- The Washington Times - Thursday, October 17, 2002

With a recent Newsweek poll showing that American adults, by a 48-32 margin, believe that congressional Democrats have not offered a clear-cut alternative to the Bush administration's economic policies, House Minority Leader Dick Gephardt delivered a major economic-policy speech Tuesday at the liberal Economic Policy Institute.

To be sure, much of the speech confirmed Mr. Gephardt's undisguised effort to use the current economic slowdown as cover to significantly expand the welfare state and government's role in the economy. On the other hand, Mr. Gephardt also indicated that he has come to accept a basic tenet of sound economic policy. Unlike October 1990, when Democratic congressional leaders used an "economic summit" with the White House to pressure President George H.W. Bush to agree to a tax increase in the middle of a recession, on Tuesday Mr. Gephardt offered an altogether different economic argument. "The one thing you don't do when you're in slow or no growth going into a recession is raise taxes," Mr. Gephardt said. "You cut taxes."

As part of his $200 billion economic-stimulus plan, Mr. Gephardt proposed reducing individual and business taxes by $75 billion. Reacting to Mr. Gephardt's tax-cut proposal, White House spokesman Ari Fleischer noted, "The idea of tax incentives to help stimulate growth is always an interesting idea."

As always, of course, the devil is in the details. Mr. Gephardt was not very specific, but he did imply that the bulk of the tax reductions for individuals would be given to workers who already pay no income taxes. He will probably try to sell the idea as a payroll-tax credit. But he can hardly complain about diverting money from the Social Security Trust Fund to other programs, on the one hand, while financing a Social Security tax cut with general revenues on the other. The business portion of the proposed $75 billion tax cut would apparently be designed to encourage companies to make planned investments sooner rather than later, thus providing the economy a boost when it most needs it. In any event, Mr. Fleischer was right: Tax incentives to stimulate growth are an interesting idea that deserves to be explored.

The rest of Mr. Gephardt's short-term stimulus program offers much less promise. The spending portion would total $125 billion, representing a massive increase in federal spending, most of which would be difficult to eliminate in the future, even after the economy has fully recovered. Much of it would subsidize state and local government programs, such as $25 billion for school construction and $25 billion for infrastructure. Mr. Gephardt's stimulus program would also add $75 billion for health programs, including a major federal infusion into state coffers to finance Medicaid.

Yes, state budgets are in trouble today. But that is because of their spending binges. Thus, the $125 billion spending portion of Mr. Gephardt's $200 billion short-term stimulus plan represents little more than a backdoor federal subsidy for state and local government spending binges. There is little to negotiate here. However, regarding the $75 billion in proposed tax incentives, let the discussions begin.


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