
House Republican Leader Steven
Pierce.
The results from Massachusetts and
Oklahoma seemed to blow away any
complacency on the part of incum
bents.
By a 2-to-l margin, Oklahoma
voters approved a constitutional
amendment placing a 12-year life
time limit on slate legislative service,
the first stale to do so, but probably
not the last
Similar proposals will be on the
November ballot in California and
Colorado and additional proposals have
been introduced in New York and
Florida.
Oklahoma voters also backed the
outsiders in the primaries for gover
nor, giving the nod to David Walters
over veteran congressman Wes Wat
kins for the Democratic nomination
and for Bill Pnce over Vince Orza in
the GOP balloting.
Senate may debate gas-guzzling car bill I
w AoMiiNU iun - America’s gas
guzzling cars are under the heaviest
attack in more than a decade as the
Mideast crisis brings home the coun
try’s reliance on foreign oil.
And Detroit is shuddering.
Today the Senate is expected to
take up a bill that would require auto
makers to produce cars with an aver
age gas mileage of 40 miles per gal
lon.
The bill was once given scant
chance, but industry lobbyists and
members of the Bush administration
now say they’re concerned the meas
ure may sneak through as Congress
searches for a response to the crisis in
the Persian Gulf.
The spotlight shining once more
on efficient cars could not have caught
automakers at a worse time. For years,
they have been increasingly pushing
performance over gasoline savings.
As the bill’s prospects have risen,
so have the voices on both sides of the
issue.
It should be called the highway
fatality bill,” Transportation Secre
tary Samuel Skinner told a news
conference called so he could de
nounce the legislation. If passed, he
said, the measure would lead to smaller
cars and more traffic deaths.
Skinner said the “near hysteria
over the Midcast situation may Pr '
pel the legislation through C ongres
even though, he insisted, the mileag
goals are “unrealistic, irresponsib (
and, more important, unattainable.
He said he would urge President Hus
to veto the bill if it reaches his des .
But environmentalists say Skmn
is being taken in by the automake s
who repeatedly have said they w
the technology to improve fuel c
ciency dramatically after yc^
making cars lighter, smaller and rm
efficient
