In yesterday’s issue of the political newspaper Politico a parade of “top Republican strategists” argued that GOP presidential candidate Sen. John McCain must make a “sharp break from Bush administration economic policy.”
On one level, this is sound advice, as many of the policies of recent years have undercut the economy’s structural foundation while also failing to lift the living standards of the typical American family. Moreover, even if the recent moves taken by central banks and national governments across the globe manage to stabilize credit and financial markets, a prolonged downturn appears unavoidable. In the United States, for instance, slack job creation and increasing joblessness likely should characterize the labor market for the next few years. A “sharp break” from recent policies indeed is needed.
Yet there is nothing bold about any of the solutions being advanced by these “top strategists.” All that is being offered is a new spin on old policies — policies that appear disconnected from current realities. To wit: former Speaker of the U.S. House Newt Gingrich boldly calls in the article for a temporary moratorium in the capital gains tax.
As reducing and/or eliminating the taxation of capital gains has been a staple of conservative economic policy since circa 1980, Gingrich is hardly proposing what no one has proposed before. More to the point, the policy doesn’t apply to the current financial situation as it is not the result of the value of various assets appreciating sharply and leaving people who sell those assets with unexpected tax bills; rather, many asset values have declined sharply, some to the point of becoming worthless. Similarly, a freeze in the capital gains tax does little for the vast majority of families because most have few or no taxable capital gains in the typical year. (Even gains realized in tax-advantaged retirement accounts are not subject to the tax; they are taxed at withdrawal as ordinary income.)
Bold ideas indeed are needed to address the serious challenges confronting the American economy and working families, but there is nothing bold about recycling tired ideas that appear to have run their course while inflicting damage on working families and the structural foundation of the economy.