Senate Minority Leader Mitch McConnell doesn’t claim to have developed an economic stimulus plan of his own. But he does favor a cluster of proposals that, when packaged together, are a simple, sensible program for rejuvenating the economy.
I take the liberty of dubbing it the McConnell Plan (without asking the Republican leader’s approval). If enacted, the plan would do a great deal more to boost the economy and increase employment than the “jobs bill” that President Obama and congressional Democrats are cooking up.
McConnell’s set of proposals would do several specific things. First and foremost, it would provide a measure of certainty to the business and investment community about the future. The aim: Produce economic conditions conducive to private investment, economic growth, and job creation.
And the plan would restrain the budget deficit and the national debt, without indulging in what is universally regarded as counterproductive during an economic downturn–raising taxes.
McConnell mentioned two steps to reduce uncertainty about the economic future when I interviewed him recently, and he’s repeated them publicly since then. One is to declare the effort to enact Democratic health care reform–ObamaCare–over. “That would be a great relief to American business looking at health care taxes,” he told CNN.
It’s not hard to imagine how this would ease the minds of the CEOs and owners of businesses and prompt them to invest in expansion and begin hiring. However, it would be up to Obama to put his health care legislation “on the shelf,” as McConnell is urging. Instead, the president wants Republicans to join him in tweaking ObamaCare and making it a bipartisan bill. That, in McConnell’s view, is a non-starter.
The other McConnell idea is an extension of the Bush tax cuts, but not Obama-style. The president wants to preserve the tax cuts for individuals earning less than $200,000 a year and couples making less than $250,000.
McConnell would extend the tax cuts, which are set to expire at the end of 2010, for all taxpayers. The top rate on individual income would stay at 35 percent, rather than increase to 39.6 percent. The rate on capital gains would remain at 15 percent, not jump to 20 percent. And instead of rising to 39.6 percent, the rate on dividends would stay at 15 percent.
There’s a solid reason for preserving Bush’s across-the-board cuts for those above Obama’s income cutoff. It is these wealthier folks who do the bulk of private investing in America and thus most of the job creating. Penalizing them with tax increases would discourage both their propensity and their ability to invest.
“If you’re a business now and you’re trying to figure out what the future is, you’re looking at health care taxes, you’re looking at capital gains taxes going up, dividend taxes going up,” McConnell said in a CNN interview. “If you’re a small business and pay taxes as an individual taxpayer, your taxes are going up. So is that a great environment in which to expand employment? I don’t think so.”
McConnell’s plan also includes the creation of a commission. I know that sounds bad. But the McConnell Commission–my name for it–would be different from the commission that Obama intends to set up. The president’s panel would have the broad assignment of reducing the deficit. McConnell’s would only target reductions in federal spending.
A deficit commission would surely recommend tax increases–probably large increases–as well as spending cuts. It’s a clever method of getting Republicans to support tax hikes.
A spending commission, in contrast, would deal only with spending. “The American people are appalled at the amount of money we have been spending this year,” McConnell said. “Nobody thinks raising taxes in the middle of a recession is a good idea. Have you ever heard anybody say that? I don’t think so.”
McConnell didn’t originate the idea of a spending reduction commission. Republican Senator Sam Brownback of Kansas did. But the Brownback bill failed in the Senate last week. It got 51 votes, but needed 60 for passage. Three Republican senators voted against it.
So McConnell would require three things: Shutting the door on ObamaCare, retaining the Bush tax cuts for everyone, and getting a blue-ribbon commission to specify sweeping cuts in spending. That’s a pretty good package. Too bad it’s one that would never occur to Obama and congressional Democrats.
Fred Barnes is executive editor of THE WEEKLY STANDARD.