Ehrlich on Washington column, January 22, 2001

HEWS FROM Robert L. Ehrlich, Jr. Second Congressional District of Maryland 1407 York Road, Suite 304 Lutherville, Maryland 21093 315 Cannon House Office Building Washington, D.C. 205 1 5 EHRLICH ON WASHINGTON Week of January 22, 2001 By Congressman Robert L. Ehrlich, Jr. Retroactive Tax Cuts: Help is Coming to Improve Our Economy Recent reports of an U.S. economic slowdown has caused concern from Wall Street to Main Street. President Bush has been up-front and honest about the indicators pointing to the downturn in our economy. Several of those factors include the National Association of Purchasing Management’s factory index falling to its lowest level since 1990; auto sales dropping 8% in November with General Motors, Ford, and Chrysler all reporting double digit drops in sales; and the 15% decline of the U.S. dollar against the Euro. Investors already predict economic growth in Europe, especially in Germany and France where tax rates have been cut, will exceed U.S. economic growth next year. While a sluggish economy does not guarantee a recession, we must remember that previous recessions were usually well under way before most economists noted they had even begun. Knowing this fact, it is urgent that I identify two key factors hurting economic growth today which could be cause for long term economic growth. First, the growth rate of high-tech industry, which has been the driving force in our economy and accounted for a substantial increase in industrial production last year, is showing signs of slowing down. The drop in high-tech stocks prices on NASDAQ, the trading medium for most high-tech stocks, and the significant increase in Internet business bankruptcies are among the factors leading economists to place the odds of a recession at 40%. Second, the economy is suffering because of tremendous energy cost hikes. On average, the price of oil is double its 1999 price and the price of natural gas has quadrupled. These skyrocketing prices are sapping American household and business purchasing power. The Federal Reserve Board, under the guidance of Chairman Alan Greenspan, took the first step to stave off the economic slowdown by cutting interest rates. It is now up to Congress and President Bush to provide a soft landing by enacting across the board tax cuts that are fair, substantial, and responsible. It is critical we increase the entrepreneurial spirit and purchasing power of the American people. For these reasons, I believe we must enact a tax cut containing the chief element in President Bush’s plan: Across the board cuts in income tax rates. C