- The Washington Times - Friday, September 28, 2001

This week millions of patriotic citizens bought stock to invest in America and help prevent a financial market collapse.
Their efforts were only partially successful. Foreigners and big investment houses were selling. The Dow-Jones at one point in the week was down a catastrophic 1,000 points, while the Nasdaq has been flirting with the 1,500 mark a two-thirds decline from its 5,000-point high mark back in early 2000. These are massive losses in Americans' wealth. The net worth of American citizens dropped by $1 trillion in the days since Wall Street reopened the stock market.
The murderous terrorists have not just destroyed life and property; they have caused a world of hurt to our financial stability and our free enterprise economy. That was their evil intention, of course.
There is even some evidence that Bin Laden and his co-conspirators shorted the U.S. market in the weeks before they unleashed their wicked acts of death and destruction so they would also profit from the ensuing market decline. It was no accident that the terrorists chose the World Trade Center towers as their targets. These beautiful structures were the very symbols of America' s financial and economic might.
We are not just fighting a military war, but an economic war as well. Our enemies mean to destroy our prosperity and drag down our high standard of living. Our politicians must understand that we must now respond not just by restoring our military supremacy, but our economic superiority as well.
President Bush and Congress are working on an economic rescue plan, but the White House may allow ultraliberal Democrats Sen. Tom Daschle of South Dakota and Rep. Dick Gephardt of Missouri to dictate the terms of that package in the spirit of "bipartisanship." If that turns out to be the case, the plan will almost certainly be severely flawed and insufficient to avert the economic crisis we now find ourselves in.
Mr. Daschle and Mr. Gephardt want tax cut gimmicks that would be only temporary in nature and would thus have a minimal revitalizing effect on the economy.
In any case, with 80 percent public approval, President Bush must go around the liberal Democratic leadership and present his own plan, and then dare the far-left flank of the Democratic Party to thwart his agenda.
The first goal of any economic package must be to restore confidence in the stock market. Congress and Mr. Bush must come to the urgent aid of the Main Street American investors who have risked their savings and retirement nest eggs in a shaky market. And they should act quickly. It took just 48 hours for Congress to pass a military emergency aid package. It shouldn't take more than that time to pass an emergency financial rescue plan.
We know from history precisely how to pump adrenaline into the market and get prices up. A capital gains tax cut. In fact, if Congress would immediately reduce the capital gains tax rate from 20 percent to 10 percent, we could reasonably anticipate that the stock market would regain all of the ground that it lost this week and then some. The stock market virtually always rises after capital gains taxes have been cut, as seen in the graph displayed below. When the capital gains tax is lowered, the value of every company in America rises. This means that the stock must rise in value too.
Many Democrats fiercely oppose any reduction to the capital gains taxas if it is a violation of their core religious beliefs. Rep. Charles Rangel of New York reportedly threw a tirade when House Speaker Dennis Hastert, Illinois Republican, suggested that the capital gains tax penalty be sliced in half. Mr. Rangel believes that only the rich would benefit from such a policy. But no one has ever explained to me how a falling stock market helps any American. Falling stock values hurt our soldiers, our seniors, our union workers, our minimum wage earners. And boosting the stock market will help the 80 million to 100 million Americans who today own shares of American companies.
Next, President Bush should propose some tax relief for the ailing manufacturing sector that has lost more than 1 million jobs over the past 18 months. The best plan here would be to allow companies to immediately expense the capital purchases for plant, equipment, computers, R&D;, etc., in the year that they incurred the expense.
Finally, all the tax cuts in the original Bush tax plan passed back in the spring should be implemented immediately, not over 10 years. I would adopt an effective date of Sept. 11, 2001. This would immediately lower tax rates to 35 percent and immediately end the death tax.
There really is no time to waste in getting these tax and regulatory reforms enacted. The U.S. economy was already teetering on the verge of recession before these planes struck their targets. Now a recession is almost a certaintythe only issue is: how long, how painful, how much wealth and income, and how many jobs will Americans lose over the next several months? It could get very ugly fast.
President Bush must take a page out of Ronald Reagan's economic playbook. A recurring lesson of American history is that we have won every major war because we had an industrial might that simply overwhelmed our opposition. Most recently, rapid economic growth was instrumental in winning the Cold War against the last great evil of the planet: totalitarianism. Ronald Reagan proved brilliantly in the 1980s that we can, if we simply get our economic policies aligned correctly, afford to pay for guns and butter, whereas our enemies with their inferior economic systems must choose between the two.
Mr. Reagan's adversaries here in the U.S. thought the idea of cutting taxes and fighting a war at the same time made little sense. But it was precisely the economic growth, inspired at least in part by the tax cuts, that convinced the Soviets they could never win an arms race with us.
Defense Secretary Donald Rumsfeld was right on the mark when he announced last week that we are now to fight the first 21st century war. This requires adopting a set of wartime economic measures that will push the pedal to the metal of our new age high-tech industrial structure. The measures will be designed to hyper-accelerate our rate of economic production to the 5 percent to 6 percent range.
Restoring prosperity to our economy quickly would be one of the sweetest forms of revenge against those who hate us. Bush now clearly has the capacity to ram through Congress an aggressive policy of growth. The plan he comes up with may very well ultimately define the degree of success or failure of his presidency.

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