No confidence in US Congress

Regardless of party affiliation or the results of the recent presidential election, members of Congress will continue to meddle in matters beyond their knowledge. In doing so, they will exacerbate the U.S. current economic downturn and delay the recovery of its financial markets, says Harvey Golub, a former chairman and CEO of American Express.

If Congress really wants to make things better, they need to do two things, says Golub:

  • Provide enough liquidity so that the capital markets continue to function.

  • Congress needs to promote economic growth – and the fastest and surest way to do so is to cut the marginal rates on corporate and individual income taxes, and to maintain lower levels of taxation on capital.

    These measures will guarantee investment spending will occur, creating jobs and generating wealth. But how can we tell if Congress begins to understand its role in causing the problem and what it must do to help solve it? Here are some signs, says Golub:

  • If Congress passes a stimulus package that simply gives people money, they don't get it; rebates will not stimulate the economy and will not solve the underlying problem.

  • If Congress tries to "help" the people who cannot afford the house they are in, be assured that we are wasting money and delaying the recovery; Banks can decide better whether to foreclose or make a deal far better than any governmental entity.

  • If Congress forces the Treasury to provide cheap equity to companies which are solvent, or to automobile companies because of the debt owed unions in a politically important state, or if it continues with politically motivated spending, all Americans will suffer a long and deep recession.

  • If Congress raises marginal tax rates and erects trade barriers, and makes it easier for unions to organise without secret ballot through "card check" legislation, then the recession will be even longer and deeper.

    Source: Harvey Golub, I Vote No Confidence in Congress, Wall Street Journal, November 5, 2008.

    For text:

    For more on Economic Issues:

    FMF Policy Bulletin/ 11 November 2008
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