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Time Is Now For Economic Stimulus Package
GRAND RAPIDS — An economic stimulus package designed to get businesses spending again and boost sagging consumer confidence should come out of Congress within a few weeks, federal lawmakers say.
On the table in talks between Republican and Democratic congressional leaders and the Bush Administration are significant temporary cuts in corporate rates, changes that would accelerate depreciation on personal property, and possibly another decrease in the federal payroll tax or accelerating income tax cuts Congress passed earlier this year.
Spurring Congress to act are the affects the Sept. 11 terrorist attacks in New York City and Washington will have on an already ailing economy that has avoided a recession only through solid consumer spending. With the attacks severely affecting the mood of consumers, and the sluggish economy beginning to take a sizable bite out of state and federal tax revenues, a heightened sense of importance for an economic stimulus package has evolved, said U.S. Rep. Pete Hoekstra, R-Holland.
“There’s a real recognition that we need to get the economy moving again or the problems are just going to pile on,” Hoekstra told Muskegon business leaders recently at a Muskegon Area Chamber of Commerce breakfast.
In a follow-up interview, Hoekstra said he expects a bipartisan effort to result in passage of an economic plan by November.
“There’s all kinds of things on the table for discussion,” he said.
Hoekstra expects to see a package that’s designed to spur near-term business investment to jumpstart the economy and ease consumer fears about the economic effects of the Sept. 11 attacks. Accelerating depreciation on business equipment, for instance, may convince corporations to proceed with capital projects that were placed on hold when the economy faltered.
“We want business investment, and we want businesses improving productivity. We think business can provide the biggest jump in the short-term,” Hoekstra said. “We’re saying to people, ‘we’re responding to the events of Sept. 11. We’re moving forward and we’re going to move out of this, and we’re going to move out of this as quickly as we can.’”
A current capital gains tax is also under on the table, although Hoekstra doubts Congress will include it in a stimulus package.
U.S. Rep. Vernon Ehlers, R-Grand Rapids, hopes to see a balanced package that benefits consumers and businesses alike. The challenge is to formulate a package that satisfies all interest involved and will not put a large strain on the federal treasury, Ehlers said.
“There’s an immense number of things on the table,” Ehlers said. “There’s no shortage of options. It’s just a matter of sorting through them all.”
With unemployment rising and many believing the economy will show negative growth for the third quarter, signaling a recession, George Erickcek, chief economist of the Upjohn Institute for Employment Research in Kalamazoo, welcomes congressional action to boost the economy.
While he also worries about over-stimulating the economy, Erickcek believes something needs to occur to spur an upturn in business spending and avoid a deep recession.
“It’s going to take something for business leaders to buy more equipment,” Erickcek said. “They certainly have stepped away from the table over the last nine months.”
In West Michigan, the decline in business spending this year has been the primary factor behind an unprecedented downturn in the office furniture industry. The trade group BIFMA expects industry-wide sales to drop from about $13 billion to $11 billion in 2001.
West Michigan — as home of industry leaders Steelcase Inc., Herman Miller Inc. and Haworth Inc. — is feeling much of the burden from the industry downturn. Herman Miller last month reported a 25 percent decrease in sales for its most recent quarter, compared to last year. Steelcase last month reported a 23.5 percent decline in quarterly sales.
Those figures resulted from business conditions prior to Sept. 11. Since the attacks, business spending has dried up even further, said Chris Byrnes, president of the Holland Area Chamber of Commerce. More worrisome are indications that consumers are also pulling back, Byrnes said.
“Now people are hunkering down,” Byrnes said.
He hopes a federal economic-stimulus package will result in shoring up consumer confidence and convincing businesses to proceed on capital projects that were planned and then shelved in response to the economic downturn.
“The time is now,” Byrnes said. “Right now, for folks sitting on the bubble and those series of motivations may make a big difference. There are definitely things we could do to keep some projects moving that have stalled right now.”