This morning’s Republican hearing on the economy offered several alternatives to the Democratic stimulus package that was set forward just afterward. Mitt Romney and former E-Bay CEO Meg Whitman dropped in for the first panel and discussed a wide range of ideas.
Despite the current rush to enact something quickly, Congress has every reason to work slowly and carefully on a bill this size. (The House Democratic proposal of today is $825 billion, and appropriations chairman David Obey (D., Wisc.), has already said that may not be enough.) If an enormous and poorly-conceived stimulus bill goes into effect, the results could be catastrophic.
Between the stimulus and bailout money, the federal government may run deficits twice the size of those that existed during the Bush Administration. The most likely congressional response to this will be a tax increase next year or shortly thereafter. “Our concern is that we’re going to whipsaw ourselves with much higher taxes just when things start to improve,” said Rep. Paul Ryan (R., Wisc.).
The hearing was a rump hearing by Republicans, but it was not characterized by partisanship or acrimony. In fact, many new ideas were discussed that could receive bipartisan support. A few highlights:
- A “net new hire” tax credit, which would make it less risky and expensive for businesses to expand.
- A zero capital gains rate for those making less than $200,000 per year, to encourage investment among the middle class.
- Full expensing of business investments for tax purposes. This would encourage businesses to make such investments, as they must currently report depreciation losses slowly over several years.
- A decrease in the top corporate tax rate of 35 percent to 25 percent.
One idea that was got the thumbs-down was rebate checks, which were mailed out to taxpayers last year but do not appear to have had the desired effect. As Rep. Paul Ryan (R., Wisc.) noted in a presser after the hearing, “Many of us supported rebate checks in the past with an open mind, but we discovered that they don’t work.”
Romney also said during the hearing that people don’t tend to spend such checks in hard economic times because they are worried about their jobs. “It is not just about giving people a government check, because they know that check has been written on their bank account.” The first order of business, he said, is to put businesses and investments on a solid footing, because then workers feel confident enough about their future to spend their money at a normal level.