Editorial: Let’s resist the urge to act rashly

Thursday, Sept. 27, 2001 | 8:56 a.m.

The U.S. economy unquestionably has stalled, and it likely is in the throes of a recession, and proposals are coming in from all directions that ostensibly would jump-start it. Some sort of economic stimulus will be needed, but Congress should carefully sort through the competing suggestions and make sure it finds the right prescription.

Two ideas in vogue among Republicans are a capital gains tax cut (which many Republicans in Congress back) and a reduction in corporate income taxes (which the White House advocates). Supporters of each proposal say that these tax cuts would increase investment and get the economy moving again, but there isn't much guarantee that they would do the job envisioned. Members of Congress instead should heed the counsel of Federal Reserve Chairman Alan Greenspan and former Treasury Secretary Robert Rubin. Both of these men, who were the principal architects of the boom the economy experienced during the 1990s, on Tuesday advised Congress that these two tax cuts wouldn't give the economy the boost it needs.

If tax cuts are enacted, Greenspan and Rubin contended, they should be crafted in a way that provides both consumers and businesses with enough incentive to spend again immediately. Greenspan indicated that a tax cut in the range of $40 billion to $60 billion would be just about right. In addition, the two financial experts said a tax cut should be temporary so that long-term budget problems aren't created. Otherwise, long-term interest rates could spike upward if the financial markets worry that the government's fiscal soundness may be imperiled.

The bottom line is that a tax rebate that would cover all workers -- unlike the president's limited tax rebate passed earlier this year -- should be given top priority. A capital gains tax cut and a reduction in corporate income taxes may only end up benefiting wealthier Americans -- with no advantage to the overall economy. And in light of the massive layoffs that have taken place since the Sept. 11 terrorism, serious consideration should be given to boosting the unemployment insurance program.

The nation is entering a war, the newness of which has left many people uneasy and has hurt the confidence of consumers and businesses. Just as it's natural for people to want to see immediate retaliation against terrorists, there also may be a desire for Congress to take swift action to get the economy moving again. But Congress should listen to Greenspan's repeated advice about tax policy, which is that it's more important to get it done right than it is to get it done quickly.