This year, George Bush's Treasury secretary, John Snow, speaking at the 68th annual meeting of the council, acknowledged, "I don't have anything that breathtaking and far-reaching to announce" in terms of revitalizing the faltering U.S. economy. But he said President Bush's proposed half-trillion-dollar-plus jobs-and-growth plan, centered on massive tax cuts, "will lead to job creation and higher economic growth rates" for "all regions of the country."
By a 222-203 vote the same day Snow spoke, the House approved tax cuts totaling $550 billion over the next 10 years. Although that's $176 billion less than President Bush had wanted, congressional supporters said the lower taxes provided in the legislation would stimulate the faltering economy.
The Senate is working on its own, more conservative, tax cut package, expected to total about $350 billion.
"I think things are really moving well; a lot of progress is being made," Snow said at a press conference prior to his address. A House/Senate conference to resolve differences could come as early as the end of this week or the following week of May 19, he said. "One thing looks very certain: I think we're on the verge of major tax reform, with far-reaching reductions in tax rates for individuals and capital formation, and that's going to lead to jobs."
The economy "is in recovery," Snow told the media, "but it isn't as strong and robust as it could be, or should be. As a result, many, many Americans are looking for work and can't find jobs. This administration isn't going to rest until all Americans who are looking for work can find it."
While Snow said it's the "responsibility of the federal government to try and do what it can to create conditions for prosperity in all parts of the country," and that President Bush's package "will be beneficial to everyone," he said nonetheless that there are areas of the country experiencing an outflow of people and resources and "they won't see as much benefit as those with high economic growth rates."
It "won't do as much good (in the Mississippi Delta) as in other regions where you have more going on in the economy."
He said some 750,000 Mississippi taxpayers "will get real tax relief" under President Bush's proposal, and that 125,000 to 150,000 small businesses "will get major tax relief."
"As that happens, they'll be more inclined to expand and to put up 'Help Wanted' signs. That's the impression I got in talking this morning (at a breakfast meeting) with the business people of this region, who were quite supportive of lower marginal tax rates, lower taxes on capital, reducing or eliminating the dividend tax, and job growth and creation as a result of these proposals."
Snow said both House and Senate versions "incorporate virtually all elements of the president's bill: lower marginal tax rates, accelerated expensing for small businesses, elimination of the marriage penalty, acceleration of child care credits, and reducing the tax on dividends."
Reducing the tax on dividends and capital gains would "encourage more use of capital," Snow said, "and that's critical to creating jobs. It takes $80,000 to $90,000 in capital to create just one job. Lowering the cost of capital, encouraging more capital investment, will lead to creation of more jobs."
This will "be quick," Snow said, citing estimates of 400,000 to 500,000 new jobs by the fourth quarter of this year, 1.5 million by the fourth quarter of 2004, and 2 million by 2005.
"The bigger the (tax relief) package, the better," he said.
Lower tax rates, Snow said, "will put more money in people's pockets, and they will be inclined to spend it, which will in turn result in increased orders for businesses across the country. Business expands when it sees its order books filling up."
There's "a big ripple effect," he said, as businesses replace inventory. A major tax reduction will boost profitability for businesses, improving cash flow and credit ratings and promoting expansion.
More companies will be inclined to pay dividends "rather than manipulating earnings," Snow said, leading to a "restoring of confidence in the business community."
Equity values for U.S. businesses could increase anywhere from 5 percent to 20 percent, he noted. "If we take the middle figure, 10 percent, the increase in equity values for the country could be $1 trillion. That additional wealth will affect confidence levels and spending patterns, and will be very possible."
Presently, he said, the growth rate of the nation's economy is about 2 percent. The Bush program should "double that," he said.
Snow provided an Office of Economic Policy assessment showing the projected impact of the president's program on Mississippi.
By raising the economic growth in the state, it said, Mississippi tax revenues would increase by about $37 million this year and $68 million in 2004; that would be offset somewhat, however, by reductions of $16 million this year and $17 million in 2004 as a result of changes in the tax rate on dividends and changes in expensing provisions. By reducing the tax on equity, it said, Mississippi's state and local municipal bonds would be "relatively less attractive."
Given the recent less-than-enthusiastic Federal Reserve Board outlook for the U.S. economy, Snow was asked if there is danger of stagnation, as has been the case for several years in Japan, or a possible deflationary period.
"I don't think there's much risk of anything like Japan," he said. "While the Fed is looking for a bit more downward sensitivity than before, we see no risk of a significant deflationary period for the United States, and any comparison to Japan would be inappropriate."