- The Washington Times - Wednesday, December 31, 2008

BAD EXAMPLE

“When Barack Obama makes his New Year’s resolutions, at the top of his list ought to be the following: ‘I will not allow America to become New Jersey,’” Wall Street Journal columnist William McGurn writes.

“Think of it as our gift to the nation. Other states offer promising experiments in areas such as Medicaid, taxes, education and regulatory reform. In contrast, the People’s Republic of New Jersey offers America something truly unique: the perfect bad example,” Mr. McGurn said.

“As harmful as this has been for our own prosperity, our example could be invaluable for President-elect Obama. That’s especially true given that his team appears to be considering some of the same things that have long been popular in Trenton. For years, the solons in our state capital have operated on the assumption that you can have high taxes everywhere - on income, on property, on business - without suffering any consequences.

“Well, Gov. Jon Corzine is now dealing with those consequences, and his budgets show it. Earlier this year, he pushed through a budget that was one of the few in New Jersey history to be less than the one that preceded it. With revenues now running $1.2 billion short of what was expected, the next budget will undoubtedly be tougher still.

“Not all of Mr. Corzine’s choices have been good ones. In fairness, however, he is dealing with huge problems that have been years in the making. In some ways, we are a mini-California. That is to say, where New Jersey was once a national leader in terms of economic growth and job creation, more recently we have become a national laggard.

“It seems not to have dented the consciousness of our political class that New Jersey’s dismal economic performance might be linked to the state’s tax policy. According to the nonpartisan Tax Foundation, New Jersey is home to the most hostile tax environment for business in the nation. We also bear the nation’s highest burden of state and local taxes. And on the list of the 10 counties with the highest median property tax, we claim seven of them.”

MISTAKEN IDENTITY

“The government is fighting the current recession as if it were the Great Depression of the 1930s. This reflects a serious misinterpretation of reality, and one that will most likely persist beyond Inauguration Day,” Lawrence H. Officer and Ari J. Officer write at www.time.com.

“President-elect Obama’s appointment of Berkeley Professor Christina D. Romer as chairwoman of the Council of Economic Advisers is consistent with this orientation, as she is an expert on the Great Depression and may lend support to the unwarranted focus on the Depression. Indeed, Romer has supported the Fed’s current monetary policy because she sees parallels with earlier financial panics,” said the writers (Lawrence H. Officer is professor of economics at the University of Illinois at Chicago; Ari J. Officer has completed a master’s of science degree in financial mathematics at Stanford University).

“… Liquidity problems are not the source of our current financial and economic woes. Incredibly, excess reserves of depository institutions have increased from under $2 billion in August to a record $774 billion in mid-December, according to the Federal Reserve’s Dec. 18 release. But the banks have not taken advantage of this liquidity to increase their lending.

“Why not? Because what we have is not a crisis of liquidity but rather a crisis of confidence. With tremendous excess reserves, it is obviously not the case that banks are not lending money because they do not have the money to loan. Instead, they are afraid that other institutions, including even other banks, will not pay it back. …

“By continuing to throw money at the banks, the government is on the road to prolong the recession and effect massive inflation when confidence is restored and the economy then has too much liquidity.”

RAISING TAXES

President-elect Barack Obama may be about to make a big mistake: raising taxes in the middle of a recession,” the New York Post said Monday in an editorial.

“That’s what his top political aide, David Axelrod, hinted Sunday: The Bush tax cuts are ‘something that we plainly can’t afford, moving forward,’ Axelrod said. ‘Whether it expires, or whether we repeal it a little bit early, we’ll determine later. But it’s going to go.’

“Either way, of course, would deal a significant blow to the economy. But moving up the hit to a time when the nation is struggling to recover from a brutal downturn would simply intensify the pain - and jeopardize any possible recovery,” the newspaper said.

“True, during the presidential race, Obama did call for an immediate repeal of the cuts. But after the election, he thought better of it - suggesting he might just wait and let them expire, as scheduled, in 2010.

“No doubt, scrapping ‘tax cuts for the rich’ has political appeal. After all, many Americans - particularly those not among the top earners - see no problem with having other folks pay more in taxes.

“So it’s hardly surprising that Obama’s political adviser is pushing the idea.

“But, as policy, it would be disastrous.

“As it is, those at the top of the scale already carry the bulk of the load: The top 5 percent, for example, pay 60 percent of federal income taxes.

“Obama may mask his tax hike by pushing a middle-class tax cut.

“But the Bush cuts helped demonstrably in the one area of the economy that needs help the most today: Investment.”

BICYCLE BAILOUT

“Remember that big $700 billion bailout package that Congress passed? There were all sorts of goodies tucked inside, including one for bicyclists. Yes, bicyclists,” Nikki Schwab writes in the Washington Whispers column at www.usnews.com.

“It’s called the Bicycle Commuter Act and goes into effect Jan. 1. While employers can already dole out tax-free funds to employees for parking and public transportation, this act permits companies to provide $20 a month tax-free to employees who bike to work, allowing the money to be used for bicycle purchases and bike upkeep.

“Spearheading the campaign for a bike commuter bill was Democratic Rep. Earl Blumenauer of Oregon. ‘We have legislation that is designed to promote cycling and to provide a little equity for the people who burn calories instead of fossil fuel,’ he says.”

• Greg Pierce can be reached at 202/636-3285 or Greg Pierce.

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