Skip to comments.STEPHEN MOORE: The president needs new tax-cutters
Posted on 12/09/2002 12:54:58 AM PST by MadIvan
When George W. Bush fired his Treasury secretary and chief economic adviser on Friday, he was signalling to the financial markets not just a change in personnel but a change in economic policy to come.
Both Paul O'Neill and Lawrence Lindsey are able men, and were fiercely loyal to the president. Their downfall was a result of the "bumpy performance of the economy" - as President Bush put it - over the past two years and what turned out to be a series of Pollyanna-ish economic forecasts. It was only coincidence, but symbolic nonetheless, that what has come to be known in the US media as the "Friday morning massacre" occurred as new unemployment numbers were released for November, showing a sharp rise in the number of jobless.
Mr Bush and Karl Rove, his chief political stragegist, are keenly aware that the only thing that stands in the way of this enormously popular president being re-elected in a landslide in 2004 is the economy slipping into a double dip recession. Mr Bush's father was thrown out of office 10 years ago despite foreign policy successes because he seemed to be inattentive to the ailments of the economy. And the truth is that Mr Bush Senior was guilty as charged.
This president wants a more aggressive economic stimulus plan to revive the 4 per cent economic growth of the 1980s and 1990s and, just as important, to bring the bulls back to Wall Street. No president has been re-elected in this century when the stock market has been down by more than 20 per cent during his first term. Mr O'Neill in particular did not share the White House's enthusiasm for a big new tax cut next year. We can be sure that his replacement will.
What should that tax cut look like? What is needed now is a cut designed to benefit workers and investors. This plan should combine the Republicans' goal of creating economic growth incentives and the Democratic goal of offering a slice of the tax cut pie for middle-income workers and those out of work.
The problem with the US economy is not insufficient demand from consumers, as many Keynesian economists have suggested. In fact, for the past year or two, the American consumer has continued to spend and the government has spent at an even more frantic pace. The problem is barriers to production. These barriers include over-taxation of capital and labour, over-regulation of the business sector and over-litigation. Unless these barriers are cleared away, no amount of Fed interest rate cutting or demand-side tax cuts such as tax holidays will impel businesses to produce.
If you want to see a symptom of the ailing US economy, look at the venture capital industry, which is almost entirely dormant today. Investors do not see the profit opportunities in new ventures. Costs are too high for new businesses thanks to government meddling; payoffs are too meagre thanks to excessive taxes on capital investment - the capital gains tax and dividends tax.
With that in mind, the president should endorse a tax plan that has three components.
First, Congress should reduce the capital gains tax from 20 per cent to 10 per cent on all new investment. Any share purchase made after January 1, 2003 should be taxed at a new lower rate in order to incentivise new business creation and lift stock values.
Second, Congress should chop the payroll tax on all workers from 15.3 per cent to 13.3 per cent. The payroll tax cut should remain in place until economic growth is resumed to 4 per cent and the unemployment rate falls back to the level of full employment. This would allow all workers to keep more of their pay cheques and lower the cost of labour so businesses would start hiring again. Third, implementation of the Bush tax cut from last year should be accelerated. Seventy per cent of the Bush tax cut has not yet taken effect. There is no point in delaying income tax cuts until 2005 and later years. The economy needs an adrenalin shot now.
The idea behind this plan, which the White House is considering, is to replicate the supply-side tax cut successes of presidents Ronald Reagan and John F. Kennedy. It was JFK who said: "It is a paradoxical truth that when tax rates are too high the economy will never produce enough jobs or enough revenues to balance the budget."
Deficit hawks in both parties will no doubt squeal that this tax plan is unaffordable and will run up the national debt. They are wrong. What Presidents Kennedy and Reagan, and now George W. Bush have understood is that an absence of economic growth causes runaway budget deficits.
Mr Bush is riding high now with voters. He appreciates, in a way that his father did not, that this popularity can be fleeting. His father's conqueror, Bill Clinton, was right when he said that "it's the economy, stupid". Mr Bush will soon have an economic team that understands both the politics and economics of growth.
If he can lead in the economic arena with the same tenacity that he has shown in the realm of foreign policy, he has an opportunity to be one of the most successful presidents in US history. And he will avoid his father's sad fate: being a one-termer.
The writer is a senior fellow at the Cato Institute
He's aggressively stimulating the economy alright. He's practicing the FDR method by increasing government spending at dizzying levels. FDR learned that his tactics weren't working and that War was the only fix for the economy.
I warned you. Now are you going to answer the question if you believe that the possession of child pornography should be illegal?
From your posts yesterday we can only assume that you believe the possession of such pornography should be legalised. In which case, you are an amoral sack of filth whom everyone should shun.
If Jim Rob wants to ban me out of defending you, fine. Jim, if you're reading this, if you think this Demidog weasel is correct, go right ahead, pull the trigger on me.
But I will keep on you about this because I can no more keep silent about your presence here than I could keep silent about a Communist showing up. If that is a sincere belief on your part, that the possession of child pornography should be legalised, then I am going to hit you with it every single time you rear your head, because it is disgusting, amoral and should not go unremarked. You should be forced to confront your amorality each and every time you spout off, which is all the live long day.
Because I've already answered it. He's lying if he claims otherwise. Perhaps he'll be so kind as to direct you to the thread himself.
She's already seen the thread you weasel. You didn't answer anything - you did not want to answer the following question:
Do you believe that the possession of child pornography should be illegal? YES or NO?
You tried to slime your way out of it and did not succeed.
xJones, who started this nonsense (when it was clear you guys had no substantial arguments for the topic at hand) should direct you to the threads in question here on FR. I only keep my original work on my FR profile page. If he's got the links I wouldn't mind looking at them again myself.
Otherwise, talk about the article you posted and argue with me about that. I'm not turning this into another dogpile in spite of your ludicrous "warnings."
So this is a calculated plan. How quaint. Do you guys send each other suggested responses by freepmail too? LOL....pathetic.
In our wildest dreams--but this is a step in the right direction.
Stephen Moore obviously wrote this before the choice for Treasury Secretary was leaked. Peeeeyyyeewwwwww.
Amen! That deserves a big BUMP---as does this article!
MY sense of decency? MY character? I'm not the one who supports the legalisation of the possession of child pornography. You have absolutely no right to lecture to me on either morality or decency, when you support such a thing.
If you want to avoid fighting with me, don't talk to me - you indicated you sheer boredom with doing so yesterday because I refused to let you off the hook. And you still have not answered yes or no to the question.
If Jim Rob wants to keep you here that's his affair, not something I shall comment on, nor feel qualified to comment on. However I regard it as a very low tactic on your part, indicative of your low character, to try and intimidate me by invoking him, something which I have not done to you.
I have no desire to talk to someone who I regard as beyond the pale. I would be happy to debate the whole Keynesian issue with someone else, but you are morally offensive. It was bad enough you attempted a smear on Ronald Reagan, the fact that you can't issue a straight answer on the possession of child pornography, and now trying to threaten me with words about Jim Rob means you are utter scum.
As I say, if you want to avoid a fight, don't talk to me. I have nothing to say to you except my utter contempt and scorn.
As I am sure Happygal will swiftly correct you, she has quite a powerful mind of her own.
Getting an Irishwoman angry is a very bad idea, very bad.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.