"Commentary"-A Different Stimulus Plan
Monday, July 28, 2008JEFF YASTINE: Tonight's commentator has some thoughts about a new economic stimulus plan. He's Glenn Hubbard, dean of Columbia University's school of business and former economic advisor to President George W. Bush.
GLENN HUBBARD, GRADUATE SCHOOL OF BUSINESS, COLUMBIA UNIV.: Signs of weakness now and for the balance of the year in the U.S. economy have led to calls for Congress to enact a stimulus package. We've had one already. Can we do better this time? Yes. There are three policy actions that would provide immediate relief. First, we should address the housing crisis directly. Congress should temporarily expand the Federal Housing Administration's authority. The FHA should be able to make larger loans to home owners who live in their own homes. Why? Many creditworthy homeowners got trapped in adjustable rate mortgages and couldn't refinance. Borrowers who can document their income should be able to refinance. And with the FHA's new loans, they'll be able to. Second, we should offset the credit crunch's negative effect on business investment with investment incentives. Greater expensing of investment offers an immediate, front-loaded stimulus. Cutting the high U.S. corporate tax rate would also help. Third, we should forestall the negative effect on consumer spending of a tax increase. The expiring 2001 and 2003 tax cuts represent the largest increase in personal income taxes in a generation. Raising dividend and capital gains taxes, as proposed by one presidential candidate, would be particularly harmful, with negative effects on both the stock market and investment in a fragile economy. Cries for stimulus offer a chance for serious discussion. Let's hope this election season permits that. I'm Glenn Hubbard.
