Ron Spielman knows what he’d like to hear when President Bush announces his economic stimulus plan Tuesday in Chicago.
But he knows he’ll probably be disappointed.
Spielman, chief executive of Chicago-based Republic Windows and Doors Inc., wants Bush to decide whether the country is going to war with Iraq, and end the uncertainty that he says is slowing sales for business owners.
“Either he goes forward with what seem to be his plans, or he backs off,” Spielman said. “The longer this lingering goes into the year, the greater the chances are of this economy not making the recovery.”
Spielman is looking to expand his business on Goose Island. But like many business people, especially in the capital-intensive manufacturing sector, he is leery of taking on that extra risk with so much uncertainty in the air.
“I couldn’t care less about all this posturing about tax cuts,” Spielman said. “Any tax cuts he can propose are a drop in the bucket compared to whether we’re going to go to war or not.”
Nearly everyone has an opinion on what is needed to restore the nation to prosperity–especially in a business community as diverse as Chicago’s. But if the president and his economic advisers have crafted a stimulus package that seems to have something for everyone, their plan also appears to have something to annoy everyone.
Bush will unveil the plan in a speech to business executives Tuesday at the Chicago Sheraton and Towers. Highlights are expected to include extended and enhanced unemployment benefits, an end to taxation of dividends, an increase in the child credit for low-income families and speeding up of planned cuts in federal income taxes.
Richard Wellner, president of Elgin-based Corporate America Family Credit Union, favors some of the more populist elements of the plan.
“I like increasing the child-care tax credit, eliminating the marriage penalty, maintaining and extending unemployment benefits,” Wellner said. “Those help ordinary, common people.”
Wellner said that putting money into the hands of lower-income people moves money directly into the economy while helping those who need it the most.
But Sam Peltzman, a professor of economics at the University of Chicago Graduate School of Business, takes another view.
“A permanent reduction in marginal tax rates” is what the economy needs, he said. “That is the only thing that will provide the stimulus that [Bush] is looking for. I like tax reduction.”
That said, Peltzman wonders how the government, already in deficit, can afford a tax cut.
“The one dismaying feature is that nobody is talking about cutting spending,” he said.
Sooner rather than later
Some economic observers don’t really much care what is in the stimulus package–they just want it now.
Jerry Roper, president of the Chicagoland Chamber of Commerce, said past efforts to jump-start growth came too late. Partisan disputes in Congress can tie up legislation so long that the economy recovers on its own.
“Sooner rather than later” is best, Roper said. “It’s [Bush’s] Congress, and if he can’t get it done, the next guy will.”
The Chicago Federation of Labor has an ambitious wish list that federation President Dennis Gannon describes as “reaching for the stars.”
“I’d like to see job creation with federal dollars, money for our schools and roads, transportation, and to rebuild our industrial base,” Gannon said.
He also would like “some sort of tax rebate for all working men and women, an extension of 26 weeks in unemployment insurance, money to cover the health care of the unemployed [and] an increase in the minimum wage.”
Nickolas Neubauer, chairman of the Chicago Board of Trade, has just one suggestion: End taxation of dividends.
But Neubauer said the goal isn’t to enrich shareholders but rather to enforce fiscal discipline among corporations.
“The current tax system creates an incentive to use debt, far too much debt,” Neubauer said.
Companies are allowed to deduct debt interest from taxes but cannot do the same with dividends. That provides an inducement to borrow, but it doesn’t reward the discipline of paying out some profits to stockholders in the form of dividends.
Impact on oil prices
As Spielman noted, the tension in the Mideast is having an economic effect. Beyond the uncertainty it has created, it has driven oil prices to their highest levels in years, creating a drag on the economy.
“We need a really solid energy policy,” said Craig Sieben, president of Chicago-based Sieben Energy Associates, which helps companies find affordable power.
Sieben said he would like stricter energy standards and building codes, and an increase in the fuel economy required of automakers.
“Energy underlies everything we do,” he said. “We have to have access to solid supplies, but we should also be responsible in our use.”
Like many other business owners, Craig Culver, president of the Prairie du Sac, Wis.-based Culver’s restaurant chain, wants Bush to accelerate how quickly companies can write off assets.
For example, Culver said his business is forced to write off the value of its buildings over 39 years. If that schedule were trimmed to 15 years, Culver’s would lower its annual taxable income, reducing its tax burden and likely spending some of the extra profits in ways that would boost the economy.
Culver also hopes Bush will extend unemployment benefits to people who lost their jobs during the downturn so they will eat out more.
“Somehow or other, I think all of us need some relief,” Culver said.
Rebecca Atwood Langeler, president of the Women’s Business Source directory in Chicago, stressed the importance of giving small-business owners assistance so they can offer employee health insurance.
With insurance premiums soaring, many companies are passing more of the cost along to employees, Langeler said. Increasing insurance expenses and payroll taxes constrain new hiring, she said.
Robert Agra, president of the family-owned Chicago’s First Lady cruise ship company, supports efforts to stimulate the economy, but says people must also consider the government’s budgetary requirements.
If the deficit grows too much, Agra said, “it kills everything you have been able to accomplish.”
Harry Kraemer, chief executive of Baxter International Inc., said Bush’s main goal should be to restore confidence in the economy.
“A lot of this becomes psychological,” Kraemer said. “It becomes a self-fulfilling prophecy.”
