The Financial Fight Ahead
Battle plans against “capital punishment.”

Rep. Baker is chairman of the House Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises
September 20, 2001, 1:15 p.m.

n symbol and in substance, the war begun last Tuesday against America was waged on two fronts — the hitting of the geographic centers that best represented America’s financial and military might. True, along with the tragic airline crash in Pennsylvania, the three successful attacks against the World Trade Center and the Pentagon had strategically symbolic implications.

But just one week later, however, we were already getting a clearer sense of the perilously greater implications of the substance of the attacks.

"President Bush, [Defense Secretary] Rumsfeld and other senior U.S. officials have vowed to conduct a diplomatic, financial and military campaign to strike back at anti-American guerrillas and states that support and harbor them."
— Reuters, Tuesday, Sept. 18

"[S]ome countries where bin Laden's companies are based have been reluctant to give the United States and other Western countries the access they needed to move against bin Laden [and his estimated $300 million in financial assets]."
— Associated Press, Sept. 18

"Securities regulators in the U.S., Europe and Asia say they are investigating whether terrorists raised money through insider trading on knowledge of attacks that destroyed New York's World Trade Center and closed U.S. stock markets for four days."
— Bloomberg, Sept. 18

"The White House is considering several ideas, including cutting payroll taxes, to revive the U.S. economy after last week's attacks, but no decisions have been made, Bush aides said on Tuesday. Before the Sept. 11 attacks, lawmakers floated the idea of cutting taxes — including the capital gains tax on the sale of investments as well as payroll taxes — as a way to perk up an economy that grew at a minuscule 0.2 percent rate in the spring."
— Reuters, Sept. 18

"In an emergency meeting yesterday of the Real Estate Board of New York, developer Larry Silverstein confirms that the World Trade Center will be rebuilt. The propriety of such a project remains a matter of conjecture, however, as the numerous entities involved have not yet publicly addressed the implications of redeveloping the site. 'The engineering is certainly there to rebuild and build higher,' observes one source."
— GlobeSt.com, Sept 18

As the nation collectively girds for a long and sustained military, diplomatic, law-enforcement, and intelligence-gathering campaign to combat terrorism, this week’s sizable stock-market declines and reports of impending airline bankruptcies portend America’s equally important necessity to ready for a "wartime economy."

If President Bush’s speech Thursday evening before a joint session of Congress evokes any justifiable parallels to the unparalleled "date of infamy" address of December 8, 1941, it is this. Sixty years from now historians may look back to chronicle the start of our third most challenging presidency, confronting a combination of economic and military exigencies not seen since FDR led us through the Great Depression and the Second World War sixty years earlier, and Lincoln stared down the Civil War upheavals another sixty years before.

But mind you, the Gettysburg Address, while eloquent on the theme of battlefield sacrifices remembered, could be silent on perhaps the starkest task taken up by the President tonight — that of preparing the American people, in the simplest possible manner, for the economic sacrifices that may yet lie ahead.

The selfless displays of unity and purpose across the country since last Tuesday have been nothing short of inspiring. And the bipartisan support in Congress to rally behind President Bush has been crucial as his administration formulates plans to defend against terrorism on the domestic front and to tackle it abroad.

There are already signs of bipartisan cooperation to formulate emergency measures to stimulate the already slumping economy and ward off recession. Bipartisan compromise clearly should rule the day here as well, and my hope is that it will lead to greater "concessions" on both sides that strengthen rather than water down opposing remedies. But more importantly, if we are to mount an attack on the financial front of this war, it should be just as comprehensive as that being waged in the military theatre. It should include a defense and an offense, be directed against perils both foreign and domestic, and be symbolic as well as substantive.

To that end, I would like to use the occasion of this column to propose a rough legislative battle plan. For discussions’ sake, call it the "War Emergency Commemorative Investment Capital and Asset Strength and Security" Act (sound out the acronym yourself). It has four main provisions:

1. Strengthening federal government authority (for both the Treasury and intelligence agencies) and methods for freezing international capital assets of known terrorist organizations, including the threat of financial and economic sanctions against countries that don't pursue assets in their financial institutions or capital markets.

2. On a one-year basis an immediate cutting in half of the capital-gains tax rate and a means-tested responsible reduction of payroll taxes, for both warding off national and worldwide recession and for stimulating investment and consumer activity alongside the "war effort."

3. To further promote national unity, a reinstatement of full tax deductions of donations to charitable and relief organizations and even to federal government operations specifically engaged in anti-terrorism relief and combat, along with a means-tested total elimination of federal income taxes on armed services personnel serving on combat-zone and non-combat-zone active duty.

4. A resolution expressing the sense of Congress — if desired and deemed appropriate and practical by pertinent private and public entities in the city and state of New York — to rebuild and to provide whatever appropriate assistance necessary toward rebuilding the twin towers of the World Trade Center, only bigger, stronger, and safer (as a symbolic as well as living memorial to itself, to the spirit of those lost, and to the freedom represented by our market system).

While the last three provisions (and the bill’s name obviously) are open to revision, bipartisan negotiation, and direction from leadership, they nevertheless are, I believe, serious and deserve a place at a table in a world in which "everything has changed" and requires thinking "outside the box." And I will await and invite any and all feedback from whoever reads this, regardless of party or position of importance.

In my next column I will provide greater background and detail on the first provision regarding terrorist assets, which, as the pre-attack stock trading inquiries suggest, is plainly urgent, necessary and an essential complement to pending anti-terrorist money-laundering measures.

I’m the last person on Earth who ever thought to see himself offering, even if it is to be a stand-alone bill, what in ordinary times could accurately be called a proposal for "financial protectionism." But these are not ordinary times, and it is not for me to quibble with an enemy financially sophisticated enough to profit by possibly "shorting" on the destruction he himself is bent on bringing to our very way of life.

So maybe, in the context of ordinary airplane passengers and firefighters lost while freely placing themselves, for the sake of others, in harm’s way, Lincoln’s eloquence applies after all, because:

It is rather for us to be here dedicated to the great task remaining before us — that from these honored dead we take increased devotion to the cause for which they gave the last full measure of devotion — that we here highly resolve that these dead shall not have died in vain — that this nation, under God, shall have a new birth of freedom — and that government of the people, by the people, for the people, shall not perish from the earth.