A Stimulus Not Worth Passing
The New York Times
December 9, 2001
If President Bush truly wants an
"economic stimulus" package on his desk
this year, he needs to do more than exhort
Congress to get moving. He and the
Republican leaders in the House and Senate should drop the pretense that
tax-break giveaways to corporations and the wealthiest Americans are the
key to reviving the economy.
On Friday, Republicans broke off bipartisan negotiations on stimulus
legislation, raising doubts about whether any measure to help the economy
can be enacted this year. But in a slump like the one right now, an ineffective
and lopsided bill is worse than no bill at all. Congress has to decide this
week whether it wants to provide a real stimulus and help those hurt by the
downturn, or give handouts to the people who need them least.
The country would be better off with no stimulus package than with one that
abolishes the minimum corporate tax, as Republicans demand. Part of the
sweeping tax reforms of 1986, the minimum tax is a sensible rule requiring
corporations that have used loopholes and deductions to reduce their tax
bills to zero to pay at least something to the federal Treasury. With the
prospect of deficits stretching out to the horizon, and the administration
claiming that it cannot afford to spend more money on homeland security, the
idea of permanently eliminating this source of revenue is outrageous.
Republicans initially also wanted corporations to get refunds based on the
repeal of these taxes, retroactive to 1986. The outcry over that proposed
giveaway forced them to back down a bit from that idea. But tax law is
infamously tricky, and the measure remains structured so companies could
use it to recoup past taxes. The positive effect on the economy would be
negligible, and the federal Treasury would be the loser. The winners,
beneficiaries of huge and unnecessary windfalls, would include General
Electric, General Motors, I.B.M. and even Enron, the bankrupt energy
concern.
The Bush administration and Congress did enough damage to the
government's long-term financial health with the tax cuts enacted last June,
and the country is now seeing the results in the future deficits. The stimulus
package backed by the White House would accelerate the high-end tax cuts
that were approved earlier this year but are not scheduled to take effect for
several years. These particular cuts will almost certainly be reconsidered and
perhaps repealed by Congress when it starts wrestling with deficits and the
need to make drastic spending cuts next year. Sticking them into the stimulus
package is just a ploy to nail down a benefit to the wealthiest 1 percent of
America before the country realizes it cannot afford the bill.
Last week, Republican leaders agreed to include in the stimulus an extension
of unemployment benefits for nearly eight million Americans out of work.
They took that step to secure Democratic votes for a separate bill to grant
Mr. Bush expanded trade-negotiating authority. Republicans have also
accepted the concept of tax breaks for those low- income Americans left out
of the tax cut earlier this year. But these are only half-steps, hardly worth
trading for the budget-wrecking effects of the other provisions. Extended
unemployment benefits under the Republican plan would still go only to
white- collar workers, not to part-time or recently hired people who were
laid off. At a minimum, the stimulus bill needs to help all Americans who need
jobless and health benefits.
There can certainly be room for tax breaks for business in a stimulus
package. One sound approach would be to expand business tax deductions
for future expenses and depreciation. Such steps would truly encourage new
investment and also focus their benefits on the small and medium-size
businesses hit hardest by the economy today. Congress should also include a
measure to help the states close their budget deficits.
There is an impasse in Congress now on the stimulus, and Republicans
favoring a bill for rich and big corporate taxpayers apparently think they do
not need to make concessions. They simply plan to blame the Democrats if
nothing is passed. That is why Mr. Bush needs to stop his exhortations and
do the dirty work of negotiating with Congress. The presidential bully pulpit
goes only so far. More welcome would be some tough decisions to get a bill
that can not only be passed but can also do some good.
nytimes.com |
