Plattsburgh Press Republican - It's Time To Declare War On Debt, Focus On Jobs
It is nice to see our political representatives lead the discussion in the marketplace of ideas. The Press-Republican editorial on April 29 documented some excellent suggestions emanating from Albany Republicans. They include ways to save almost $5 billion, and other ways to enhance income by $765 million. Their proposals are common sense and seem to cross the partisan divide.
At the same time, we see new leadership from those in Congress who dare to create innovative ideas. The War on Debt Act is one such innovation. And a Rural Jobs Tax Credit Act is another.
Now is the time to wage war on debt. It is also about time that those in Washington began to focus on how to put people back to work in the private sector, rather than focus solely on job retention in the public sector.
To his credit, Congressman Bill Owens has introduced these two bills that move us in the direction of economic recovery and fiscal responsibility.
The first is his proposal for War on Debt Bonds.
Remember the war bonds that mobilized domestic savings in the just cause of World War II? Owens's War on Debt bonds try to appeal to our inherent desire to see this country to a better economic footing. Rather than rely on debt from abroad, War on Debt bonds would offer us all the same deal some foreigners already receive. We would be able to buy U.S. bonds without penalty of federal, state and local taxes on their interest. By making savings attractive again to Americans, hopefully we can encourage domestic savings. At the same time, we would become less vulnerable to the foreign lenders who allow us to pursue our irresponsible spending ways.
At one time, this country withheld 30 percent of interest earned by foreign purchasers of our bonds. However, this withholding was repealed in 1984, in essence giving preferential treatment to foreign investors and sovereign funds compared to our own citizens.
In turn, the resulting inflow of foreign investment increased demand for our dollar and strengthened the U.S. exchange rate. This higher exchange rate damages a region like our that benefits most when other countries find affordable our goods and services. Exports suffer and we import more when our exchange rate is kept artificially high. War on Debt bonds help alleviate this problem.
War on Debt bonds will also encourage our growing retiring and retired population to convert their savings into a safe investment that will provide for a flow of income in their golden years without increasing their tax liability. A four or five percent tax-free return in these uncertain times is not a bad return.
On the surface, it would appear that such a War on Debt bond instrument would cost the Treasury dearly. However, if foreign bond purchasers avoid U.S. taxes anyway, tax-free benefits offered instead to American savers would cost the Treasury nothing. And, it would allow our citizens and residents an attractive opportunity to invest in our own future rather than in international mutual funds.
The bill goes still further. It would mandate that this country cannot habitually run deficits in excess of 3 percent of our GDP. Washington seems all too willing to run a deficit and drive up the debt, without any consideration of economic perspective. By imposing some fiscal discipline on federal spending, much in the same way as the European Union imposes on its national spending deficits, we can hold legislators fiscally accountable.
Another proposed bill, Owens's Rural Jobs Tax Credit Bill, would allow businesses a tax benefit for each $100,000 invested that also create at least one job.
Of course, businesses can already depreciate such capital spending, whether or not they generate jobs. This provision allows them to accelerate their deductions by permitting them to expense the investment in one year rather than many years. A company's tax burden is unchanged over time. However, this provision would allow them to keep, and hopefully reinvest, more of their capital earlier on. In return for the acceleration of this tax benefit, our rural communities receive more and more certain jobs now.
To now, there has been a lot of talk about job creation, but little job creation action. Our federal efforts have, for the most part, prevented further layoffs in the public sector, but have done little to prevent layoffs in the private sector. All of the federal efforts have created few jobs in critical areas of our economic infrastructure, despite all the political rhetoric. And, no efforts single out our rural communities hard hit by the Great Recession and by the vagaries suffered when our rural communities depend so critically on one or two large employers. From farmers to Pfizer, warehousers to Alcan, we can encourage employers to reemploy those rural workers so hard hit by the economic downturn.
We can do so without bailouts and taxpayer expense. That would be truly novel.
What I find most refreshing about all these proposals is that someone is finally talking about incentives that build upon what is great or what could be great in this country. With all the partisan bickering poisoning compromise and dialog in Washington, at least some still seek a middle ground that costs our nation little and could benefit us all a lot. These common-sense proposals appeal to the best of our collective nature by providing incentives to save domestically and to create jobs domestically. They are "pull ourselves up by our bootstraps" proposals that should transcend party divisions.
I am just an economist, and profess to no great insights into the machinations of Washington or Albany. I would not want to venture how such savings-creation or job-creation proposals will fare. I can only hope that common sense trumps politics, regardless of the fountain from which common sense flows. These proposals seem to divine that common ground upon which all can agree, regardless of party affiliation.
Most of all, I am encouraged that individuals are finally talking about solutions that can help us all. I just hope that such real-world, common-sense solutions receive consideration commensurate with the pragmatism that is one of our most endearing North Country values. It should not surprise me to discover that such common sense finds its source in our Land of Pragmatic Habits.