- The Washington Times - Monday, October 8, 2001

Extraordinary economic times require extraordinary economic measures. By reducing the federal funds interest rate this week to 2.5 percent a level not seen since the Kennedy administration the Federal Reserve Board demonstrated how well it understood this maxim. Now, in the wake of the Sept. 11 terrorist attacks, there appears to be bipartisan consensus that fiscal policy should play a much more expansionary role as well. This is a most welcome development.
Recently, President Bush endorsed a stimulus package totaling as much as $75 billion. These funds would be in addition to the $55 billion in fiscal stimulus for defense-expenditure increases, the New York City rebuilding effort and the airline bailout that Congress had already legislated since the Sept. 11 terrorist attacks. This would come on top of previously legislated tax relief, which would contribute approximately $70 billion more. Given that the terrorist attacks almost certainly tipped the U.S. economy into a recession, the current goal is to avert a deep, prolonged economic contraction in the United States indisputably the worst conceivable development for the world economy.
Congress and the White House must now decide on the elements of the stimulus package. Democrats prefer an increase in cleverly disguised transfer payments, such as inadvisable health-insurance subsidies for the newly unemployed and payroll tax rebates for individuals who already pay no income taxes. Neither idea would address the primary, immediate need of reversing the economic decline, and both would establish precedents that Democrats would surely attempt to exploit once the current economic emergency passes.
Congressional Republicans make the common-sense argument that the purpose of a stimulus package should be to stimulate the economy as quickly as possible. The best way to achieve this goal would be to accelerate the implementation of the income-tax reductions that Congress passed earlier this year. In addition, as has been demonstrated repeatedly over the past few decades. Reducing the capital-gains tax rate would generate additional tax revenues, which could then be used to further accelerate the income-tax reductions.
While an increase in the minimum wage will not directly affect fiscal policy in any meaningful way, Democrats have been attempting to include this measure in any stimulus package. This is a bad idea simply because raising the minimum wage destroys jobs; doing so during a recession would be especially counterproductive.
If Congress is serious about not worsening the recession, it will oppose any increase in the minimum wage instead and support common-sense stimulus measures.

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