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Jewish World Review Feb. 13, 2001 / 20 Shevat, 5761

Dan K. Thomasson

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Consumer Reports


The need for a
one-armed economist

http://www.jewishworldreview.com -- LYNDON JOHNSON used to say that he only wanted one-armed economists around him so that they couldn't answer his questions with "on the one hand this and on the other hand that."

The need for some "one-armed economists" will become increasingly evident the next six months as Congress struggles to determine just how generous it needs to be in relieving taxpayers of some of their burden. In a national legislature so closely divided between opposing parties the exercise of deciding who will benefit, by how much and when will become the first really big Capitol Hill spectacle of the new century.

The only certainty is that there will be a tax cut. Everything else, including whether to give corporations a piece of the action, is to be determined. Will it be George W. Bush's $1.6 trillion version or the $900 billion model proposed by Democrats, or somewhere in between or even larger? The answer probably won't be forthcoming until late summer. In the meantime, Americans will be besieged by some of the most outlandish economic claims, counterclaims and dissembling since the last big income tax reduction took place in 1981.

Any doubt about the tone of the debate should have been dispelled by Senate Democratic leader Tom Daschle's response to the Bush plan. He offered a dog-eared analogy used by his party throughout the ages to argue that Republicans only care about the wealthiest of us. The senator charged that under President Bush's proposal a single person making $1 million annually would receive a reduction of $46,000, enough to buy a Lexus, while the person making $50,000 could only buy a muffler for that car with the amount he gets back.

Well, of course, he is right. But missing here is the fact that the person who is making $50,000 most likely couldn't afford a Lexus even if he paid no income taxes at all. Also, the $1 million-a-year person currently is paying nearly $312,000 in taxes while the single person earning $50,000 pays less than $8,000, and that drops to below $5,000 if he or she is married.

But the potency of Daschle's argument, given wide exposure by the press, is reflected in a recent Time Magazine/CNN poll showing that 51 percent of Americans believe the Bush proposal would benefit the rich. Don't be fooled. The Democrats are climbing aboard the tax cut bandwagon as fast as they can. They just want desperately to put their own stamp on it and can't resist a bit of demagoguery.

Just as disturbing is the president's claim that the tax proposal is necessary to jolt a faltering economy. Experience shows that it takes quite some time for that to occur and, usually, the recession is over before the impact is felt. Much better, it seems to me, was Bush's original argument that with the prospect of huge surpluses, it is only fair and right to give some back. Twenty years, after all, is a long time, especially during peace, not to cut taxes.

The Time/CNN survey shows that Americans marginally support a tax cut but that they also have higher priorities, including fixing Social Security and education and reducing the national debt.

That indifference is not unusual. Tax cut or reform bills have a way of taking on a life of their own despite public apathy. In 1987, for instance, there was no national outcry for tax reform. It was an issue counted dead by both parties from the White House to Congress. Then-Sen. Robert Packwood, R-Ore., sat in a Capitol Hill bistro with an aide and a pitcher of beer and drafted a plan on a cocktail napkin to "simplify" how we pay income taxes.

Simplify indeed. What seemed at first an uncomplicated formula of deduction elimination and margin reduction ultimately became a morass of complexities and unfairness that led to a recession and the near-collapse of the commercial real estate industry.

The trick, this time as it always is, will be to keep whatever bill emerges from becoming the proverbial Christmas tree, adorned with every lawmaker's special-interest bauble. At the moment, each side's economists have their own dire predictions about how much surplus actually will be available the next 10 years and what the ultimate cost of this plan vs. that proposal will be and the impact on the budget. The blizzard of opinions is impenetrable.

It's kind of like "on the one hand this and on the other hand that."

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