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GOP aims for new economic agenda

By Donald Lambro (Contact) | Sunday, November 23, 2008

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Republican leaders say they will have to reshape their economic agenda and message if they are to regain the majority in Congress, and they are getting plenty of advice about how to do just that.

House Republican Leader John A. Boehner, before winning a second term as minority leader, told his colleagues last week that "ideas are vitally important."

"We need to be bold," he said. "The 'same old, same old' won't cut it."

"If it's an idea that's relevant, that touches a constituency, that seizes the initiative, I and my team will make it a priority. We can't slip into the mode of 'comfortable minority' or 'angry, bitter minority.' We have to engage in the battle of ideas," he said.

GOP leaders say the weakening economy and growing unemployment will dominate next year's political debate on Capitol Hill, and by week's end there was no lack of economic proposals for quickly turning things around. They ranged from boosting capital investment aimed at stimulating new start-up companies and job creation, to educating workers for 21st-century jobs.

"Republicans have got to retool their policy agenda in ways that connect to middle-class Americans. For instance, instead of calling for a flat tax or a retail sales tax, which will never happen in our lifetimes, how about cutting the middle-income tax bracket from 25 percent to 15 percent, which means most people would pay a flat 15 percent tax?" said Republican economic strategist Cesar Conda, who was Vice President Dick Cheney's chief domestic adviser.

"Or how about treating investments in human capital the same as investments in physical capital by allowing taxpayers to deduct all educational expenses? Our party can't simply rehash the Reagan 1980s; we need a future-oriented economic agenda," Mr. Conda said.

President-elect Barack Obama's economic agenda does not call for cutting the income-tax rates. Instead, he proposes a "refundable" tax credit for low-to-middle-income workers that would allow them to take $500 for individuals and $1,000 for joint filers off their tax bill. And, he would send a check for those amounts to the 49 million tax filers who will owe no taxes — a proposal his critics have compared to welfare.

In Saturday's radio address, Mr. Obama said his economic plan will save or create 2.5 million jobs by 2011.

Over at the Heritage Foundation think tank, a longtime Republican resource for new-policy initiatives, economist J.D. Foster, says he has several economic-growth ideas ready to put on the Republican Party's leadership table.

"One of the things we are going to have to do is to have a lot of new businesses being created, and a lot of them are going to need investment capital. We can accelerate this process and the hiring that follows by helping them to raise capital by offering a zero capital-gains tax for start-up companies," Mr. Foster said.

"The top — 35 percent — individual income-tax rate should also come down, probably to 30 percent" as a further incentive to work, save and invest, he said.

"These are the kinds of policies that really would help the economy, because they encourage economic production and risk-taking. Unfortunately, there is nothing in the Democrats' economic-stimulus plan to stimulate the economy," he said.

Lower tax rates aimed at stimulating investment capital in a credit-starved economy are among the top proposals being urged by Glenn Hubbard, the former chairman of the Council of Economic Advisers under President Bush.

"Normal lending will not return until more progress has been made on recapitalization" to encourage capital investment in the nation's troubled financial institutions, Mr. Hubbard wrote last week in the Financial Times.

"A decision to retain current low tax rates on dividends and capital gains would be an important first step. Reducing corporate tax rates will positively affect both stock prices and investment," said Mr. Hubbard, now the dean of Columbia Business School.

Mr. Obama intends to raise tax rates on dividends and capital gains and would also raise taxes on businesses such as oil companies and firms that move their operations overseas. But the idea of cutting corporate taxes has been proposed by Rep. Charles B. Rangel, New York Democrat and chairman of the tax-writing Ways and Means Committee. He argues that it is needed to make U.S. businesses more competitive in global trading markets.

In the meantime, Republican officials are pushing their party to strengthen its effort to reconnect with middle-class taxpayers with proposals that will reinvigorate the economy.

"We're going to have to start working for and talking to the taxpayers — that's a constituency we had," said Katon Dawson, chairman of the South Carolina Republican Party. "It's going to be up to our party to erase the confusion about what we're for, and that is limited government, economic opportunity for all, for people who want to build a small business, work hard and create the American dream."