- The Washington Times - Monday, January 6, 2003

In a widely anticipated speech in Chicago tomorrow, President George W. Bush will outline his tax-relief proposals to stimulate the economy.
Our humble advice to Mr. Bush is short and simple: Do the right thing by following your instincts, Mr. President. Stand by the principles that helped to elect you in 2000 and that contributed to the resounding Republican victory in 2002. Democrats threatening class warfare need, once again, to be engaged. Indeed, as Donald Lambro of The Washington Times reported Friday, post-election polls revealed that the Democrats' class-warfare strategy failed among key groups of middle-income voters.
In recent days, the leaks from the White House have been as copious as they have been contradictory. To wit: The president, it is said, has rejected counsel from political advisers who had reportedly urged him to accelerate the 2004 and 2006 tax-rate cuts for all rate levels except the top rate of 38.6 percent, which is legislatively scheduled to decline to 37.6 percent in 2004 and 35 percent in 2006. While the president will likely propose some form of rate cuts at all levels, according to another leak, the White House is prepared to cave on the cut in the top rate during negotiations with Democrats. Other leaks report that the president intends to (a) accelerate the timing of the child tax credit, which is scheduled to increase in stages from $600 today to $1,000; and (b) more rapidly phase out the odious marriage penalty.
Since the election, this page has assessed various stimulus options. Our recommendations have been strongly influenced by the obvious weakening of the economy since midsummer. At the same time, we have recognized the indispensably positive role that consumer spending played during the 2001 recession and throughout 2002. Thus, we have unapologetically endorsed policy actions that would buttress the role of the overtaxed, debt-burdened consumer as the linchpin of the recovery. And, yes, cognizant of the high levels of excess capacity, both domestic and worldwide, we admit to being spooked by the horrifying prospect of deflation, the arrival of which would be hastened by a decline in consumption. Dismal holiday retail sales certainly weren't reassuring in this regard; nor was the recently reported plunge in consumer confidence.
So, what is the best policy? In hindsight, it is utterly indisputable today that the president's headstrong pursuit of the fulfillment of his campaign promise to reduce taxes was the right thing to do in early 2001. And if a timely tax cut was appropriate during the early stages of a recession, then an acceleration of that phased-in cut has to be the right policy today.
With monetary policy likely to remain in a holding pattern in the immediate future, re-invigorating the recovery will have to be achieved by fiscal policy. That policy ought to be pursued from both the demand side and the supply side. One tax-cut option that addresses both sides is an across-the-board reduction in tax rates. Across-the-board cuts will put money in the pockets of consumers at all income-tax-paying levels. That's the demand side. As for the supply side, it is no secret except in Democratic cloakrooms that the economy's highest-earning workers, who bear a vastly disproportionate share of the income-tax burden, also happen to be the biggest source of the economy's investment capital. Allowing them to keep more of their income is the surest way to guarantee that funds will reach the likes of the Steve Jobs of tomorrow laboring away in their not-so-mythical garages.
Nor do we apologize for urging the president to include in his package marriage-penalty relief and an acceleration of child tax credits. Those were good policy actions in 2001, and they remain so today.
On Thursday the president acknowledged the likely tactics of his opposition. "I understand the politics of economic stimulus," he told reporters, adding, "Some people want to turn it into class warfare." Better than anyone else, Mr. Bush knows that his policies prevailed in that warfare in 2000 and 2002. Why should he change now?

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