Half a Million More Jobs Seen By End of '92
President's short-term goal is to pump money into the US economy via tax credits. BUSH'S BUDGET
'JOBS for Americans," President Bush's rally cry during the Gulf war and the rationale for his recent trip to Asia, is the centerpiece of Mr. Bush's economic recovery plan.Skip to next paragraph
Subscribe Today to the Monitor
With the release Wednesday of his federal budget for fiscal 1993, the president says he's building a strong future for United States economic security. Mindful of 7.1 percent unemployment and concern among many Americans that they might lose their jobs, Bush promises to help spur the sluggish economy over the coming months and to address the country's long-term economic needs. (Defense spending falls; early signs of compromise with emerge. Stories, Page 3.)
The $1.52 trillion budget calls for tax relief, business incentives, and fiscal restraint. Bush's short-term goal is to pump more money into the economy by offering an optional withholding tax credit averaging $365 this year for US taxpayers and a $5,000 tax credit for first-time home buyers.
Other immediate goals are what the White House calls "job-creating investments a sharp reduction in the capital-gains tax, a 15 percent investment tax allowance, and a moratorium on certain business regulations.
Jolted by new US Department of Commerce figures that show the economy grew a meager 0.03 percent during the last quarter of 1991, the president challenged Congress to pass his short-term program by March 20.
Michael Boskin, chairman of the White House Council of Economic Advisers, says if Congress meets the challenge, the economic recovery "will build momentum over the coming months." He and Treasury Secretary Nicholas Brady point to the current low inflation and the most favorable interest rates in 20 years as the makings of a good environment for renewed economic activity.
If Bush's short-term agenda passes muster on Capitol Hill, Mr. Boskin says, "we'll have more than a half a million additional Americans working" by the end of 1992.
Budget Director Richard Darman says Bush's long-term plan is an "investment in the future," and identifies "record levels of investment" in infrastructure, job training, education, drug-abuse programs, and crime prevention.
Herbert Stein, chairman of the Council of Economic Advisers in the Nixon administration, says Bush has control over the "two things that are most useful to increase the rate of recovery."
Mr. Stein, an American Enterprise Institute economist, says changing withholding rights, which increases workers' take-home pay, and accelerating $10 billion in spending under presently authorized programs will marginally stimulate the economy. But he says "there's no use in holding Congress's feet to the fire on capital gains" because it's unclear whether a reduction in the tax will recycle more money through the economy by further investments.
Stein isn't sanguine about a tax credit for first-time home buyers. "We partly got into this recession by overbuilding commercial and residential real estate - and that was stimulated by the 1980s tax program. I wouldn't want to reinvigorate that by issuing $5,000 credits to every 25-year-old."
Business leaders largely welcome the Bush initiatives, but they will lobby for a longer-term approach. John Cregan, president of the US Business and Industrial Council, a conservative lobby representing 1,500 businesses nationwide, says: "What's killing businesses is uncertainty. They don't know whether they can rely on incentives such as tax credits for investment or tax relief for research and development."
The regulatory environment is ominous for US firms, Mr. Cregan says. Bush's proposed 90-day moratorium on regulations affecting business does not cover the two most burdensome laws, he says. "The Clean Air Act and the Americans with Disability Act are so costly," he says, that they threaten to wipe out US manufacturing competitiveness. "These and other strangling regulations must be halted, not given a 90-day stay of execution."
Jeff Faux, president of the labor-oriented Economic Policy Institute, calls the tax breaks "election-year bribes to voters." He argues that business over the past decade has enjoyed tax reductions and de-regulation. If Bush wants to focus on the American worker, Mr. Faux says, he ought to invest in labor training and education and force US trading partners to provide fair access for American goods.
"What we do short term must help the long term," says Faux. "By shifting more resources into speculative real estate or encouraging more consumption based on borrowing, Bush is wasting the stimulus." Meanwhile, he says, the economy's standing in the world is slipping.
Government industrial policies succeed in Asia and Europe, Faux says, and the US should adopt the same approach and make public investments in the private sector to improve the US competitive position.
"We know we have to do it in the future," he says. "Why not start now?"