THE NEXT FED CHALLENGE

Back in the 1970s, Washington policymakers were obsessed with increasing aggregate demand, but they forgot about aggregate supply. Today's short-term-stimulus rebate package is a throwback to that era. Keynesian central planning has damaged the Federal Reserve Bank's credibility. It has weakened the dollar. Entrepreneurs and investors can't possibly plan ahead when interest rates bob up and down like yo-yos. We should say goodbye to Fed tinkering hello to permanent enhancements to the economy's incentive structure, such as:

> Lowering tax rates on corporations
> Lowering the corporate capital-gains tax rate.
> Abolishing the individual capital-gains tax, dividend tax and the estate tax.
> Eliminating the multiple-taxation of savings and investment.

At some point, the entire corporate tax structure should be thrown out, along with all the murky K-Street tax-earmark loopholes that litter the Internal Revenue Code. Without strong tax-reform measures to expand the production of goods and services, further Fed money injections are only demand-side "solutions" that will surely inflate prices and depreciate the currency.

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