As the market closes on one of the worst weeks we've had in years—down more than 10 percent in the last two weeks, with at least $1 trillion in stock market wealth destroyed since the budget deal was reached—we also learned with Friday morning's jobless numbers that, according to Bloomberg, the share of the population holding a job fell to 58 percent, the lowest since July 1983. The headlines are screaming, the charts and graphs are horrible, and people are scared.
Yet Congress is gone on vacation. They're on a scheduled five-week recess, not back until after Labor Day. As Jerry Seinfeld would ask, Who's the marketing genius who came up with that idea? [Check out U.S. News Weekly, now available on iPad.]
The latest CNN/Opinion Research poll out this week shows a post debt deal disapproval rating of 84 percent, with only 14 percent approving of the job Congress did in reducing the debt. I think it's safe to say that people are not only scared, they're disgusted. Even though the deal averted a default by the government, it's clear that Wall Street agrees with the public—judging by the latest turmoil in the markets, investors don't think Congress went far enough in reducing long-term debt and promoting growth and prosperity.
Here's an idea to help calm the markets and create growth: the congressional leadership should call Congress back in town and convene the congressional supercommittee mandated in the debt ceiling legislation. Their first order of business: reforming our tax code. Overhauling our tax code has already won support from everyone from the Simpson-Bowles Commission to the Gang of Six to House Budget Chair Paul Ryan. Republicans and Democrats agree that it's time to bring across-the-board fairness and efficiency back to the tax code, and everyone seems to agree—with the notable exception of the president— that simply soaking the rich won't bring economic growth back. [Check out a roundup of editorial cartoons on the economy.]
Economist Stephen Moore makes a great case today for 1986-style "radical" tax reform, which would drop the top corporate tax rates and bring jobs and money that have gone overseas back to the United States. Moore quotes supporters on both the right and the left:
Last year the White House tax-reform commission headed by former Fed Chairman Paul Volcker denounced the corporate income tax structure and warned that the 'growing gap between the U.S. corporate tax rate [39 percent, a combination of state average and federal rates] and the corporate tax rates of most other countries [25 percent] generates incentives for U.S. corporations to shift their income and operations to foreign locations.' Treasury Secretary Tim Geithner was even more succinct when he said earlier this year: 'Everybody who looks at the current system says we can do better than this.' Amen.
President Obama isn't going to call Congress back—the last thing he wants to do is be in Washington and continue focusing attention on the debt. In fact, he's announced he'd rather be on a bus tour of the sweltering Midwest, "pivoting" to jobs. He doesn't have a plan for going forward, because he knows he can't propose more stimulus spending, and the Fed doesn't have much ammo left to use fiscally. There's only one thing left to do to encourage economic growth: enact sweeping tax reform to encourage private investment and job creation. [See a collection of political cartoons on the budget and deficit.]
Congressional leaders would go a long way toward improving their public standing if they'd stop their vacations, return to Washington, and get back to work. They still need to enact serious entitlement reform and long-term debt reduction, but starting with tax reform that creates growth would be a great move. Today's papers prove that we can't start soon enough. Time for Congress to get back to work.