With interest rates this low, America's nearly a steal

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© St. Petersburg Times,
published October 3, 2001

America's just gone on sale.

Tuesday, the nation's greatest salesman made an offer many of us can't refuse.

Federal Reserve chairman Alan Greenspan offered a blue-light special on the already-cheap U.S. dollar by cutting interest rates for the ninth time this year.

Greenspan cut a key interest rate by a half-point to 2.5 percent, a level not seen since 1962 when President Kennedy was in office and Lawrence of Arabia won the Oscar for best picture.

What other business has cut the price of its product nine times since January?

Nobody. But now all kinds of U.S. business are slashing prices -- big time.

The reason for the national sales binge, of course, is to help lure consumers still shell-shocked by the Sept. 11 attacks back into a buying mode. To boost confidence in such unstable times, businesses find -- like Greenspan -- that their sale prices must be deeply discounted and, perhaps, cut again later.

Even President Bush says he is close to a deal with Congress on a stimulus plan that could boost the economy without doing long-term damage.

But will putting America on sale do the trick? Here are eight troubled pieces of the U.S. economy whose backers are praying cheaper prices will put consume back in the word consumer.

1. Loans: Courtesy of Greenspan and his Fed pals, the federal funds rate (the interest banks charge each other on overnight loans) has dropped this year from 6.5 percent to (as of Tuesday) 2.5 percent. That's spurred cuts in other short-term interest rates, including the prime rate (to 5.5 percent). The effect? A new and lower sales price for many consumer and business loans.

Still more cuts are likely. The question then becomes: With short-term rates already so low, will further Fed reductions make much difference?

2. Air travel: Desperate to draw passengers back onto their planes, airlines are cutting fares rapidly. This week, United Airlines began offering 25 to 50 percent off some unrestricted business fares purchased in advance and used for travel through December 31. American Airlines' Aadvantage program now offers members the opportunity to earn double miles on flights through Nov. 15. Both Aadvantage and Delta's SkyMiles programs have reduced the points (from 25,000 to 15,000) members must accumulate to get a free domestic ticket.

Discount travel Web site Bestfares.com says there are hundreds of air fares "coast-to-coast" for less than $178 round trip, as well as $110 round-trip fares from many East Coast cities to Florida.

3. Theme parks: Orlando and Tampa Bay area theme parks were hurting for business before the Sept. 11 attacks and have begun aggressive discounting. Since the attacks, Tampa's Busch Gardens and sister park Sea World in Orlando started offering a monthly payment plan on yearly passes with no interest or service fees. Starting Friday, Disney's annual $306.34 pass for Florida residents will be extended an extra 100 days.

Universal Orlando has begun its own sales plan for Florida and select Southeast residents. For example, visitors who stay at Universal's Hard Rock Hotel for two nights ($99 per night) can get access to both Universal theme parks (Universal Studios Florida and Islands of Adventure) for the $48 price of one.

4. Hotels/Resorts: Hotels and resorts have been flooded with cancellations since the attacks. Heavy layoffs of workers are under way. In Washington, for example, almost half of the capital's 25,000 hotel employees have been laid off. In New York, hotel occupancy rates hover near 45 percent, half of normal.

In response, national hotel chains are offering discounted room rates. Hotels along the Tampa Bay area's beaches are trying to lure tourists within driving distance with packages that include reduced package prices on accommodations, restaurants and attractions. In South Florida, high-end hotels such as the Fontainebleau Hilton offer a 30 percent discount to Florida residents. And the Boca Raton Resort & Club has extended its summer discount rates through October.

In Georgia, state residents may soon get a 20 percent discount on in-state lodging and attractions simply by showing their drivers' license. And while the Tampa Bay area's tourist leaders try to attract visitors close enough to travel by car, so are regions of Georgia. Among their prime marketing targets? Atlanta, Charlotte and the Tampa Bay area.

5. Vehicles: It may be the best time in years to buy a new domestic vehicle, as Ford, General Motors and Chrysler lure customers back into their showrooms with offers of zero-percent financing. GM started the zero-percent program -- dubbed "Keep American Rolling" -- last month. Ford and Chrysler followed.

Many carmakers that are not providing interest-free financing are offering low-rate loans (courtesy of Greenspan) and even manufacturer's rebates. Already, J.D. Power surveys indicate, vehicle sales are responding to industry incentives.

6. Department stores: Dillard's and some other retailers are hyping early and aggressive fall sales. The biggest surprise is Nordstrom, which Friday started an unplanned fall season sale until Oct. 8. The Seattle retailer, which just arrived in Tampa at the new International Plaza, normally hosts three major sales a year: an anniversary sale in July and two half-year sales in June and November. But a drop in business prompted the company to hold a fourth sale for the first time since it began selling apparel 38 years ago.

7. Gasoline: Don't want to fly on planes yet? Still want to take that trip? You'll need gasoline to drive. The good news: Gas prices are, in effect, on sale. U.S. retail gasoline prices fell 6.9 cents to $1.416 a gallon in the week ended Monday.

That's the biggest decline in at least 10 years, the Department of Energy says. Nationwide, the average pump price for regular gasoline is down 10.8 cents from this time last year. In the Tampa Bay area, AAA reports regular is selling for only $1.344 a gallon.

8. Stocks: After the sharp decline in the stock markets since Sept. 11, share prices of more companies are starting to look like better values, or at least less overpriced. Greenspan's aggressive slashing of interest rates -- the second cut in just under three weeks -- will help. But the strong chance that we are already in a recession means any significant rebound in the stock market -- "sale" or not -- is a ways off.

Odds are good, this massive America on sale effort will spread to other parts of the economy. Is it enough to shift consumer behavior from bear to bull?

Not by itself. Not until the country knows where it stands in this new, so-called war against terrorists.

But, no question, an ever-broader swath of price-cutting promotions and incentives will help. Cheaper money, cheaper flights, cheaper vehicles, cheaper investment opportunities. It's all part of our grand national economic correction.

Everybody loves a sale -- right?

- Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

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