Candidates Shop for Votes on eBay

The bidding has begun! Presidential candidates are tripping over each other with government-spending plans to forestall recession and, incidentally, to win your vote in November. Senators Obama and Clinton have raised the ante to the $70-100 billion range, and who knows if it will stop there? The idea is to put cash in your pocket with the expectation that you will go spend it. Republicans tempted to scoff should be reminded that President Bush resorted to similar tax rebates during his first recession in 2001.

Such fiscal stimulus is most likely to work if (1) it is administered quickly and (2) it follows a budget surplus. Alas, deficit-spending over the past seven years has severely compromised the ability of the feds to stimulate. We are in a debt-induced crisis, and we are going to solve it with...more debt? Hillary's chief economic adviser, Gene Sperling, calls it "new money." I call it imaginary money, a short-term fix that would not treat the addiction and would be billed to our children and grandchildren.

There is disagreement among economists as to whether rebates would even work this time as intended. Cautious consumers might actually use the rebates to pay down debt, thereby confounding the pump-primers. Banks are already doing that very thing, using the liquidity created recently by the Federal Reserve to repair their balance sheets rather than to extend new loans. We may have entered a new era of risk aversion, where the same old tricks no longer apply.

What is needed instead is tax reform that removes impediments to entrepreneurial investment. We will have to work, not borrow, our way out of the looming downturn; jobs will have to be created. At the federal level, companies should be allowed to expense rather than depreciate business equipment. At the state and local levels, the personal-property tax should be repealed. Maine already has a program in place to reimburse companies for local taxes levied on new business equipment. The time has come to abolish the tax outright and to adjust revenue-sharing accordingly to neutralize the effect on municipalities.