-Caveat Lector-
Wednesday September 22 2:56 PM ET
http://dailynews.yahoo.com/h/nm/19990922/ts/yk_days_1.html
Y2K May Spark Downturn - U.S. Senate Panel
Full Coverage U.S. Economy
By Jim Wolf
WASHINGTON (Reuters) - The Year 2000 computer glitch is likely to trigger
international supply-chain disruptions that may end more than eight
straight years of U.S. economic growth, a Senate panel studying the problem
said Wednesday.
With 100 days left to the year change, the Special Committee on the Year
2000 Technology Problem said it was ``greatly concerned'' about the
international Y2K picture for strategic as well as economic reasons.
``Severe long- and short-term disruptions to supply chains are likely to
occur'' as a result of Y2K-related system failures, it said in its 288-page
report.
``Such disruptions may cause a low-to-moderate downturn in the economy,
particularly in industries that depend on foreign suppliers,'' the panel
said. The U.S. economy, a locomotive for the world, has been expanding
since March 1991.
But John Koskinen, President Clinton's chief adviser on Y2K, said he
expected Y2K to have no ``significant'' impact on the U.S. economy, citing
what he called a consensus of forecasters.
At worst, Y2K-related tangles might shave one or two tenths of a percentage
point off U.S. economic growth in the first quarter of 2000, he said in a
telephone interview with Reuters.
Most of U.S. trade was with developed countries, ``and they're doing
relatively well'' in preparing, Koskinen added.
``While the committee has become increasingly confident about U.S. Y2K
preparedness, it has become increasingly concerned about international
preparedness,'' said the report, the panel's last before the clocks tick
over to 2000.
At issue is the coding glitch that could cause older computers and embedded
chips to mistake 2000 for 1900 starting Jan. 1. Unless fixed, this could
play havoc with everything from cash machines to telephones to power grids.
GREATEST OVERSEAS CONCERNS
The committee listed its greatest concerns as China, Russia, Italy plus a
handful of U.S. oil suppliers: Venezuela, Nigeria, Saudi Arabia, Colombia
and Kuwait.
``Several important U.S. trading partners are severely behind in addressing
the Y2K problem ... and are not likely to avoid significant disruptions,''
the report said.
Other countries' Y2K-related problems may wash up on U.S. shores ``in the
form of recession, lost jobs or requests for international assistance,'' it
added.
Committee Chairman Robert Bennett, a Utah Republican, cited a ``strong
possibility'' that Y2K would tip the rest of the world, along with the
United States, into a ``slight economic downturn.''
In addition, Bennett foresaw a ``slight'' possibility of a global recession
-- at least two straight quarters of negative growth -- due to Y2K-related
disruptions, committee spokesman Don Meyer said in an e-mail reply to a
query from Reuters.
At a news conference, Bennett compared Y2K's potential domestic fallout
with the harm to U.S. farmers sparked by the Asian economic crisis that
began in Thailand in July 1997. Prices for many U.S. crops are at their
lowest in decades because of huge supplies and weak foreign demand.
``I think that would be the model that we could look to as to what could
happen,'' he said. ``But there is no really reliable model because the
world has never gone through anything like this before.''
U.S. SHORTCOMINGS
The committee, which has held about 30 hearings and heard testimony from
more than 150 witnesses, voiced deep concerns about the lack readiness of
U.S. health care facilities, state and local government operations, schools
and small businesses.
In addition, it said local and regional power outages remained a ``distinct
possibility'' in some parts of the United States. Both Koskinen and the
chief trade group for U.S. electricity suppliers disputed this assessment.
All available data suggest any Y2K-related outages ``will be highly
localized and of short duration,'' said John Castagna of the Edison
Electric Institute, which represents most major electricity suppliers.
Panel vice chairman Christopher Dodd, Democrat of Connecticut, said a major
U.S. concern remained the Medicaid system, the combined federal and state
health-care program for the poor, elderly and disabled. It ``still needs
some work in about 23 to 25 states,'' he said.
The panel also highlighted fears about possible ``trap doors'' that could
have been stitched into the millions of lines of U.S. computer codes
overhauled overseas to clean up Y2K issues.
If a ``trap door'' were inserted into key network software under the cloak
of a Y2K repair, for instance, an adversary could gain access for years
without anyone being the wiser, the panel said.
ITALY CITED AS CONCERN
The panel cited Italy as a particular concern, partly because of the
throngs expected to converge on the Vatican to mark the 2,000th anniversary
of the birth of Christ.
Specific areas of concern are water, electric utilities, transportation,
airports and, ``appearing weakest,'' Y2K preparation of hospital equipment,
the report said.
The panel faulted an initial series of State Department country-by-country
Y2K summaries as ``rather general, with little to distinguish one country
from another.''
The State Department summaries were released on Sept. 14 after two sets of
government-to-government consultations. Russia was likely to experience a
month of disruptions in financial markets, two months for utilities and
health care and up to three months of turmoil in transport and
communications, the panel cited one assessment as saying and Meyer said it
''generally'' agrees with that assessment.
China appears to be very poorly prepared as well, the panel said. ``Because
of improper planning, insufficient resources and a very late start ... the
committee believes that a substantial portion of Chinese companies and the
government will experience several failures,'' it said.
China may also be haunted because as much as 95 percent of its software
``is thought to be pirated,'' the committee said. ''This could prevent
Chinese companies from receiving technical support from suppliers.''
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