GST, hard as it is for me to say, I share Daschle's concern that they might over do it. My reasons are probably different, though.
He's concerned renewed deficits might drive up LT rates, but that assumes "crowding out" of private borrowing, something that's not likely, IMO.
I'm more concerned with the Congress' propensity for engineering complex, tax-based schemes intended to incent businesses to spend, and with its propensity for jumping on any opportunity to grab some pork for local benefit.
For example, Congress is today considering peanut subsidies and proponents are actually arguing that it is a matter of national security and in support of the fight against terrorism. Yes, bomb 'em with Jif and make 'em hand over bin Laden before we'll give 'em any jelly. ;-)
"Targeted" incentives have a knack for perverting rational economic behavior, encouraging, for example, over-investment in certain classes of equipment or other areas. While I'd be happy to see my software stocks and communications gear stock (singular) run up in anticipation of renewed spending, I'd worry that the renewed spending might be unsustainable (especially the comm gear).
A better fiscal stimulus, IMO, would be tax reduction (or even better, simplification and reduction) that benefits all classes of taxpayers, not just certain sectors of the economy. Rebates are already in the works on the individual taxpayer side - some just now receiving their checks. Cap gains cuts might help too, if they can be done in a way that does not encourage "churn" in the markets. An obvious choice would be moving up the timetable for the already passed tax rate cuts.
The Dems will probably resist tax cuts, though (not all - Zell Miller was already in support before 9/11). If some of the stimulus has to come from actual spending programs, Id suggest it be done in areas where spending planned for future periods can be accelerated into the next 6-12 months. If, for example, long-term infrastructure spending can be moved forward, then presumably, the near-term increase would be offset by future reductions, leaving the long-term, cumulative deficits or surpluses relatively unchanged. I have no idea, however, whether this is possible in any significant way.
JM Random Thoughts,
Bob |
