Magazine article Sojourners Magazine

Who Doesn't Want a Tax Cut?

Magazine article Sojourners Magazine

Who Doesn't Want a Tax Cut?

Article excerpt

Bush's plan looks like the `gimme-mine' generation at it again.

President Bush argues that his proposed $1.6 trillion tax cut will be good for the economy and good for American families, as it will return current surpluses in the federal budget back to the American people rather than the government hoarding them. Is he fight?

One alternative to a tax cut is for the federal government to use this money to continue to pay down the accumulated federal debt and reduce federal interest payments. That would almost surely create a healthier economy in the long run.

A second alternative is for the government to spend the money in another way. There are obviously major public needs in this country. Most pressing is the large demographic bulge of the baby boom, people who are going to be retiring over the next 30 years. Our current Social Security system is not able to fully pay its commitments to these citizens. Today's surpluses provide an opportunity to make our public pension system solvent in the long run.

Other needs--such as health insurance for low-income working families and prescription drug insurance for the elderly--are also good uses for the surplus. Why should the immediate consumer needs of American taxpayers be more important? Finally, these surpluses may be more illusory than we think. If the economy slows down, if the Bush administration and Congress increase spending, the surpluses could shrink fast. But the proposed tax cut will reduce government revenues permanently and could easily produce a reappearance of budget deficits.

Do we need this tax cut to stimulate the economy? It's pretty amazing to hear a Republican administration making this argument. Fiscal stimulus--using the federal budget to stimulate the economy--has been derided by the last four Republican presidents. While it's true that expanded federal spending can help boost economic growth when timed exactly right, fiscal stimulus has fallen into disuse precisely because it's rarely a well-timed tool. The proposed tax cuts are phased in over several years. If the stimulus hits after a slowdown and as the economy is expanding, it can fuel inflation and harm the expansion. …

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