President Bush and Congress have pledged to enact an economic package aimed at boosting the sluggish economy. On Friday President Bush outlined the principles of his economic stimulus plan.
FreedomWorks Chief Economist Dr. Wayne Brough commented:
“The return to a serious discussion about the economy is refreshing, but policy must focus on the fundamentals for long run economic growth, not short term spending. The President Bush’s call for permanent tax reform is an important step forward in that regard and his warning not to increase taxes or spending is also significant. However, efforts for a temporary boost in near term spending are not as likely to be effective. The notion that the government can boost the economy by collecting taxes from one group and then redistributing that money to others is outdated and wrong. Borrowing against future tax revenues to provide temporary, election-year rebate checks is not sound public policy and adds to the debt America is placing on future generations.”
Nothing can provide an economic stimulus as a permanent reduction in the overall tax burden. One serious proposal, the Middle Class Jobs Protection Act, was introduced by Congressman Eric Cantor (R-N.J.) earlier this week.
Representative Cantor’s plan would slash corporate taxes from 35 percent to 25 percent, and would strengthen the economy and improve American global competitiveness while creating new jobs.
Other ideas under consideration are well-intended but will create new risks for taxpayers. For example, President Bush is calling for an expansion of the size and scope of the Federal Housing Administration to address the slowdown in the housing market. However, the most effective way of dealing with the current slowdown it is to let the market correct itself. FreedomWorks is concerned that new regulations would have the effect of a government bailout of lenders and overextended homeowners.
Dr. Brough noted:
“Congress should be wary of imposing new regulations or exposing taxpayers to new liabilities in the housing market. A rush for federal intervention sends the wrong signal that risky behavior will be subsidized while making it more difficult for consumers trying to purchase a home. The market is in a correction, sorting out the missteps of the recent run-up in the housing sector. It is a costly and sometimes painful process, but increased federal involvement may not necessarily improve upon the outcome.”