Nick Smith, Feb. 16, 2003

The possible war in Iraq, the aggressive statement from Osama bin Laden, and the high terrrorism alert has us all on edge. The government tells us that they have specific intelligence that terrorists are plotting strikes on targets in Washington, though one source later failed a lie detector test. On February 13, authorities closed one of the major bridges over the Potomac river during rush hour because of a perceived threat. People are buying gas masks and some stores are sold out of plastic sheeting and duct tape. The high level of concern, which interferes with daily life, reinforces the need not only to defend against terrorism, but to preempt it when we can.

Here in Washington, the training and briefing on terrorism is extensive. At a meeting for members, the terrorist threat was outlined. Terrorists do a lot of surveillance before they strike, making it important to add variety to your routines. We are not supposed to come to work the same way every day, or have licence plates or parking passes that identify members’ cars. Each office has multiple evacuation plans, meeting places, and a duffel bag full of gas masks. We stockpile necessary medicines and building security is much heightened. It’s quite alarming and probably an overreaction, but nobody knows how much is enough.

Nevertheless, Congress keeps moving ahead. Secretary of State Colin Powell addressed the International Relations Committee on the State Department budget and the situation in Iraq. He reiterated the points he made at the U.N. and the Administration’s determination to disarm Iraq. I also met with R. Glenn Hubbard, the Chairman of the President’s Council of Economic Advisors. I expressed my opinion, as do many other economists, that there is no difference over the long-term between the economic effects of higher taxes on the economy and those of higher debt. This makes it imperative not just to cut taxes, but to cut spending in order to avoid piling up debt on our children and grandchildren. The money that debt repayment and the interest on that debt drains from the economy has a real and lasting effect that tends to reduce growth and jobs.

We also discussed the downturn in business investment which is the primary cause of the slow economic recovery. The Administration’s proposals seek to encourage the investment necessary to start and expand businesses, purchase new buildings and equipment, and hire new workers. One part of the proposal is lower tax rates for small business. Most small business owners file on the individual income tax return, including even the income of so-called "S" corporations.

One reason that Dr. Hubbard came by is to discuss the neutral cost recovery bill that I’ve introduced in every Congress since 1993. One drawback to the Administration’s expensing proposal is that it gives no help to struggling businesses that are breaking even or losing money because they have no income on their tax filings to deduct from. I’m introducing a version of my neutral cost recovery legislation that would improve the expensing proposal by giving businesses the option to put the same amount of investment onto a depreciation schedule which is adjusted for inflation and time value of money, and provides the same advantage as expensing. He promised the White House’s consideration of this proposal that would help the most vulnerable small businesses and encourage the business investment that is important for productivity and jobs. This is one of the challenges we’ll face in what is likely to be a very busy few months.

Congressman Nick Smith represents the 7th District Congressional of Michigan in the U.S. House of Representatives.