How to Cut the Deficit And Create New Wealth
The stock markets could boom in 1989, says Felix Rohatyn, senior partner of Lazard Freres, a shrewd, big-time financial-market participant. "It could be called the Bush Bull Market, and I would cheer it on," he adds. But there's a big "if": if the president-elect drops his "no new taxes" pledge and makes a believable deal with a Democratic Congress on spending reductions.</br></br>"If we get that, the stock market would go up several hundred points, and interest rates would come down, creating wealth and economic activity again," Rohatyn said in an interview.</br></br>Rohatyn is a Democratic member of the National Economic Commission charged with finding a solution to the deficit impasse. He says he would accept any credible combination that would get the current $150 billion deficit down to no more than $20 billion by 1992, the goal being to regenerate investment and economic growth.</br></br>His own scenario calls for a half-and-half package roughly divided between tax increases and budget reductions.</br></br>What motivates Rohatyn is a belief that the nation's biggest and most immediate problem is the huge, overhanging Third World debt-a crisis likely to begin in Mexico. "We can't deal with that until we get real interest rates down, and stabilize the dollar, and we can't do either until we tackle the budget deficit," he said.