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FreedomWorks is cheering a plan offered today by free-market House legislators to deal with recent market instability. In a direct response to the Treasury Department’s woeful approach to the recent financial mess on Wall Street, the Republican Study Committee (RSC) has put forward an alternative proposal that would get at the heart of the real problem for U.S. markets: the failure of government institutions and the punitive treatment of capital.
Most importantly, the RSC plan would bring about real reform in three key areas that have contributed to today’s crisis. First, it would reform aspects of the tax code that currently discourage capital formation with a two-year suspension of the capital gains tax, removing a barrier and penalty on corporations selling assets to improve their balance sheets. Second, it would correct failures in government institutions by creating a firm time-table for the full privatization of the GSEs at the heart of the current problem, Fannie and Freddie. And third it would repeal the Humphrey-Hawkins Full Employment Act which expanded the mandate of the Federal Reserve, distracting the Fed from it's focus on money supply. Loose monetary policy and easy credit are key causes of the boom-bust cycle was are currently experiencing, and something the $700 billion bailout exacerbates.
Through this approach, the RSC recognizes that the current problem is a direct result of government interference in the market. Only by getting government out, will we address the problem. The idea that somehow more government intervention is needed, as the Treasury proposal reflects, only offers up more of the same policy that brought us to this crisis state.
FreedomWorks President Matt Kibbe commented:
“Thankfully some sanity has entered the debate over the recent Wall Street crisis. By proposing a break from the ‘government-knows-best’ approach that got us into this mess, the RSC is offering a real solution. Treasury’s approach is to do more of the same and hope that this time government will get it right. The American taxpayer can’t afford that and the RSC knows it.”
"While the Treasury proposal would prevent the correction the market is trying to make to years of government intervention encouraging the misallocation of capital, the RSC plan would facilitate that market correction and help the US economy get back on the right track."