- The Washington Times - Thursday, October 18, 2001

There's a lot to like in the $100 billion economic stimulus bill that the House will vote on next week. It cuts taxes for struggling businesses, speeds up tax cuts for individuals, and reduces capital-gains taxes to spur new investment to create more jobs.

The economic recovery legislation reported out of the House Ways and Means Committee last Friday on a party-line vote did not receive very much attention in the news media. That's understandable, because the media are focused on America's war on terrorism.

But this bill, made up mostly of tax cuts, is critically important to our country's future economic security. "This bill is focused on investment. That's what we need now more than anything else," House Majority Leader Dick Armey, Texas Republican, told me after the committee acted.

Crafted by Ways and Means Chairman Bill Thomas, California Republican, the bill contains most of what President Bush called for a couple of weeks ago when he said the country needs additional tax cuts, not the increased social welfare and public works spending the Democrats are proposing. No country has ever spent itself out of a recession. Just ask the Japanese.

For businesses, the bill would repeal the corporate minimum tax and let companies write off purchases of equipment much faster. Of course, many hard-hit companies do not have the cash to buy new equipment, so the bill lets them use net operating losses to lower their tax payments over the previous five years, yielding refunds that will put cash back in their tills.

People who did not get tax rebates this summer because they do not earn enough to pay income taxes will be given rebates from the payroll taxes they paid. I agree with Sen. Phil Gramm, Texas Republican, that people who do not pay income taxes should not get rebates, but Mr. Thomas put that provision in to attract Democratic votes. "Let's see the Democrats vote against that one," said a House GOP leadership official.

Most important, the bill would accelerate the president's 10-year, $1.35 trillion tax cut plan, which Congress passed in the spring. Under those tax cuts, the 28 percent rate was cut to 27 percent, and was then scheduled to gradually drop to 25 percent by 2006. The Ways and Means bill would let that take effect in January.

The White House is opposed to cutting the capital gains tax rate, largely for political reasons. Class-warfare-provoking Democratic demagogues will certainly denounce it as "a tax cut for the rich," and the president's advisers think that would make a stimulus bill harder to enact in the Senate. (Try telling that to the 100 million Americans who make up the growing investor class.)

Mr. Thomas finessed this issue somewhat by easing the asset-holding rules for capital gains, which would effectively cut the tax rate from 20 percent to 18 percent.

But the bill, which is expected to win House approval easily today, faces an uncertain future in the Senate, where Democrats want to turn it into an unemployment maintenance bill.

"They want to keep the unemployed comfortably unemployed for a longer period of time. We want to boost economic growth and create more jobs to put the unemployed back to work as soon as possible," Mr. Armey told me. "That's the difference between our two approaches."

Another big difference is the size of the stimulus. The Thomas bill would quickly pump $100 billion into the economy in tax incentives, more than the $75 billion Mr. Bush called for, and much more than the puny $50 billion in spending and tax cuts that Democrats want.

Moreover, House Republican leaders will be sending their tax cut bill over to the Democratic-run Senate at a time when events will be playing to the White House's advantage. At the end of the month, the Commerce Department will be releasing its third-quarter growth numbers, which will likely show for the first time that the economy has stopped growing and is plunging into a recession.

The consensus gross domestic product forecast in the third quarter is minus .07 percent, and it is expected to be much worse in the fourth quarter.

With newspaper headlines reporting what America's unemployed workers already know (namely, that the U.S. economy is contracting), it is going to be politically difficult for Senate Majority Leader Tom Daschle, South Dakota Democrat, to argue that harder economic times to come call for a smaller stimulus with tinier tax cuts.

That's when Mr. Bush can turn up the political heat and sound the call for a stronger tax cutting stimulus bill to repair the damage that the terrorist attacks inflicted on the U.S. economy.

Along with the war against the terrorists and their Taliban protectors in Afghanistan, we need an all-out offensive here at home against a looming recession. This is no time for timidity or half-baked solutions. Jobless Americans and struggling businesses need to hear that help is on the way, and soon.

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