Businesses Cry for More Tax Cuts

Aug 30, 2002
George Anderson

According to the U.S. Chamber of Commerce’s chief economist, further tax cuts are necessary to keep the U.S. economy afloat, particularly as downside risks to economic growth remain.

Economist Martin Regalia notes that for all the weaknesses in the U.S. economy, access to cheap credit was not one of them. As a result, he questions the effectiveness of a further interest rate cut even if the Fed did decide to further ease monetary policy. As the key federal funds target rate is already at its lowest level in nearly 40 years at 1.75 percent, Mr. Regalia says that the economy could benefit from a more accommodative fiscal stance. “Tax cuts will increase consumption… and provide consumer confidence,” he says.

Entrepreneurs dismissed concerns about the federal budget deficit, prioritizing raising consumer and business confidence to generate profits. The chamber also called for more open immigration policies in anticipation of a shortage of laborers.

Moderator Comment: Are further federal tax cuts necessary to keep the economy afloat as the U.S. Chamber of Commerce contends?

We think its time for business executives to stop looking for outside assistance from the Fed or Congress.

Consumer spending has been the engine for the economy but without jobs there is no fuel. Its unlikely that any tax cut will significantly spur hiring. Claims for unemployment are going up and reports of massive layoffs are becoming everyday news. At some point, businesses are going to need to pick up their spending if we are to shake these doldrums.

In the most recent report, consumer spending increased by one percent in January with big-ticket sales such as cars and appliances leading the way.

The black lining in the consumer spending white cloud is that American wages and salaries fell by 0.2 percent. Falling wages, uncertainty about job prospects and mounting consumer debt are a dangerous combination.

Business needs to reinvest to grow the economy. It’s time for business leaders to do just that – lead. [George Anderson – Moderator]

  • U.S. Businesses Call for More Tax Cuts – United Press International

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