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Strategies & Market Trends : Currencies and the Global Capital Markets
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To: Sam who wrote (3007)2/13/2001 1:10:30 PM
From: Robert Douglas  Read Replies (1) of 3536
 
Sam,

Very nice post. I agree with much of what you said. I have never been a knee-jerk tax cutter myself. I supported raising rates in the 90's because I felt that debt was accumulating at too rapid a pace. But I do support lowering tax rates today because I feel that taxes are too high in relation to GDP. I dispute your characterization that the proposed cut is "gargantuan," indeed I think it is modest in its size. I think that now is an opportune time to cut taxes because the economy is slowing and the added stimulus will not be inflationary. I also believe that the recovery will not be as simple and rapid as many are hoping for. I think we are entering a long period of sluggish investment and moderating consumer spending. Slower growth than what we had the last 5 years is inevitable, IMO.

If we have learned anything the last decade, it should be that these surplus/deficit numbers cannot be generated in a vacuum. They are very dependant on the growth of the economy. Remember, it wasn't long ago that deficits as far as the eye can see were being predicted. So it is very possible that a course of not cutting taxes may actually be the course that results in higher deficits. If we take care to maintain a healthy economy and be prudent in government spending, I think the deficits will take care of themselves.
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