The Washington Post

January 11, 2002, Friday, Final Edition

SECTION: EDITORIAL; Pg. A21

Economic Wake-up Call

by John T. Dillon

Robert J. Samuelson says most economists don't understand the peculiar recession the country is going through ["Economic Dreamland," op-ed, Jan. 9]. He warns that today's predictions of a rosy recovery this spring could be as off the mark as the never-ending dot-com boom prophecies of the recent past.

Maybe it's time to hear from the front lines of business -- those who see the economy as it stands today.

From this vantage point, it's clear we are nowhere near recovery. We need to awaken from our dreams and act. President Bush, Republican and Democratic leaders in the House and Senate, organized labor and the business community all agree on the need for an economic stimulus package. Not a bad start. Now, in the same way we all came together in support of the war against terrorism, we need to come together swiftly to win the economic battle at home.

Some argue that recovery is underway and therefore no action is needed. If by recovery they mean two consecutive quarters of positive growth, they may be right. But if they mean putting nearly a million people back to work in the next two quarters, they are certainly wrong.

Unfortunately, while the debate over the various stimulus proposals has dragged on, more Americans have lost their jobs. We cannot allow the pursuit of political gain to overtake the renewal of economic growth.

Both houses of Congress need to make it one of their highest priorities, when they return later this month, to finish up and pass a package by a date certain. Feb. 15 would be our recommendation. Unless a deadline is set for coming together, rhetoric will rule the calendar. It is time for everyone involved to rise above partisanship and reach a compromise that gets the job done. This will ensure immediate and decisive action to restore consumer confidence, get the economy moving again and put people back to work.

If it hopes to meet this deadline Congress won't have time for partisan squabbling. It must stick to substantive discussions and negotiations on what American workers, families and the economy need.

The goals are clear. To boost consumer confidence and spending, an economic plan should provide broadly based and significant incentives to spur demand and thus help create jobs. It must be large enough to change spending behavior in the near term, for consumers and businesses. It should also serve as a buffer in the event of any future attacks on our nation that again threaten consumer confidence.

Broadly based tax relief, touching all segments of the economy, will provide an effective stimulus to economic growth and productivity. We should also provide help to those who have lost their jobs or need help with health care costs in the wake of this recession.

There are several significant actions already under consideration that Congress can take to achieve these objectives.

First, an immediate and significant reduction in the payroll tax will, more than any other proposal, put money in the hands of those who need it and will spend it -- across the entire income spectrum. It will give both employers and employees more cash as quickly as the next payday, thus relieving financial pressures on both. A just-released Congressional Budget Office study notes that a payroll tax cut "would probably have a large bang for the buck" because it could induce spending and reach families with lower earnings. This action can be taken without undermining the Social Security Trust Fund or the benefits of current and future retirees.

Second, Congress can permit greater depreciation and expensing of business investments. Such broad business incentives -- if large enough -- can accelerate spending that is now being deferred. Allowing a significant write-off of productivity-enhancing investments in 2002 will encourage businesses to make such investments sooner than they otherwise might. The larger the write-off, the faster a business will realize a return on its investment, and the greater the stimulative effect on the economy. That means jobs.

The terrorists attacked our people and our economy. Just as there is no quarter for partisanship in our response to one such attack, so should there be none with regard to the other.

While reasonable people can differ, they can also agree. The need is urgent to put aside politics and provide the incentives to help keep Americans working and the economy strong. We ought to agree on a process, draw from the best on all sides, consider new ideas and reach agreement promptly. The president and Congress should act now.

The writer is chairman of the Business Roundtable and CEO of International Paper.