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Getting Back to American Principles on Economic Stimulus

January 18, 2009
With world financial markets in turmoil, families on Main Street struggling to make ends meet and U.S. unemployment projected by some to exceed nine percent this year, one doesn't need to be a financial wiz to realize the economy needs a boost, and fast.

It is no wonder that among the pomp and circumstance surrounding the planned festivities of President-Elect Barack Obama's inauguration next week, politicians in Washington are scrambling to come up with solutions to the nation's economic woes.  

The President-Elect, Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid favor a New Deal-style "economic stimulus" plan that relies heavily on massive new government spending as a means to create jobs.  This, despite a national debt that currently exceeds $10 trillion and climbing. 

With all due respect to the aforementioned government leaders, we've already tried recklessly throwing taxpayer money at the problem.  It hasn't worked.  And, it is unlikely that spending more money our nation doesn't have to build bridges, pave roads and repeat the recent failed experiment of handing out rebate checks will work either. 

Fortunately, there are some in Washington who get it. 

This week, the Republican Study Committee (RSC), a coalition of more than 100 conservatives in the House of Representatives, introduced the Economic Recovery and Middle-Class Tax Relief Act of 2009 as an alternative to the Obama-Pelosi-Reid plan.  To be sure, the RSC plan doesn't rely on the growth of government and saddling future generations with even more debt to pave a path toward long-term and sustainable economic recovery.  No, the RSC plan relies on America's greatest strength - her people and the private sector - to steer us out of this mess.   

How will the Economic Recovery and Middle-Class Tax Relief Act of 2009 provide sustainable economic recovery?  For starters, it calls for across-the-board tax relief -- allowing American families to keep more of their hard-earned money, rather than forking it over to Uncle Sam to spend on dubious projects.

Among the many taxpayer-friendly provisions of the RSC plan are calls for:

  • A permanent five percent reduction in individual income taxes across the board.
  • An increase of the Child Tax Credit from $1,000 to $5,000 per year.
  • Making permanent the 15% tax rate on capital gains and dividends.
  • Permanently repealing the Alternative Minimum Tax on individuals.
  • Making all withdrawals from IRAs tax- and penalty-free during 2009.
  • Permanently repealing required withdrawals by senior citizens from their retirement accounts.
  • Increasing tax deductions for student loans and other education expenses.

In addition to tax relief for American families, the Economic Recovery and Middle-Class Tax Relief Act of 2009 provides incentive-based relief for American businesses and entrepreneurs in every sector of the economy to do what they do best - create jobs.  Specifically, the RSC plan would, among other things:

  • Allow for all businesses to deduct the full costs of assets they purchase in the year they make the purchase.  (Current law requires that businesses depreciate those assets over several years.)
  • Cut the top corporate income tax rate for from 35% to 25%, enabling American businesses to better compete with their European counterparts. 
  • Make permanent the tax credit for research and development.
  • Extend the 15% capital gains rate to corporations and small businesses.

Finally, the RSC recognizes that the U.S. cannot spend its way toward economic recovery.  Just as American families are being forced to cut back and live within their means, so must the federal government.  That is why the RSC plan calls for a "down-payment on spending restraint" -- a one-percent reduction to FY 2009 discretionary spending, excluding defense, military construction and veterans' affairs.

It is yet to be seen whether the RSC plan will see the light of day in a Congress that is dominated by too many politicians who, in normal times much less during an economic recession, need little excuse to spend our hard-earned taxpayer dollars.  We, unfortunately, are among those who aren't holding our breath.  Then again, it is President-Elect Obama who has promised us a bipartisan tone in Washington and who said time and again on the campaign trail that he believes in a "bottom-up" approach to tackling the nation's problems.

If that is truly the case, what better way to show it than to work with the RSC to get government out of the way and trusting America's people and private enterprise, not the federal government, to get us back on the right track?

How does that old maxim go?  Oh yeah! "Government doesn't create wealth; it either redistributes it or destroys it." 

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