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Cato Daily Dispatch for October 11, 2001

Do We Need A Fiscal Stimulus

Key Republicans in the House of Representatives vowed yesterday to press for an economic stimulus package that included "pro-growth" tax cuts, while a top Democrat said it should include checks of $300 to $400 for low income people, according to Reuters.

House Republican Leader Dick Armey ( Tex.) said the package should focus on creating jobs and include a tax cut on gains from the sale of stocks and other assets as well as eliminate the corporate alternative minimum tax, which businesses say discourages investment in a slow economy.

Last week, Cato Director of Fiscal Policy Studies Chris Edwards had the following comments on the stimulus plan:

"To stimulate long-term economic growth we need permanent tax cuts, not temporary ones -- and not federal spending increases. We should accelerate the marginal rate cuts that are to be phased in in future years. And we should also liberalize depreciation write-offs for business capital investment."

"An economic slowdown is not surprising after nine years of solid growth. So let's not overreact and, for example, start down the failed Japanese path of big government spending sprees. Japan's experience shows that Keynesian stimulus spending is simply voodoo economics."

Today the Cato Institute will host the policy forum "Is Fiscal Stimulus Desirable? If So, What Works Best?" Speakers include Douglas Holtz-Eakin, Chief Economist, Council of Economic Advisers, Chris Edwards, Director, Fiscal Policy, Cato Institute, Rep. Jim Saxton, Chairman, Joint Economic Committee, Alan Reynolds, Cato Institute Senior Fellow, and William A. Niskanen, Cato Institute Chairman. The event can be watched online.

Senate Turns To Air Safety Bill

The U.S. Senate yesterday took up a bill aimed at making flying safer but also agreed it could switch suddenly to anti-terror legislation if the contentious airport safety measure stalls out again, according to Reuters.

After a week of squabbling, the Senate agreed to bring the aviation security bill to the floor although arguments about a proposed federal takeover of baggage screening operations and other issues such as worker relief have not been resolved.

In "Airlines in the Aftermath," Edward L. Hudgins examines new airline safety proposals. He explains that "policy makers must examine the intended as well as unintended consequences of such suggestions to ensure both the safety of travelers and the economic soundness of America's transportation system."

Daschle Pulls Plug On ANWR Talk

Senate Majority Leader Thomas A. Daschle (D-S.D.) yesterday abruptly halted further committee consideration of major energy legislation after Democrats concluded there were probably enough votes on the panel to approve the Bush administration's plan for drilling in Alaska's Arctic National Wildlife Refuge, according to The Washington Post.

Two Democratic members of the Energy and Natural Resources Committee -- Sens. Daniel K. Akaka (Hawaii) and Mary Landrieu (La.) -- said they would vote with the Republican minority in favor of exploratory oil and gas drilling along the coastal plain of the Alaskan refuge, provided they agreed with other major sections of the energy package, according to their aides.

"Several members of the other side don't want a vote on ANWR because they know they would lose," Sen. Frank H. Murkowski (R-Alaska), a chief proponent of the drilling plan, angrily told reporters. "They didn't have the votes in committee and we did."

In "Bush's Energy Babble," Cato Director of Natural Resources Studies Jerry Taylor writes, "Putting a big ANWR field into the market would be a sizeable addition to global supply as far as these things go. But not one that will radically change the dynamics of the world oil market, particularly when that oil is about 6 times more expensive to produce than Persian Gulf oil. Even if America had opened up those reserves a decade ago, we'd still be in the same boat today. OPEC's ability to manipulate the world market wouldn't be significantly attenuated by the Bush plan."

Taylor and other Cato scholars have looked at energy and the environment in the wake of the September 11 attacks. Their articles can be found online.