Enron Mail

Subject:KUDLOW'S TAKE -- National Review Online - September 11, 2001
Date:Thu, 13 Sep 2001 08:45:51 -0700 (PDT)


By Lawrence Kudlow

We are at war. And war changes everything.

After today's heinous crimes committed by terrorists against the U.S. and the
rest of civilized humanity, there must be a sea change in American policies
if we are to effectively play the rough hand that God has dealt us.

We are at war. And war changes everything, including policies. We must now
embrace war policies.

Among the carnage and massive human suffering there is an important wake-up
call that must be heeded by Democrats and Republicans alike: We live in a
dangerous world, and we must never forget how utterly important it is to
maintain our defenses in order to preserve freedom and democracy and our way
of life.

The terrorist invasion of the U.S. mainland underscores the urgent need to
rebuild the defense and national security structure that has slowly but
steadily eroded in recent years. Barbaric terrorists have revealed
significant flaws in our intelligence systems and in our security
arrangements at home. This will all have to be changed. The threat of
terrorist use of nuclear or other weapons of massive destruction hammers home
the urgent need for strategic defense measures and a general technological
rebuilding of our defense posture.

In financial terms, this will cost hundreds of billions of dollars. So be it.
It's a drop in the bucket for the defense of freedom. We will sell bonds to
finance military security. Bonds will finance investment in freedom.

In economic policy terms, today's terrorist invasion similarly changes
everything. To backstop national security recovery we must take aggressive
actions to stimulate economic recovery. It was Reagan who argued 20 years ago
that U.S. economic decline in the 1970s stimulated Soviet adventurism and
expansionism. Reagan knew that economic recovery at home would insure
international recovery abroad.

In an interesting book by Professor Gary Dean Best, entitled Pride,
Prejudice, and Politics, a similar point was made about the linkage between
domestic economic policy and international security policy. Prof. Best noted
that the failure of the U.S. to recover from the Depression - where even as
late as 1940 the unemployment rate was 14.6% - created an image that the
economically-plagued U.S. would be a weak player on the world political
scene. Quite simply, Best argued that economic weakness at home encouraged
Hitler and Japan abroad.

In today's terms, one cannot help but wonder whether Mideast-based terrorist
groups do not think that their energy-producing state government sponsors can
simply turn the dial, tighten oil production, and thereby weaken the American
economy even more. Is it entirely a coincidence that the terrorist actions
aimed at closing down Wall Street, closing down the Pentagon, and even
closing down the U.S. government, have occurred in the immediate aftermath of
worsening economic news and slumping stock market performance?

No matter what the cost, the U.S. must be prepared to restore its economy.
Phony lockboxes must be thrown out the window. Unnecessary obsessions over
debt retirement must be driven away. Now is the time for aggressive fiscal
and monetary stimulus to promote growth and finance freedom. Substantial tax
cuts on individuals, businesses, capital investment, and equipment
depreciation should be immediately put into place. Lower tax rates across the
board will aid recovery by reducing production and investment costs while
stimulating an entrepreneurial economic return. The Federal Reserve Board
must substantially increase the volume of bank reserves to reliquefy the
financial system and the economy. Steps to promote energy production must be
taken aggressively.

Here in New York, with the destruction of the World Trade Center, those of us
in the financial community will grieve over the sad and tragic loss of
husbands and wives who worked Downtown. So many of us involved in politics
and government will know people who lost their lives in the plane hijackings.
While we grieve sadly, our anger will demand immediate U.S. retaliation to
clean out the terrorist criminals and the states that sponsor them. We know
who they are. We know where they are. And we will hope and pray that
president Bush takes immediate and effective actions.

But amidst the grieving and the anger, none of us should lose sight of the
long-term goal of preserving our freedom and democracy. This is a national
security goal, and it is also an economic security goal. What happened today
changes everything. Lord give us the strength to learn from it and take the
right actions to preserve it.