In this time of business and political uncertainty it can be difficult to see the light at the end of the economic tunnel. However, we believe that a rebound might not be that far off. Below, we propose three key stimuli that―independently or collectively―could help put the economy back on track.
First, we urge the Bush administration to resolve the Iraq situation (and to a lesser degree, the Israel/Palestinian conflict). Resolution to these challenges in the Middles East would alleviate many of the jitters businesses and investors have at that moment. Regardless of whether Iraq’s fearless leader flies to exile in the comfort of a Gulfstream or whether one of Raytheon’s smart bombs finds a home in one of his palaces, getting rid of Hussein is central to an economic rebound. Either a peaceful or military solution would do. Resolution―and stability―in the Middle East is what counts.
Second, we propose Congress pass a new economic stimulus package based along the lines of the Bush administration’s proposal. Key to this are two areas: 1) targeted tax cuts aimed at stimulating the economy (i.e. tax cuts that result in investment, or preferably, those are that spent by individuals in this country immediately); 2) small business tax cuts or credits to stimulate growth and investment. We recently interviewed our cousin who runs a hardware store in the Maryland area about what he would do with a business tax credit or direct cut, and he responded that he would immediately upgrade his store’s computer system and purchase a new truck. We believe that speeding up this sort of investment by individuals and businesses is critical to putting the economy back on track.
In today’s market, many small and medium sized businesses (not to mention individuals) continue to place capital expenditures on hold, taking a wait and see approach. This promotes stagnation, not growth. Whether our leaders in Washington promote new investment through accelerated tax write-offs for small business, capital-gains tax reduction, or through free lifetime savings accounts that encourage longer-term investment strategies, new small business and individual investment is needed to accelerate growth.
Third, we propose our government think hard about targeted spending opportunities specifically designed to jump-start economic expansion. Whether you’re a moderate, conservative or liberal, it’s difficult to dispute the immediate, short-term effects of government spending as a stimulus to economic growth. Long-term, this is not a sustainable strategy, but as the economic rebounds following World War II and those during Reagan’s tenure proved, short-term government investment in key sectors (e.g. military, infrastructure, science and industry) provides the fastest jump-start to a stagnant or down market.
As a last observation, in times of economic stagnation, we need to avoid the tendency to close our economic and political doors. Unnecessary tariffs and overly restrictive immigration and work policies will do nothing but prolong the times that we’re in. We have a wonderful resource in our neighbors to the North and South (not to mention in Asia and Europe), and while we might disagree with some on political issues, we must continue to promote open trade of physical and intellectual capital.
Taken together, we believe that these proposals would provide the short-term kick we need to get the economy back on track, sooner rather than later. And we can’t forget the benefits of a connected global free market system. To quote a favorite Benjamin Franklin saying, in tough times, “We must all hang together, or assuredly we shall hang separately.”
