Stimulating a wartime economy

Tuesday, October 2, 2001

Taking steps to avert an all-out recession has more economic importance than bailouts of hard-hit industries and businesses. Making sure the nation's economy is sound is a matter of national security.

With the report, weekend before last, of some terrorists interested in renting crop-dusting aircraft in Florida as their next weapons of choice, the Federal Aviation Administration grounded such aircraft nationwide.

One of the suspected terrorists, Mohammed Atta, was positively identified by the aviation rental official from Florida as the one who sought the rental.

The FAA order ended up being lifted in a matter of hours, with the new provision that such aircraft were prohibited from flying over populated areas.

"This is absolutely unprecedented," said one crop duster from Southeast Missouri, looking over at his idled, yellow biplane.

Indeed it is.

So were the actions of the terrorists on Sept. 11 in New York and Washington. It is, in so many respects, a changed world since that awful day.

Also nearly unprecedented is the reality of a federal bailout of any sort for the airline industry.

Tailspin started months ago

With the weakening economy over the last 18 months or so and with their high-cost operations guaranteed by rigid labor contracts, the airlines had been in a tailspin most of this year.

Nearly all airlines were looking at big losses for the year even before Sept. 11. The terrible events of that day meant catastrophic losses for this vital American industry, as scared passengers canceled flights or refused to book other travel they would ordinarily have undertaken. Huge layoffs were announced, in the tens of thousands, airline company by airline company. Losses are climbing into the billions.

None of this is in itself an argument for a federal bailout in a free society where all companies survive in a sea of unforeseeables and imponderables, even something so remote as the events of Sept. 11.

Moreover, say opponents of any bailout, where does the government stop once it goes down this road?

What about insurance companies, now facing billions in losses of their own after Sept. 11?

What about travel agencies, resorts, the rest of the hospitality industry or, for that matter, crop-duster aircraft operators?

It is a slippery slope to enter on this practice, say opponents.

Proponents of a bailout prevailed with members of Congress and the administration, probably because of the national-security and economic-lifeline arguments they advanced.

Airlines' success spurs others

Whether this is persuasive or not, opponents have been proved right in one respect: The airlines' success spurred countless other supplicants to make the same request of the federal government. Saying no will prove more difficult.

Of more immediate concern than this bailout plan or that bailout proposal is doing something like declaring war on the recession now looming.

By the time you read this, the Fed will likely have met and dropped benchmark interest rates yet again, as chairman Alan Greenspan corrects for his over-tightening of last year. This all to the good, but it is quite insufficient.

It is imperative for the White House to work with Congress to move an economic stimulus package through as soon as possible. We nominate a significant cut in the capital-gains tax rate from its current 20 percent to at least 15 percent, if not 10 percent. No measure would do more -- or act faster -- to spur anemic equity markets than this simple, long-overdue reform.

Moreover, the Bush tax cuts now scheduled for years between 2002 and 2006 should be immediately accelerated to take effect immediately.

These steps and more are needed now. Fixing the economy is a vital part of national security in wartime.

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