No Easy Answers

KERMIT the Frog should revise a favorite song slightly and sing on Sesame Street, "It isn't easy being Greenspan."The nation's top central banker, Alan Greenspan, sits in a hot spot these days with the economy feeling like a wilted piece of lettuce. Many economists blame the Federal Reserve System for the slump, saying it failed to ease monetary policy adequately. But managing monetary policy isn't easy when the science of economics is so inexact. The Fed's policymakers wanted a modest slowdown in business activity to reduce inflation. They got more than they bargained for - an economy still in the doldrums more than a year after the July 1990 start of the recession. Technically, the recovery could have started last spring. We won't know until we see the extent of the pause in production in the current quarter and until the statistics and their revisions come out in the next several months. But, as presidential spokesman Marlin Fitzwater acknowledged last week, "People are hurting.... From any practical standpoint, the recession does continue." What to do about it? Well, the Fed took an important step Friday when it lowered the discount interest rate that it charges on loans to commercial banks by a full percentage point to 3.5 percent. Other interest rates quickly followed suit. Such lower rates should encourage some business people and consumers to borrow, invest, buy a home or a car, and otherwise spend, giving the economy a lift. Second, Washington should consider other measures to stimulate the economy. Bush administration officials are talking of a one-time, election-year tax rebate of as much as $300 for each US taxpayer by spring. That would add $30 billion to a $362 billion deficit already expected in this fiscal year - not a comfortable thought. But the trial-balloon proposal has the merit of simplicity, avoiding the lengthy political fight that will surely arise should the administration seek a cut in the capital gains tax and the Democrats in Congress push for taxes on the rich. We suspect that economic activity will pick up fairly soon in the new year. Thus perhaps some less ambitious ideas being tossed out by economists will be adequate. Lacy Hunt of the Hongkong Bank Group calls for bringing some troops home fast from Europe, letting them spend their money here. He also urges the Treasury to borrow short-term only, thereby easing long-term interest rates. Raymond Saulnier, President Eisenhower's top economic adviser, suggests a White House task force look for administrative m easures to stimulate economic activity.