IN CONGRESS, DEBATE ON STIMULUS PACKAGE

Byline: Joanna Ramey

WASHINGTON — Heading into a critical fourth quarter that typically accounts for a third of their annual sales, retailers are facing increasingly rocky prospects after the Sept. 11 terrorism attacks, and industry officials are asking Capitol Hill for immediate help.
Congress is in the midst of hashing out the mix of incentives that would have the dual goals of sending consumers back to stores and fortifying businesses so they’ll start hiring again.
“Consumers — even those with their wallets out — are struggling to maintain a delicate sense of confidence,” House Ways and Means Committee Chairman Bill Thomas (R., Calif.) said Friday during debate over a $100 billion GOP plan to jump-start the economy.
An economic stimulus package could emerge from Congress as early as this week, if the two parties are keen on compromising as they have been since the attacks. However, as of Friday, deep differences remained, particularly in the GOP-controlled House, where conservatives in the party are pressing ahead with their plan, much to the exasperation of Democrats who have their own $110 billion proposal.
Rep. Charles Rangel (D., N.Y.), the top Democrat on Ways & Means, criticized the Republican plan for not working with Democrats on a compromise and straying from an earlier agreed-upon goal by the parties to use temporary measures to stimulate the economy.
The GOP package, eventually approved in a 23-14 committee vote along party lines, does makes a nod toward Democrats’ economic calls to help low-income consumers who didn’t benefit from tax rebates this summer. The GOP bill would send $300 to $600 in rebates to this group of about 30 million people in a type of refund being advocated by department stores.
There are tax-cut portions of the GOP bill, such as accelerated depreciation of equipment and improvements like store renovations, that Democrats also support. But among many tax provisions, Democrats oppose GOP calls for stepping up personal tax breaks to 2002 from 2004 for higher incomes and to speed up changes in capital gains taxation for long-term investments.
The House GOP bill, in all likelihood, won’t be the final stimulus package to emerge. Senate Majority Leader Tom Daschle (D., S.D.) has already declared the House GOP plan unacceptable. In addition, Daschle and Senate Minority Leader Trent Lott (R., Miss.) have, thus far, insisted on compromising on an economic package.
“Everything ought to be on the table,” Daschle said. “The President is attempting to work with us to find a compromise, and I’m confident we can do that.”
In the wings are lobbyists representing various interests.
“We have geared most of our recommendations to Congress on the consumption side,” said Scott Cahill, vice president of government and industry affairs at the National Retail Federation, underscoring an urgent need to put more money in shoppers’ pockets by the start of the Christmas-shopping season. “It’s consumers who have kept the economy sustained over the last nine months.”
Despite the political divisions, lawmakers and economists agree on one thing: the U.S. economy, already shaky before the attacks, is likely already in a recession that could easily continue into the fourth quarter. According to various long-term forecasts, the economy — barring more upheaval from follow-up attacks or negative fallout from the allied mission in Afghanistan — is expected to gradually rebound into 2002, but to what degree is in dispute.
The varying forecasts are “telling you something about the range of guesses people have about the rebound of confidence — confidence by households and confidence by business,” said R. Glenn Hubbard, chairman of the President’s Council of Economic Advisers.
However, speaking Wednesday before business executives at the U.S. Chamber of Commerce, Hubbard emphasized the historic resiliency of the U.S. economy in the face of war and economic downturns.
“The key to retail sales is bolstering consumer confidence,” Hubbard told WWD after his address.
As one confidence builder, Hubbard cited President Bush’s call for Congress to accelerate personal income-tax cuts approved earlier in the year and step up deductions for business investments in equipment, contained in the House GOP plan.
But the White House, as it has since the attacks, is eager to compromise, and Hubbard said the President “has indicated his flexibility to work with Congress” on some Democratic proposals, like a temporary rebate to lower-income consumers of their federal payroll taxes.
Department and specialty stores, represented by the NRF, are championing a November and December holiday for consumers and businesses from paying the shared 15.3 percent payroll taxes used for the social security fund. For consumers, this deduction would target low-income individuals who don’t pay income tax and didn’t receive a tax rebate this summer.
Like mass retailers, represented by the International Mass Retail Association, NRF backs the President’s call for incentives such as accelerating individual tax cuts, as well as increasing deductions and the rate of depreciation for equipment investments. IMRA isn’t pushing the payroll tax cut and is generally opposing such short-term stimuli.
“Accelerating the income-tax cuts will give consumers the needed confidence to go out and spend,” said Lisa Wolski, IMRA’s tax counsel. While this summer’s $38 billion in $300 and $600 consumer tax rebates helped boost sales, she said “we saw a lot of people save their checks.”
Alice Rivlin, former director of the Office of Management & Budget in the Clinton administration and now a senior fellow at the Brookings Institution, said some kind of temporary tax cut like a payroll-tax rebate or holiday “is a good idea, provided that it gets money out quickly to people who will spend it and doesn’t give us [federal budget] deficits.
Jim Glassman, a resident fellow at the American Enterprise Institute, said a stimulus package should work to bolster business.
“Business cuts make the most sense,” Glassman said. “If people are given rebate checks and they think they are going to lose their jobs, they are going to stick the checks in the bank, and the money never gets spent at Nordstrom.”
Mark Levinson, chief economist with the apparel union UNITE, favors some kind of stimulus for low-to-mid-income consumers.
“It’s more important to boost demand,” he said. “Companies are going to invest if they think there is demand for their product.”

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