By Richard S. Dunham It's George W. Bush's economy now. For two years, voters were willing to cut the President some slack because the one he inherited was already ailing and then further damaged by the September 11 terrorist attacks. But now, with the government firmly in Republican control, Americans will hold Bush responsible if their prosperity suffers any more. "Once you get into the third and fourth years of a Presidency, it gets harder to escape what happens on your watch," says Al From, head of the centrist Democratic Leadership Council.
The President and his White House political advisers are fully aware of the stakes. After all, voters tossed his dad from office in 1992, despite a string of foreign-policy triumphs. Americans decided that Bush Senior didn't understand the pain they were feeling. Small wonder Bush has overhauled his economic team, and now he's preparing to roll out a new plan to stimulate U.S. growth. He's expected to unveil his proposals in a speech to the Economic Club of Chicago on Jan. 7.
To succeed politically, the President must convince Americans that he has a short-term fix for unemployment and investor confidence, and a long-term plan to boost economic growth. It'll be a delicate balancing act between feel-good political measures and effective solutions that create real results. Within the confines of his free-market philosophy, here's what the President would be wise to say:
My fellow Americans, I see my job as protecting the security of Americans -- our national security, yes, but also our economic security, which is just as important.
We are at war. A terrorist network out there wants to harm Americans, and we will hunt those terrorists down. Countries are out there developing weapons of mass destruction, and we will deal with them appropriately, in due time.
The war on terrorism has exacted a steep toll on the U.S. economy. We're still recovering from the attacks of September 11 -- and the lingering after-effects of a slowing economy that began before I took office.
In 2001, we gave every American a tax cut. In the past year, we took steps to jump-start growth. We passed incentives for corporate investment. We extended unemployment benefits for workers who lost their jobs after the terrorist attacks -- and we should do so once again for those still out of work.
Working with Congress, we also approved the most sweeping corporate reforms in more than half a century to punish the scandalous actions of evil executives and to reassure investors that companies will play by the rules or face serious repercussions.
I hail Democrats and Republicans alike in the House and Senate who voted to restore Presidential Trade Promotion Authority (a lot of you call it "fast track"), which gives me a stronger hand to help open foreign markets to American products. And in a special session after the 2002 elections (a lot of you call it a "lame duck" session), Congress passed terrorism insurance legislation, which already is putting construction workers back to work.
Because of these actions, and because of the resiliency of the American people, the economy is growing again. Not as robustly as I would prefer, but it's headed in the right direction.
The economic indicators are quite favorable. Inflation is firmly under control, which keeps the cost of food, clothing, and other necessities more affordable. Mortgage interest rates remain at historic lows, bringing homeownership within reach of millions of Americans. A 5.6% increase in productivity over the last four quarters is the biggest of any comparable period since 1973.
We live in uncertain times, but one thing is certain: The U.S. economy is the greatest in the world -- strong, resilient, and open to innovation and growth. We must put policies in place to enhance that resiliency and enhance that strength.
We must do more to turn a nascent economic recovery into sustained growth. To do that, I will ask Congress to enact a jobs-and-growth package designed to put people back to work, boost investor confidence, and spark corporate expansion.
This is a three-step process. We must protect the most vulnerable in our society. We must restore the confidence of the Investor Class, now a majority of our citizens. And we must create incentives for business to grow, so companies can hire more workers and reward their loyal employees who have been asked to sacrifice these past few years.
Our first priority must be job creation. I'm worried about those who are unemployed. I am concerned about those who are looking for work but can't any.
To help those in need, it's imperative that the new Congress quickly extend unemployment benefits for Americans who need them. But let's not stop there: We should raise the minimum wage for the working poor and increase the child tax credit for hard-pressed families, so they have more aftertax wages to spend for their welfare.
We should create a prescription-drug benefit for our seniors who are being squeezed by rising drug prices. And we must modernize the Medicare system to ensure that the elderly continue to receive quality care at a price all taxpayers can afford.
While we protect the vulnerable, we must put into place policies that let Americans keep more of their tax money while encouraging them to invest in our capitalist system.
To do that, I propose that we accelerate some of the tax cuts Congress passed in 2001. I ask Congress to allow middle-income Americans to receive immediately those due to take effect in 2004. That will effectively give every average American an instant pay raise.
While I would like to implement all of the rate reductions immediately, it would be too costly and would give too much of the tax-cut pie to the wealthiest among us. So I would suggest that we not accelerate the rate cut for the top tax bracket.
To boost investor confidence, I ask Congress to be vigilant in implementing the provisions of the Sarbanes-Oxley corporate responsibility law of 2002, from broader disclosure requirements to tougher penalties for wrongdoing to removing executives who break the faith with the shareholders. I am also requesting a significant boost in funding for the Securities & Exchange Commission to hire more investigators, retain them with better salaries, and train them to track down corporate malfeasance. We must end the brain drain that has complicated our efforts to prosecute corporate corruption.
But we can do more to entice investors back into the market. One thing is to move toward ending the double taxation of dividends. At its heart, this is a question of fairness. Why should dividends be taxed twice -- unlike ordinary income? While Congress would be justified in repealing this unfair tax, it's too expensive at a time when we are facing a growing federal deficit. So I ask Congress to exclude up to half of dividend income from double taxation. This is a down payment toward reforming and simplifying our tax system for the 21st century.
To create jobs, we need to give businesses an incentive to expand their plants and hire new workers. We can do that by providing tax breaks for short-term capital investments. If properly crafted, this would stimulate the economy, particularly in the hard-hit manufacturing and technology sectors. Corporate America does not need corporate welfare. But government can extend a hand in times of need.
The U.S. faces a challenging year ahead. My job is to protect and strengthen our security. That also means strengthening our economy. I'm going to continue doing the job the American people expect, which is to safeguard the nation and restore prosperity. Thank you. When he's not making up speeches for sitting Presidents, Dunham is White House correspondent for BusinessWeek. Follow his views every Monday in Washington Watch, only on BusinessWeek Online