Rubin, Volcker, Galbraith weigh in on tax cuts
By Sarah Edmonds
WASHINGTON, March 12 (Reuters) - A chorus of well-known voices has taken up the chant against President George W. Bush's $1.6 trillion tax cut package, with former Treasury Secretary Robert Rubin and ex-Fed Chairman Paul Volcker on Monday weighing in against a locked-in 10-year package.
The call from Democrats Volcker and Rubin and the Concord Coalition -- a bipartisan group founded to ``encourage fiscal responsibility'' -- came a day after revered liberal economist John Kenneth Galbraith wrote that the Bush administration could be on a course toward ``a powerful political disaster.''
The Concord group told a media briefing on Monday that locking in a 10-year tax cut program based on ``unreliable'' Congressional Budget Office forecasts could risk tumbling the United States back into deficits and putting the money necessary for the coming retiree boom in peril.
``I don't think we're in a position to confidently project 10 years ahead and in effect enact a permanent tax program, increasing in scope over a 10-year period, against the uncertainty that's out there,'' Volcker said over a satellite hookup from London.
But Republicans and the White House have said that the CBO's $5.6 trillion 10-year surplus forecast is likely to prove conservative.
``I think the projections are pessimistic,'' Senate Majority Leader Trent Lott, a Mississippi Republican, said on Monday. ``If you look at what the (White House) Office of Management and Budget has been projecting, this is a pretty conservative, very reasonable, almost pessimistic projection that you've projected over 10 years because that's what the rules require.''
MODERATE TAX CUT BETTER BET
Better than 10 years on ``autopilot,'' the Concord group said, would be a moderate tax cut for a few years renewable should forecast surpluses materialize.
This differs from the tax ``trigger'' mechanism bruited recently in the Senate, which could be played with and used as a justification for an unmanageably large tax cut commitment, said group founder Warren Rudman, a former Republican senator who co-authored a deficit reduction law in 1985.
Lott, who does not like the idea of a trigger, said he might be willing to accept some sort of a mid-course review.
Nor, the coalition members said, will the tax cut be effective as a short-term economic stimulus.
``I don't think that a tax cut is going to have much of a stimulative effect, by the time you put it in place, during the course of this year -- which is the year we're worried about,'' Rubin told reporters. He said that the move instead risked damaging confidence if the 10-year program pushed the United States back into the world of deficits.
If the administration is aiming for a short-term tonic for confidence, they'd be better advised to put in place a front-end loaded tax cut -- even a much larger one than the $5.6 billion currently contemplated during fiscal 2001, the group added.
``But to have a 10-year projection to me would be something with the analogy in the business community of a company having a 10-year forecast on earnings and they therefore declare a 10-year dividend policy right then, lock it in,'' said Sam Nunn, a former Democratic senator from Georgia. ``No sane company in America would do that.''
On Sunday, Galbraith wrote in an opinion piece in the New York Times that the United States is thought by many to be headed toward a recession or a depression.
USELESS IN THE PAST
``On this the new administration agrees,'' he wrote, saying the Bush administration has thrown its support behind interest rate cuts and tax cuts as the two-pronged path to a stronger economy. ``Both have proved useless in the past,'' he added.
Galbraith, after calling reliance on the Federal Reserve as a prescription for a looming recession ``optimism carried to the point of foolishness,'' said a tax cut -- which would have little impact on the middle and lower income brackets -- would be just as ineffective.
``If there is a recession and no remedial action beyond that of (Fed Chairman Alan) Greenspan and the lowered expectations of the Internal Revenue Service, the administration faces political difficulty, even disaster,'' he wrote.
Also weighing in on Monday was one who was likely to get a benefit from a tax reduction -- media mogul Ted Turner, now vice chairman of AOL Time Warner
``Let's skip another tax cut for the super-rich,'' Turner wrote in USA Today, referring to proposals to slice estate taxes. ``Believe me, they don't need it.''
But Ted, the rich aren't the beneficiaries of a tax cut. If they don't need it, they can't use it, so they invest it. Everyone below rich spends it on drugs. |
