A Taxing Situation
It’s jarring to hear lectures on fiscal discipline from some of my colleagues in Congress.
This year especially, since the Senate has failed to pass a budget plan for the first time in nearly three decades. And, though they criticize the Bush administration for “squandering” the budget surplus, the same majority of Senators have consistently approved spending increases at rates not seen since Lyndon Johnson occupied the White House.
America’s economic situation today is not as strong as any of us would like. Too many people are facing anxieties about their jobs, including folks I’ve talked to in Arizona. Though our economy has actually started to rebound from the recession of last year, it remains in need of special attention.
As an election approaches, it is, therefore, no surprise that many leading Democrats - Al Gore, Tom Daschle, Dick Gephardt, and others -- have criticized President Bush for the current economic uncertainty. And, just as predictably, all of the same people who hated the bipartisan tax bill passed just last year have tried to blame tax cuts for all of our ills.
But these political charges are not correct.
In actuality, the tax cut passed last year was very well-timed; it gave consumers more incentive to continue spending while businesses cleared out inventories and adjusted to new economic challenges. Through it all, our economy has demonstrated great resilience, having persevered through a horrific terrorist attack, the temporary shutdown of our airline industry, a potential war with Iraq, and high-profile scandals by corporate executives who cooked the books in the 1990s.
We need to find ways to encourage job growth and expansion and create a better investment environment. President Bush, for example, has called on Congress to pass a terrorism insurance bill that would spur building construction. He has also urged passage of a comprehensive energy package that would reduce our dependence on foreign oil, create jobs in the field of energy exploration, and provide greater stability to our economy.
He also has endorsed a proposal I’ve long advocated to make permanent the tax cuts passed by Congress in 2001 to assure taxpayers that they can count on long-term tax savings. Making permanent the repeal of the federal death tax, in particular, would put millions of dollars into the economy almost immediately, since it would free up the vast resources currently sunk in life insurance policies, trusts, and foundations used to avoid a tax penalty on a person’s assets once he or she dies.
In addition, we should pass incentives that will encourage investment, such as reducing the tax on capital gains and eliminating the taxation on corporate dividends given to investors. We also should enact pension reforms to allow American families to invest money earlier and more often to maximize savings for their retirement. Many investors are understandably nervous about this prospect in light of the corporate scandals of the summer, but long-term investments in companies remain wise ones. As Congress approves incentives to encourage company expansion and job growth, shareholders’ portfolios will also benefit.
I would also take with a grain of salt the economic insights offered by many of my colleagues in Congress - at least those at the head of the line when it comes to proposing more spending.
Let me give you just one example of their idea of fiscal responsibility. Earlier this year, Congress approved a farm bill, stuffed with pork, but which also included substantial drought and disaster relief (though, as might be expected in Congress, “disaster” tends to be an elastic concept). Senators objecting to the amount of spending were promised by Democratic leaders that no more disaster money would be proposed this year. Yet an additional $5.9 billion was proposed just a few months later.
You would think that such excessive spending would break our budget agreement - but as I noted earlier, we don’t even have one.