The Federal Reserve Board's aggressive interest rate cuts are welcome in our slowing economy. But monetary policy to stabilize prices is only half the equation.
The other half is fiscal policy. It concerns taxation and government spending, and is determined by Congress, then implemented by the U.S. Treasury Department.
There's virtually unanimous agreement among economists that it's time for a tax cut. Every few months there's a new announcement that the surplus is growing.
The latest estimate, just reported by the Congressional Budget Office, projects a $5.6 trillion surplus over the next 10 years - that's a trillion dollars more than the CBO's projection six months ago and half a trillion more than the Clinton administration forecast last month.
Ballooning budget surpluses prompted Treasury to announce the last sale of 1-year Treasury bills will be held later this month. This has long been a favorite of individual investors looking for safe, fast, reasonable returns. Canceling the 42-year-old security enables the government to erase $20 billion of debt and pay less interest on remaining debt.
There's also talk of eliminating another investment favorite - the 30-year Treasury bond. Where's the logic in issuing a 30-year debt bond when government's on track to be out of debt in 10 years?
This is why a tax cut makes so much sense. There's no question that the $5 trillion national debt must be paid down. But if done too quickly, the economy could actually be damaged by depriving investors, especially small investors, of their favorite, and safest, investment vehicles.
So the issue now is about how much of the surpluses - or, more accurately, tax overpayments - will be returned to sender and how much will be piled up in Washington for Big Government politicians and bureaucrats to spend?
The mantra by Big Government types - and repeated uncritically by much of the major media - is that President Bush's 10-year, $1.6 trillion across-the-board cut of marginal tax rates, on which he campaigned, is "huge," "massive," or, sometimes more temperately, "big."
Well, the National Taxpayers Union got to wondering - just how "big" is the Bush cut in marginal rates compared to other tax cuts of recent vintage? NTU researchers found it wasn't big at all, much less huge.
President Reagan's 1981 tax cut, which spurred the nation out of recession, came to 3.3 percent of the gross domestic product; President Kennedy's 1963 tax cut, also designed to boost a faltering economy, comprised 2 percent of GDP.
Bush's "massive" tax cut, says the taxpayers' union, is only .9 percent of GDP. The cut ought to be enlarged, not reduced. And it would still leave Washington with plenty to spend.
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