Stimulating Economic Activity and Job Growth
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I have just sent a letter to the Members of the U.S. Congress urging them to consider legislation to stimulate economic activity and spur job growth. From the letter:
The U.S. economy, which is already in recession, continues to be buffeted by the unwinding of the housing market, a severe liquidity crisis, and the general deleveraging of the financial markets. The already weak economy threatens to slow further, making credit even less accessible to Main Street businesses. This downturn will likely last longer and run much deeper than either of the two previous economic crises.
The stimulus bill enacted earlier this year was focused on increasing consumption and investment. Congress again needs to take action to provide additional stimulus not only to the economy as a whole, but also to address the severe negative effects that the economic downturn has had on specific sectors and industries, such as housing, automakers, infrastructure, and travel.
Short Term Recommendations:
The Chamber believes that including the following provisions in stimulus legislation would have an immediate positive impact on the economy:
Issuing rebate checks would infuse cash into the economy, putting money in workers’ pockets and stimulating consumption.
Extending the carry back period from two years to five years would enhance the liquidity of businesses with current losses.
By temporarily allowing foreign subsidiary earnings of U.S. companies to be repatriated at a reduced tax rate, those earnings could be used to ameliorate some of the liquidity challenges confronting companies, relieve some stress on the commercial paper market, make contributions to their pension plans in order to meet funding requirements and generally increase funds available to businesses. All of these outcomes could be achieved while producing a positive revenue effect for the U.S. Treasury.
Extending bonus depreciation and increased Section 179 expensing provisions, and adopting a temporary investment tax credit would promote investment during the current economic downturn and stretch scarce capital by lowering the cost of undertaking new investment.
Reducing the corporate capital gains rate to 15% would unlock appreciated assets held by companies, generating substantial tax revenues and at the same time providing much needed capital that could be redeployed more efficiently into the economy.
Extending the reduced tax rate on dividends and capital gains will give taxpayers greater incentives to save and invest, which will add to our capital stock and increase productivity.
By temporarily reducing borrower and lending fees for Small Business Administration 7(a) and 504 lending programs, Congress would incentivize banks to lend and make it more affordable for small businesses to borrow these funds for their enterprises. Additionally, increasing the government guaranteed percentage for the 7(a) loans and making changes to the program would provide more liquidity for these loans on the secondary market.
In addition to the above the letter also provides recommendations on Pension Plans and industry/sector specific recommendations on Transportation, the 3% Withholding Tax, Automakers, the Housing Industry and the Travel Industry. Read the letter here.
U.S. Chamber president and CEO Tom Donohue and I discussed these measures yesterday in response to a reporter's question on what can be done, and how much money is needed.