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9/11/2003

CACI gets optimistic look at economy

By Tony Kindelspire
The Daily Times-Call

DENVER — A representative of the nation’s premier business lobbying group talking to Colorado business leaders had some positive things to say about the economy this week.

At the same time, he took the opportunity to call for tort reform and to blame much of what’s wrong economically on excessive government regulations.

Unemployment, which was at 6.1 percent nationally in August, “is nowhere near as bad as portrayed,” Dr. Marty Regalia, vice president and chief economist for the U.S. Chamber of Commerce, told members of the Colorado Association of Commerce and Industry.

Regalia was in town to provide CACI members with an overview of the economy in the wake of the recent launching of the Bush administration’s “Economic Growth and Job Package.”

Overall, Regalia was quite optimistic.

“The fact is, the economy’s got a lot less ground to make up than a lot of the (news)papers have been telling you,” Regalia told the audience of businesspeople.

While several factors do, in fact, indicate that recovery is under way, Regalia acknowledged that it was the jobless aspect of the recovery that was most troublesome.

But Regalia said he believes things are about to change. Inventory-to-sales ratios — which he said have hit “rock bottom” — should begin to show signs of improvement, and that will, in turn, lead to more jobs.

The inventory-to-sales ratio is calculated by dividing the amount of inventory companies have on hand at the end of a given month with their sales totals for that month.

Regalia is projecting that private companies’ investment in equipment and software, which has been at deficit levels much of the past two years, will increase.

“We’re going to see an increase in spending over the next year, and the reason is planned obsolescence,” Regalia said, noting that he jokes about the concept with his daughter, who works for the Ford Motor Co. “Detroit has nothing on Silicon Valley when it comes to planned obsolescence.”

As technologies improve, companies are forced to keep up to maintain their competitive edge.

“This is what I think is going to carry us through most of 2004, and probably through the election,” said Regalia, adding that he is predicting growth of some 200,000 jobs per month next year.

He credits the Bush tax cuts with putting more money in the hands of consumers, and shrugged off the projected federal deficits, saying the numbers “mean nothing” because they are such a small part of the government’s overall yearly budget.

But the subject of jobs was never far away, as Regalia addressed the 2.8 million manufacturing jobs that have been lost in this country during the past 21/2 years — many of which have been sent overseas for good.

In this month’s U.S. Chamber of Commerce newsletter, and again Tuesday morning, Regalia dismissed the “Chicken Littles” who are bemoaning the outsourcing of these jobs, saying that the situation is comparable to that of the early 1990s, when similar alarms over job cuts were being raised.

These cuts, Regalia contends, made companies more efficient and helped fuel the growth of the late 1990s. As jobs were cut, he contends, new jobs were created — 13 million new net jobs between 1995 and 1999.

“The outsourcing issue is one where it’s a matter of economic fact,” Regalia said. “If you don’t do it, your competitor will.”

He blames policy — especially in regards to manufacturing — for causing many of these jobs to be pushed out of the country. He draws a direct correlation between the amount of federal regulations on business and tort lawsuits brought, and the decline in gross domestic product and jobs.

“I don’t think (manufacturing) is ever going to be at the 40 percent level that we saw in the 1950s, but I don’t think we need to bring it down to zero, either,” said Regalia, adding that government policies hamstring domestic manufacturers.

During a question-and-answer session following his presentation, an audience member encouraged the U.S. Chamber to take an active role in fighting for reform.

“It is probably our No. 1 objective,” replied Bill Armstrong of the U.S. Chamber, who also came from Washington for the breakfast at the Colorado State Bank Building. “That, and getting an energy bill passed this year.”

Regalia, who worked for the Federal Reserve in the 1980s, also predicts that if growth continues as expected over the next couple of quarters, Federal Reserve Chairman Alan Greenspan will slowly begin to raise interest rates, another sign the overall health of the economy is improving.

But much of the outlook, he acknowledged, hinges on the unemployment rate dropping.

“If I’m giving this speech in January and we haven’t seen job growth, then I’m worried,” Regalia said. “If I’m Karl Rove, then I’m really worried.”

Tony Kindelspire can be reached at 303-776-2244, Ext. 291, or by e-mail at tkindelspire@times-call.com.