Politicians Retarding The Recovery

April 26, 2002
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Deficit spending by the federal government was certainly anticipated after Sept. 11, 2001, and known to be one of the flies in the ointment of economic recovery this year. The biggest threat to economic recovery timelines, however, is not tax cuts, military spending or even projected increases in utility and health insurance rates (though both of the latter will have certain impact). The biggest threat is politics, and Michigan business may get a double whammy if gubernatorial and legislative elections empty seats in the capitol.

U.S. Senate Majority Leader Tom Daschle is accused by U.S. Rep. Vern Ehlers, R-Grand Rapids, of deliberately attempting to delay the economic recovery. Daschle is refusing to allow the Senate to even consider a proposed federal stimulus package, which the GOP House re-drafted and passed explicitly to conform to the Democratic Senate's sensibilities.

Well, Ehlers is right. It's pure déjà vu, which Daschle learned at the knee of his mentor, George Mitchell. Remember? During the elder Bush's tenure, Mitchell prevented the Senate from considering a capital gains tax cut, which economists and all of Washington agreed would help the economy at the time. But, digging in his heels, Mitchell kept the measure from ever coming to a vote. And this gave Clinton the chance to say, "It's the economy, stupid!" It was the Mitchell economy. Now we may be looking at a Daschle economy. 

Economic stimulus in the land of the Big 3 automakers and Big 3 furniture makers also proves to be an election year non-issue. Gov. John Engler has proposed reneging on his promise of graduated cuts in the Single Business Tax as well as Michigan Economic Development Corp. funding as revenues dwindle in the downturn.

To which we say, "Heed your own rhetoric, John." Engler waxed incumbent Jim Blanchard by ridiculing Blanchard's bull-headed, tight-fisted refusal to cut taxes. Now Engler talks the way Jim Blanchard acted.

 

Nothing's changed. There's no big secret here. The way you stimulate an economy is the way Ronald Reagan did it in the '80s, the way John Kennedy did it in the '60s, and the way Calvin Coolidge did it in the '20s — by cutting taxes and giving business incentives (and rewards) for creating jobs.

But regardless of what they say, most incumbent politicians seem to show one thing in their actions: "It's my power that's at stake, stupid."

It's impossible to avoid citing one example of the almost criminal stupidity with which politicians treat business. Michigan Small Business Association leader Paul Hense, of Grand Rapids, points it out repeatedly. It's the insane policy of taxing the money which business must pay as its share of employee health insurance. Could there be any greater incentive for business to get out of health care coverage? Ehlers said he expects businesses to begin dropping the benefit as costs continue double digit increases even during more prosperous times. Further, he believes it will be the issue in the next Presidential election.

Hello? Washington? Anybody listening?

Less than one month ago government leaders held their breath awaiting the advice of Alan Greenspan and the latest government economic numbers, at the ready to help clear a pathway for recovery.

Well, neither Alan nor all his rate cuts can clear that pathway. Only business travels along that pathway. And it's pretty hard to work up serious momentum when government lolls on business's back and siphons fuel from its tanks.

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