Implement Full Tax Cut Now
October 1, 2001
While President Bush seems absorbed with successful coalition building, observers remind him not to neglect domestic economic affairs. Despite the fact that the Fed has pumped out liquidity and $25 billion has been added to the budget, even before the September 11 attacks the Commerce Department reported economic growth in the April-June quarter came in at 0.3 percent -- the weakest performance in eight years. Now, retail sales have dipped and consumer confidence showed its largest one-month drop since 1990.
The issue, observers argue, isn't whether to stimulate the economy, but what works.
However justified relief spending may be in the wake of the attacks -- such as airline relief -- it has little to do with restoring economic vigor.
- The money government pays in relief has to come from somewhere -- and robbing Peter to pay Paul doesn't make anyone richer.
- And while monetary policy can indeed create new money out of nothing, it's now time to start mopping up the liquidity that came from the Fed loosening the monetary reins.
- It's also time for another step: cutting marginal tax rates, the amount of tax due on a taxpayer's next dollar of income -- a move that would actually spur economic growth.
- While the Bush tax cuts will reduce the top marginal rate from 39.6 percent to 35 percent, the long phase-in -- between now and 2006 -- won't stimulate anything.
For immediate relief, experts argue, the 2009 cuts should be implemented now.
Source: Robert Bartley, "The Economic Front: Bush in Peril," Wall Street Journal, October 1, 2001.
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