Mitch Daniels, the governor of Indiana, is on a short list of possible Republican contenders in 2012 who intrigue me. His fiscal record as a two-term governor is very impressive, giving him the track record as an executive to take on a sitting president. (I call him a “dark horse” in the headline only because he typically isn’t among the most-discussed and -polled group of potential candidates: Sarah Palin, Mitt Romney, Mike Huckabee, Newt Gingrich, et al.)
So, I was interested to read, in today’s Wall Street Journal (subscription required), his proposal for an “emergency economic reform.”
It does not constitute a long-term plan, and it certainly wouldn’t work as a platform for his own presidential run. If the economy is still in “emergency” condition two years from now, these policies would most likely be insufficient.
But as a contribution ahead of mid-term elections in which his party stands to pick up dozens of seats? I think it beats a plan to spend $50 billion on infrastructure projects that weren’t deemed to have an immediate impact the last time around. Decide for yourself:
Republicans may not reach a majority [in November's elections], but they will be looked to for constructive answers to this central dilemma of our era. A time-limited, emergency growth program aimed at triggering new private investment should be a primary goal of the next Congress, one hopes on a bipartisan basis.
What might such a project comprise? Here are a few suggestions:
• Payroll tax holiday. Suspend or reduce for the emergency period, say one year, the Social Security payroll tax on workers. Offset the revenue loss twice over through a combination of the following four policies.
• Impoundment power. Presidents once had the authority to spend less than Congress made available through appropriation. On reflection, nothing else makes sense. Plowing ahead with spending when revenues plummet is something only government would do. In Indiana, we are still solvent, with no new taxes, money in reserve, and a AAA credit rating only because our legislature gave me the power to adjust spending to new realities. I promise you that a president who wanted to could put the kibosh on enormous amounts of spending that a Congress might never vote to eliminate, but the average citizen would never miss.
• Recall federal funds. Rescind unspent Troubled Asset Relief Program (TARP) funds and any unspent funds from last year’s $862 billion “stimulus” package, as well as large amounts of the hundreds of billions of “unobligated funds” unspent from previous appropriations bills.
• Federal hiring and pay freeze. Better yet cut federal pay, which now vastly outstrips private-sector wages, by 10% during the emergency term, and freeze it after that.
• A “freedom window.” Might we try some sort of regulatory forbearance period in which the job-killing practice of agonizingly slow environmental permitting is suspended, perhaps in favor of a self-certification safe harbor process? Businesses could proceed with new job creation immediately based on plans that meet current pollution or safety standards, or use best current technology, subject only to fines and remediation if a subsequent look-back shows that the promised standards were not met.
• Accelerated or full expensing of business investment. Economists differ about its success on past occasions, and certainly it involves a degree of pulling forward investment that would have happened eventually. But it seems well matched to the current situation where so much money is cowering on the sidelines, and a burst of new investment might jump-start growth that enables more investment in the future. (Reports indicate that the administration is about to propose this very idea. If so, good.)
Surely there are better ideas or variations on these suggestions that a jobs-minded Congress could fashion. And clearly permanent tax and regulatory moderation is vastly superior to temporary. But to have a prayer of avoiding fiscal ruin, we need to go to economic general quarters immediately.