Wednesday, January 07, 2009

Tanks for Nothing   [John Hood]

The nation's leading conservative and free-market think tanks are offering some valuable insights into the new year's hotest political disputes — which you can gain without charge just by following the links below, though I'm sure the nonprofits in question wouldn't mind a bit if you visited their donation pages before you left.

• The outlines are starting to form of an alternative, conservative approach to the monstrous federal stimulus bill now being fashioned in Washington. Even though the Obama administration is dangling $300 billion in tax cuts in an attempt to attract Republican votes for the rest, conservative lawmakers should hold out for a much better deal that would do much less long-term damage to the Republic. As the Cato Institute's Michael New explains, they should insist that any federal aid to cash-strapped states and localities be conditioned on the adoption of firm expenditure limits going forward, so that we don't have another instance of Washington bailing out bad behavior and thus guaranteeing it is repeated in the future. Ideally, states would economize and avoid tax increases on their own, but conditional relief is the next-best option. The worst would be what most states are currently seeking, a no-strings fiscal bailout. New's Cato colleague, William Poole, makes another key point when he observes that any plan for stimulus today needs to reflect the inevitable pullback of the Federal Reserve's massive monetary expansion later in 2009 or 2010.

• As for the portion of the stimulus package devoted to transportation infrastructure, Sam Staley and Adrian Moore of the Reason Foundation argue that to keep the $200 billion or more from being squandered on inefficient projects of little long-term value, Congress should limit federal funds to infrastructure investments of clear national scope or economic benefits. Staley and Moore suggest four categories: 1) interstate highway upgrades using the latest technologies and substantial private-sector involvement, 2) coordinating multi-state cooperation on major projects, 3) expanding interstate freight corridors, and 4) investments in transportation research.

• The Heritage Foundation's Nicola Moore provides a helpful checklist of stimulus dos and don'ts. To start with, conservative lawmakers should be careful not to embrace just any tax relief President Obama might offer them. They should insist on permanent changes in marginal tax rates and accelerated depreciation (if not immediate expensing) of private-sector investment, plus the elimination of governmental barriers to investments in energy production. Although he's not a think tanker, Google economist Hal Varian makes a related point in the Wall Street Journal today that's well worth a read.

• The American Enterprise Institute's Desmond Lachman and Allen Meltzer offer additional comments on the stimulus package, including a rethinking of the TARP mechanism already in place.

01/07 12:57 PMShare