False Advertising

The anthrax scare on Capitol Hill has delayed passage of an economic stimulus package favored by House GOP leaders. Any delay is welcome, though the House will undoubtedly approve it. At least the Senate will have more time to craft an alternative to this blatant bit of deception.

Under the leadership of Rep. William M. Thomas (R-Bakersfield), the House Ways and Means Committee produced not a stimulus package but a vast tax break for businesses and stockholders. The cost over the next 10 years is estimated at a budget-busting $159 billion by the Joint Committee on Taxation.

An effective stimulus package would be aimed at putting money into the hands of low-income workers, who would quickly spend it. These are exactly the people given short shrift by the House. The House bill is even more generous to business than what the Bush White House proposed. The administration wanted to lower the corporate income tax rate, but congressional Republicans are targeting investment allowances not only in the future but five years back--a pure giveaway.

The package would repeal the corporate alternative minimum tax, which requires that corporations pay some tax even if they juggle their books and employ tax shelters to show no profit--a practice that the IRS reports is on the rise.

The committee bill would also permanently reduce the capital gains tax rate from 20% to 18%, encouraging stockholders to sell rather than buy and thereby depressing the market. Both Federal Reserve Chairman Alan Greenspan and former Treasury Secretary Robert E. Rubin have warned against lowering capital gains.

White House Budget Director Mitchell E. Daniels Jr. has correctly decried any further bailouts of industry. Everyone from steel makers to restaurants wants help. Democrats may pile on as well: Sen. John D. “Jay” Rockefeller IV (D-W.Va.), for instance, wants tax credits for the fiber optic industry. There’s no reason even now for the government to prop up mismanaged industries. Democrats will also have to resist highway projects and other pork favored by labor.

Daniels was aiming at Democrats when he said, “We now face a risk of runaway spending.” But the GOP strategy is even more wrongheaded, in the opposite direction of reducing revenue.

There are, however, a number of restrained and temporary measures the Senate can press for. Rubin backs tax rebates to lower-income people who didn’t get them in the first round of tax cuts. Unemployment insurance benefits can be extended past 26 weeks. Another fast boost, along with a social good, would come from increasing food stamp benefits.

Neither GOP tax cuts nor capital spending projects that Democrats favor would work as advertised. If Democrats and Republicans define bipartisanship to mean capitulating to their respective lobbies, then the country will be headed for real economic trouble.