WASHINGTON (AFX) - Treasury Secretary Paul O'Neill said the economy will recover, even with the failure of the Senate to pass a fiscal stimulus package.
"Are we going to recover? -- yes," O'Neill said in an interview on PBS Lehrer News Hour.
"Is it regrettable we didn't get (the stimulus package?) -- yes," he added.
The Senate earlier failed to approve either the Democrat or Republican favored stimulus packages; O'Neill said "hopefully it is not really over."
O'Neill said the first quarter is likely to see GDP growth of "some multiple of the 0.2 pct (GDP growth) in the fourth quarter" of 2001. First quarter GDP "is going to be positive," he stressed, explaining that "we're on our way to at least a substantial inventory snapback in the early part of this year," with businesses having depleted stocks to the extent they will need to boost production to restock.
"And then I think with business investment kicking in we could be back at good growth rates, which is where we ought to be: we need to lead the world," he said.
"We need to get Japan and Europe to do it, too," he added. O'Neill also highlighted the "phenomenal" productivity growth rate in the fourth quarter, of 3.5 pct, which he added, "I was a little surprised at."
Private sector economists noted that the economy usually suffers lower productivity growth in a recession. The fourth quarter growth rate was the highest since Q2 2000.
The Treasury Secretary said he did not think the Enron issue has created a drag on the economy, explaining that "I don't think we have a general problem" with accounting standards and Enron-type disclosure issues.
O'Neill acknowledged, however, that the Enron bankruptcy "has raised questions" about other companies' accounting standards. He said the administration will submit a recommendation to President George Bush to hold corporate chief executive officers more accountable and responsible for their actions, possibly through tightened Securities and Exchange Commission (SEC) rules.
CEOs ought to "produce value" for their enterprises, and "not make off with a lot of money," he said.
Turning to Enron specifically, O'Neill said initial indications are that some Enron executives are guilty of purposeful misleading. "It appears from what's been reported that there were intentional actions to mislead, or produce the possibility that people would be misled by not giving them all the information that they should have," he said.
As evidence becomes clearer, "malefactors ought to be brought to justice," including putting people in jail, he said, cautioning not to judge before all facts are in.
Separately, O'Neill said he called Argentine Economy Minister Jorge Remes Lenicov yesterday, concluding that Argentina is "working hard" to produce a sustainable economic plan.
"There's no place in the world that's been able to maintain a fixed currency," he said.
Independent analysts have noted China and Hong Kong still maintain some form of fixed exchange rates.
Argentina still has to deal with moving off its fixed exchange rate, he said, and highlighted the need to deal with provincial government overspending.
The problem of provincial governments being able to create obligations for the national government without the central government's say so "is not a sustainable political system," he said. Once the country does come up with a sustainable plan, "then we can help them with money," he said.