Posted by Lilly/Sadie/whatever from ? (18.104.22.168) on Monday, January 13, 2003 at 11:16AM :
I noticed this interesting point in this article:
"While dividend-paying stocks would of course become more attractive, stocks that don't pay dividends won't benefit. What that means is that the administration is coaxing investors to direct their money to slow-growth old economy companies and away from the fast-growth new companies--in other words, out of Microsoft and into Exxon."
Jan. 9-15, 2003
Frist's first fight will be an awkward one
By Phil Ashford
Sen. Bill Frist has always been a guy capable of bridging moral nuances for the sake of the big picture. He demonstrated that early in his professional life. Thanks to his autobiography, it's well known that during his medical studies, he obtained cats for research experiments by going to various Boston area shelters and professing that he wanted to adopt the cats as pets. A less scrupulous man would have just executed the deception and moved on. Frist, however, took the cats home for a day or two first to put a fig leaf on his claim.
Now that he's claimed the top Senate job by riding the torrents of Republican embarrassment over Mississippi Sen. Trent Lott's unintentional candor about what he really thinks of civil rights, Frist actually will have to lead the Republicans. The first challenge will include considerable demand for him to balance expedience with intellectual honesty.
It's going to be Frist's job to push President Bush's economic package through the Senate--the president's first legislative priority for the new congress. Bush's "jobs and growth" plan is an important political initiative for him. It's reasonable to question whether it really has much to do with managing the economy, but it's going to be Frist's job to pretend that it does.
The centerpiece of the $674 billion Bush plan calls for the repeal of taxes on dividends paid on stocks. It also accelerates some of the scheduled tax rate cuts under his showpiece 2001 tax bill, provides some additional tax credits for families with children, assistance to small business, and extended unemployment benefits for jobless workers.
The Bush plan--which might be considered the kickoff of his 2004 campaign--demonstrates the president's willingness to try to get the economy moving. It follows the recent replacement of his two top economic advisers by a couple of guys who say the same thing, but who are expected to have more credibility because they aren't the two old guys. Bush's father got bounced from office when he didn't seem to care enough about the economy, and his son isn't risking a repeat.
The trouble is that it's really not much of an economic stimulus plan. Back in 1999, Bush made a comprehensive cut in tax rates the centerpiece of his presidential campaign. At the time, the economy was riding high, and Bush mainly thought he needed to forestall Steve Forbes on the Republican right with a tax-cutting program. By the time he got to be president, the economy was slowing toward a recession. Bush then argued that he needed his good-times package as an anti-recession measure. With the key help of some moderate Democrats in the Senate, he got most of what he wanted, plus a few stimulus elements that Democrats demanded. (Remember those tax rebate checks?)
Nonetheless, the economy has continued to be sluggish even after a brief recession. (Jobs are always the last thing to recover in a downturn.) By the White House reckoning, only $98 billion of the package will be fed back into the economy in the first 16 months. Most of the rest are back-end benefits for high-income taxpayers.
The repeal of taxes on dividends, which makes up more than half the package, is utterly irrelevant to the current economy. The idea has long been a favorite of economic conservatives, who argue that dividends are subject to "double taxation"--on the corporate profits on which they're based and then as part of the income of the individual receiving the dividends. The hope is that ending the tax on dividends will stimulate the stock market and make it easier for companies to raise money.
The trouble is that it won't necessarily do those things. While dividend-paying stocks would of course become more attractive, stocks that don't pay dividends won't benefit. What that means is that the administration is coaxing investors to direct their money to slow-growth old economy companies and away from the fast-growth new companies--in other words, out of Microsoft and into Exxon. While the new economy has a lot less luster in these post-bubble days, growth companies will continue to be the main engine of job growth.
The new Bush plan, ultimately, is more of the old Bush plan. A plausible case can be made for it on its own terms: Lower taxes, especially for those with the highest incomes, will promote investment and spur economic growth. At the same time, taking money from the federal government will check domestic spending growth through the prospect of ongoing deficits as far as the eye can see.
But that isn't the sale that Frist is going to be asked to make. His job will be to sell it as an economic stimulus plan, which it clearly isn't. It's a tall order for his debut on the national stage.
Although Frist has gained considerable stature in a relatively short time in the Senate, this is really going to be his first prime-time performance. His primary challenge will be keeping enough of the president's bill to get the legislation through the Senate and not upsetting too many Republicans on the right.
The politics of passing the president's bill are pretty straightforward. With solid Republican control in the House, the program should pass easily there. In the Senate, it's a tougher proposition. Although the bill is likely to stir near-unanimous Republican support, Frist probably needs the backing of at least 10 Democrats to cut off a filibuster that would block the bill. The deals that he has to cut to get those 10 Democrats will put him at risk with the conservative wing of his own caucus.
And of course, all this will play out with Frist taking a regular bashing from Democrats for trying to give "a big tax break for the wealthy." (He probably already should be preparing his witty response for when someone asks him how much the new tax bill is going to save him and his brother, Tommy.)
A large part of why Frist was chosen as majority leader was that the White House wanted him as the spokesman for its priorities. But Frist presumably has his own priorities and ambitions as well. It won't help his political career any if he can't get things done for Bush.
Nobody ever lost political popularity by proposing to cut taxes. But it also won't help Frist much if he comes out of the whole adventure labeled as just an errand boy for the wealthy.
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