The terror attacks of September 11 caused a shock to our nation\’s economy. The most recent unemployment data showed that more than 415,000 Americans lost their jobs in October – the highest monthly job losses in more than two decades. The Gross Domestic Product for the third quarter was negative 0.4 percent.
President Bush supports practical steps to help restore the economic confidence of our country – both for consumers and businesses. Since September 11, the federal government has allocated or pledged close to $60 billion for disaster relief, recovery and cleanup, national defense and homeland security – and has committed to spending billions more to help dislocated workers and state and local recovery efforts. For example, the President proposed a Back to Work Relief Package on October 4 to provide help to those workers hardest hit by the economic impact of the attacks. This package would:
Extend unemployment benefits by 13 weeks for Americans who lost their jobs as a direct result of the terrorist attacks.
Make $11 billion available to states to help low-income workers displaced from their jobs to receive health insurance.
Provide $3 billion in special National Emergency Grants to help displaced workers maintain health coverage, supplement their income and receive job training (for example, funds could be used to pay up to 75% of health care premiums covered by COBRA for up to ten months); and
Encourage affected workers to take advantage of more than $6 billion in existing federal programs that provide job search, training, placement and other services.
These are important and necessary steps to help America\’s workers. But these efforts must be complemented by an effective economic stimulus plan to prevent job loss and get displaced workers back to work. More federal spending is not the best way to stimulate growth. Instead, the best way to retain and create jobs is through tax relief that improves incentives to work and invest while also restoring consumer and business confidence.
Tax relief can arrive quickly. Unlike spending programs, tax relief does not have to wait for program guidelines to be developed and processes put in place. New, lower tax rates for consumers and businesses will show up in paychecks starting January 1.
Tax relief is efficient. Spending programs used as economic stimulus tools often do not put money in the right places, instead coming with too many restrictions to give consumers and businesses what they need most. Tax relief gives individuals and businesses the ability to make economic decisions for themselves. And, unlike spending programs that tend to take on a life of their own, the budgetary impact of tax relief is limited and better known.
Tax relief will best help to expand job-creating investment. The changes outlined by the President will give companies and entrepreneurs bottom-line incentives to invest in new equipment, keep current jobs and add new workers. Government spending programs are unlikely to have an impact on productivity or wages. The Japanese experience of the 1990s suggests that reviving a slumping economy with large increases in spending results in budget deficits, larger public debt, high unemployment and low consumer confidence.
PRINCIPLES FOR ECONOMIC GROWTH AND JOB CREATION
The President supports the following initiatives to spur economic growth and job creation plan:
Accelerating Marginal Tax Rate Reductions: Puts more money in the hands of consumers, entrepreneurs and small businesses and improves economic growth incentives by accelerating the marginal tax rate cuts already approved by Congress. Accelerated tax relief for consumers will give them more to spend and invest, and tax relief for businesses and entrepreneurs will help them to retain or create more jobs.
Partial Expensing: Encourages businesses to invest in new equipment and resources by allowing them to partially expense capital expenditures, allowing them to make purchases they might not otherwise have been able to afford.
Eliminating the Corporate AMT: Promotes new investment by businesses by eliminating the corporate alternative minimum tax, which imposes job-killing higher taxes on corporations and small businesses.
Tax Relief for Low and Moderate Income Workers: Reduces taxes for low- and moderate-income households beyond the tax relief already approved by Congress. Helping these taxpayers, who did not get a tax rebate check earlier this year, will ensure that the most vulnerable workers will have more money in their pockets.
Recent studies support these principles as the best way to create more jobs in America.
The Council of Economic Advisers estimates that the approach supported by the President will help businesses to create roughly 300,000 more jobs by the end of 2002.
Economists from the Center for Data Analysis at the Heritage Foundation estimated that the approach supported by the President would produce almost 3 times more jobs than the Senate economic stimulus plan. The analysis also found that the President\’s approach will cause the average family\’s disposable income to rise by $1062 per year over the next four years, compared to only $175 per year for the Baucus plan.
Merrill Lynch\’s Weekly Economic and Financial Commentary noted that "the breathtaking scale of monetary and fiscal stimulus all but guarantees a powerful recovery by the middle of next year… (assuming) that Congress will deliver the goods and not end in gridlock."
The economic growth package is just one of the steps the federal government take to improve America\’s short-term economic health and long-term economic prospects. Enacting an energy plan that ensures our nation has a reliable, affordable supply of energy and greater energy self-sufficiency is a priority. And, expanding trade is essential to the growth of our economy and the prosperity and progress of the world.
The House of Representatives took an important step by passing an economic stimulus package based on the President\’s principles. Now, it is time for the Senate to act so the economic stimulus can take effect quickly.
President Bush will continue to work with Congress on a bipartisan basis to enact a meaningful, effective economic stimulus package.