How can we fix the economy and create jobs, when people are so uncertain about the future? Sales and job reports are mixed, and businesses worry about what to do, because of the uncertainty over how new regulations or tax policies might affect the business playing field.
The lack of results from the Asian meeting on trade imbalances have been a disappointment to the administration. And right now, our European colleagues do not support the controversial new Federal Reserve $600-billion dollar plan of buying US bonds to stimulate the economy. Our partners across the ocean want us to do what they are doing, and rein in spending, instead of creating more debt.
We have seen failures in the TARP and stimulus programs, the housing market collapse and the huge deficit from spiraling costs of new programs and projects. Even as we need to stop creating more debt, though, we face challenges about our tax and entitlement policies.
Most honest analysts point out that to limit our national debt; we need to raise taxes or cut Medicare and Social Security benefits, or defense costs. Probably we need to do some or all of these, over the next five years or so. The main problem we face is to take action now, to solve our current economy concerns and create jobs, rather than arguing about what to do, and then doing nothing. The business climate is improving but at a slow pace, so employment will not grow fast enough. There are important issues to be addressed; tax rates, government spending, the huge deficit and creation of jobs.
First, the present tax cuts, which are about to expire, should be largely reinstated. The middle class tax cuts should remain the same. This is the not the time to increase those taxes. Last week, a possible compromise was hinted at, suggesting that Democrats and Republicans might agree on reinstating the Bush tax cuts for all but those people earning more than $1 million dollars a year. This would allow most small businesses to try to grow, without the burden of new and burdensome taxes, for at least the next several years. Perhaps President Obama will agree to moderate his stance on that position.
Eventually, we may have to see modest overall tax increases, but only if the economy has dramatically improved. In times like the recession we are experiencing, peoples’ taxes should not be increased. In fact, corporate tax rates, which often seem punitive and anti-business, should be revised. There should be incentives and fewer regulations to induce businesses to expand and grow the economy, and disincentives for exporting company profits to low-tax havens outside our country.
Second, government spending must be cut back. Common sense tells us that most items of government spending will have to be reviewed and reduced to balance the federal budget. The new Commission on Reducing the National Debt, co-chaired by Erskine Bowles and Alan Simpson, is making a number of recommendations to reduce the national debt. It includes reductions of entitlements, and mortgage and wage deductions, and Social Security revisions, along with gasoline tax increases. Most importantly, it recommends cutting the government workforce by at least 10 percent.
Third, great care must be made to openly discuss all the recommendations before any are enacted. In the recent past, there has been too little transparency on rules, regulations and fairness of bills. For example, specific trades, labor organizations, and for-profit corporations were given exclusions from adhering to the new healthcare reform bill. That was not fair to everyone else.
Most regulations are made after bills are enacted. Given the importance and impact of changes in our tax laws and entitlements, Congress should stipulate as clearly as possible that there should be no, or even minimal exemptions, from the new policies. We need everyone treated equally and governed by the same laws.
And finally, we need jobs. It will be a long-range process, as there is no quick fix for the short term. The world is changing. New job skills, requiring re-education, will be needed for employment in the future. Businesses will need to know what the rules are for the playing field, to have confidence in investing for business growth and new jobs.
It will take political courage to cooperate on a bipartisan basis, but our elected representatives all need to do the right thing for our nation.
— Bernard Featherman can be reached by e-mail at bernard@featherman.com.
Comments are not available on this story.
Send questions/comments to the editors.
