On the Economic Stimulus: Conservative Ideas Worth Listening To

Proposals to cut Social Security taxes and increase defense spending should be given some thought.

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By John Aloysius Farrell, Thomas Jefferson Street blog

Some honeymoon. The cons and neocons at the American Enterprise Institute gave their own State of the Union report yesterday afternoon, offering a critique of Barack Obama's policies before he takes office and a rundown of the crises he will have to tackle.

Danger around the world. Economic ruin at home. What they had to say wasn't pretty.

But two proposals caught my attention.

The first was from defense expert Thomas Donnelly, and it made such sense that some of it could even get enacted.

Donnelly suggested that, as a major chunk of the proposed $800 billion, two-year economic stimulus package, the president include about $40 billion in defense spending—over and above the money in the regular military budget.

He proposed that the government hire and train 20,000 to 30,000 more troops for the Army and create and equip an additional four mobile Stryker brigades.

And because the American aerospace industry is the crown jewel of our manufacturing sector, Donnelly said, existing production lines of the F-22 fighter and C-17 cargo aircraft should be extended past their planned termination date in 2009 to keep the industry's workforce employed and productive.

At a cost of $4 billion a year, for example, the Pentagon could build an additional 20 F-22 fighters. Part of the cost could be recovered by selling some of the planes to Japan or Australia. Lockheed Martin and its suppliers employ 95,000 people, Donnelly noted, in high-paying union jobs in 44 states.

I'm not so sure about the economic wisdom of his suggestions for the Navy—he wants to buy more attack submarines and destroyerlike littoral combat ships. Those proposals may keep shipyard workers busy, but many of them are in states that may not need the stimulus as much as others. As a general proposition, however, such "shovel ready" defense jobs would seem to fit the stimulus criteria as aptly as bridges and highways, while aiding the country's crumbling manufacturing base.

Then Lawrence Lindsey, the former Bush economic adviser, made the kind of intriguing suggestion on the nondefense side that, sadly, won't even be considered by Congress or the new administration.

After listing all the reasons why a patchwork of tax cuts and tax credits, federal aid to the states and cities, and public infrastructure projects will underperform as components of a stimulus package, Lindsey proposed that, for the same price, we simply cut the Social Security payroll tax in half.

At the cost of $400 billion, such a tax cut would give each salaried worker $1,500 a year and his or her employer $1,500, said Lindsey. The workers would use the money to buy stuff, and employers would be more inclined to keep, or add, employees.

Congress would need to run the numbers: I would like to know how many employers would simply pocket the money and lay off workers anyhow. But because the Social Security tax is so regressive—Bill Gates pays the same as many cops or teachers—this has populist, as well as conservative, appeal.

Surely, there is a compelling argument to be made for military or infrastructure spending—or for investing in wind farms, electric cars, and other energy-saving innovations. After the money is spent, we still get to use the assets, and not just watch our wealth flow overseas for flat-screen televisions manufactured in China.

On the other hand, the purpose of a stimulus bill is to jolt—and then let a revived and roaring U.S. economy pay for jet fighters and bridges and wind farms down the road. And, as big as it sounds, an $800 billion package divided into many slow-acting increments may not provide the psychologically stimulating effect of a whopping, across-the-board tax cut.

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