Indicators Slip for Third Straight Month Thursday October 20, 11:37 am ET By Aleksandrs Rozens, AP Business Writer Index of Leading Economic Indicators Sees Drop in September Because of Rise in Energy Costs
NEW YORK (AP) -- A widely watched measure of future economic activity fell for its third consecutive month in September because of rising energy costs that may slow the nation's economy through year-end, a private research group said Thursday.
The Conference Board said that its Index of Leading Economic Indicators, which tries to gauge future economic growth, fell 0.7 percent in September as prices for fuel and other products from oil soared after hurricanes Katrina and Rita slammed Gulf Coast rigs, platforms and refineries.
The September figure, which was above economists' prediction of a 0.5 percent drop, follows declines of 0.1 percent in August and 0.1 percent in July.
"With three negative reports in a row, it's ugly," said Chris Low, chief economist at FTN Financial. "What we are seeing is two things: it is the storms and a pre-existing condition that came with the end of auto discounting. Part suppliers and their raw materials suppliers benefited from auto sales incentives."
David Ressler, chief economist at Nomura Securities International Inc., said much of the impact on the Conference Board's measure of economic activity came from a rise in jobless claims filed by people who were displaced by the storms.
Besides claims for unemployment insurance, the Conference Board said dampened consumer expectations also pulled down its leading indicators index in September.
Energy prices had been steadily climbing prior to Hurricanes Katrina and Rita, but the storms aggravated shortages and propelled prices higher. This hurt consumer spending and also made certain raw goods more expensive for manufacturers.
"The spike in energy prices is another major factor changing the direction of the economy, worsened by a decline in confidence by both consumers and chief executives," Ken Goldstein, labor economist at the Conference Board said in a statement that accompanied the Conference Board's report.
Goldstein also noted: "Add this to the negative impact of the hurricanes and flooding, resulting in lost jobs and incomes, and lost output, and we could be in for slower economic growth through the end of the year."
FTN's Low said economies of the U.S. Gulf States and the Midwest were hurt by the storms. In the Midwest, he said, trade on the Mississippi, a major shipping artery in the U.S., was halted by flooding. "A bulk of raw materials as well as manufactured goods from the Midwest moves on the Mississippi," he said.
Low said the latest report from the Conference Board likely will reinforce the Federal Reserve's stance toward tighter credit policy. "I think it is very unlikely they will pause (from further interest rate increases) before March," he said.
Budget Debate a Defining Moment for GOP, Groups Say By Randy Hall CNSNews.com Staff Writer/Editor October 20, 2005
(CNSNews.com) - The current debate over federal spending is a defining moment for the Republican Party, which not only could lose seats in Congress during the 2006 election, but might also saddle future generations with tremendous debt, leaders from several conservative groups said on Capitol Hill Thursday.
"This is a defining moment," stated Pat Toomey, a former member of the U.S. House of Representatives who now serves as president of the Club for Growth. "The Republican Party came into power in 1995 by advocating limited government, but in the last four or five years, there has been no evidence that GOP officials in the federal government have any remaining commitment to this vital principle."
According to David Keene, president of the American Conservative Union, the rapid growth of the federal debt is in large part due to massive increases in entitlement programs such as Social Security, Medicare and Medicaid.
Discretionary spending increased by 48.4 percent during George W. Bush's first term in the White House, Keene said. That amount is more than twice the 21.6 percent increase during Bill Clinton's administration and "embarrassingly higher than the 48.3 percent increase resulting from Lyndon Johnson's entire discretionary spending spree," on the Great Society programs.
Keene added that during the past few months, President Bush signed the $286 billion Transportation Equity Act and the government pledged to spend tens of billions of dollars to pay for hurricane relief along the Gulf Coast, pushing the federal debt toward a record amount of more than $8 trillion.
"The level of pork-barrel expenditures in congressional spending is intolerable," said Chuck Donovan, executive vice president of the Family Research Council. "Excess government spending threatens pro-family tax cuts, like the child tax credit and marriage penalty relief, which should be made permanent features of the tax code."
As a result, Congress and the president face a critical test, said Edwin Feulner, president of the Heritage Foundation.
"The American people are calling for fiscal sanity," Feulner stated. "The question is: can Washington muster the political spine to act responsibly? I am optimistic that our elected representatives can, with courage, lead us on the right path.
"The president has called for offsets to pay for hurricane relief and rebuilding and the House leadership responded with a plan to pare spending growth," he said. "These are good first steps, but already, there is slippage. Some members have balked at modest 2 percent across-the-board spending cuts.
"Congress must do more, not less," Feulner added. "I believe that any member of Congress who cares about responsible spending must do two things: End pork barrel spending and postpone the new Medicare drug entitlement for at least one year. These two measures would save taxpayers $66 billion in the first year alone."
Efforts to reduce the deficit by a few billion dollars over the next five years are insufficient, Keene said, considering the $7.99 trillion federal debt. "No appropriation bill or program -- either discretionary or mandatory -- should be off the table when it comes to finding ways to cut spending," he said.
Feulner called on the president to "give an ironclad promise to veto any bill that crosses his desk with earmarks attached -- whatever it is. There must be no compromise on that."
Toomey added that it is an "unfortunate fact" that "achieving some modicum of fiscal discipline will have to be done by Republicans alone.
"Thus far, no Democrats have shown any interest in controlling spending. They want to make the problem worse," Toomey alleged. "But it is Republicans who have majorities in Congress, so they have the responsibility."
However, Feulner offered praise for House Minority Leader Nancy Pelosi (D-Calif.), who vowed to give back most of her earmark expenditures in the highway bill to provide help for Katrina victims. "The rest of Congress should join those members of both parties who are willing to give up their earmarks," he said.
Failing to act swiftly on the problem would put the nation "on a path to fiscal disaster," Feulner added. "We are less than one generation from Congress being unable to pay for anything other than Medicare, Medicaid, Social Security and interest on the federal debt -- leaving not so much as a penny for defense or homeland security.
"To meet our existing promises without exploding deficits, federal taxes would have to grow more than 50 percent by 2030," he noted. "It's a future our children cannot afford."
Toomey stated that the GOP would not have to wait long to experience consequences of continued "fiscal irresponsibility."
"If Republicans can't see the need to rein in federal spending, they will have abandoned the one big idea that unites the Republican coalition," he said. "And if that happens, core elements of that coalition may in fact abandon the Republican Party before the 2006 elections."
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