Job cuts heighten recession fears

Signs of dramatic slowdown in the U.S. economy multiplied this week, with big employers announcing major job cuts and the consumer confidence index hitting an all-time low. Appliance maker Whirlpool said it would eliminate 5,000 jobs, Chrysler laid off 4,300 white-collar employees, and Goldman Sachs and Xerox said they would cut thousands of positions. Publishers Gannett, McGraw-Hill, Time Inc., and Tribune Co., announced staff cuts totalling thousands of jobs.

The Federal Reserve this week slashed its key overnight lending rate by half a percentage point, to 1 percent, in a bid to stir the economy. Expectations of a rate reduction sparked a roaring stock market rally, with the Dow Jones Industrial Average climbing almost 900 points in one day. But veteran investors expect the optimism to rapidly dissipate. “We’ve seen these big rallies before,” said Richard Sparks of Schaeffer’s Investment Research. “This is a significant bounce in an overall down trend.”

The tottering economy poses a major challenge to the next
president—and a “unique opportunity,” said Mahlon Apgar and Stephen Sorett in the Baltimore Sun. The new president can lift employment and strengthen America with much-needed investments in roads, bridges, mass transit, and other public-works projects. “Infrastructure revitalization offers a path out of panic, into recovery, and toward sustainable growth.”

The last thing the U.S. needs is another giant government program, said Steve Forbes in Forbes. Ronald Reagan inherited a stagnant, inflation-riddled economy when he became president, in 1981. Instead of trusting Washington to lead the recovery, he let business do it, by cutting taxes, easing regulations, and investing in national defense. “The American economy came booming back, and the U.S. won the Cold War.”

Government has failed to lift the economy, said The New York Times in an editorial, because it has “failed to deal effectively with the root cause of the financial crisis: unaffordable mortgages.” But Sheila Bair, head of the Federal Deposit Insurance Corp., has come forward with “a workable plan.” She has proposed a streamlined process for modifying troubled loans and keeping people in their homes. Mortgage servicers, which handle collections and foreclosures for lenders, would be given a financial incentive to make mortgages affordable. That beats “the ad hoc anti-foreclosure efforts of the past year.”