- The Washington Times - Tuesday, April 17, 2001

In a move that defies common sense and economic sense all but one of the Senate Democrats voted to cut the president's tax relief proposal by nearly $400 billion. In the face of an economic downturn, that's not the direction we should be moving. And now it's up to us in the House to ensure that when the dust settles, America gets the amount of tax relief it deserves.
When President George W. Bush drafted his $1.6 trillion tax relief proposal in 1999, the economy was much stronger. Today, circumstances have fundamentally changed, and our economy requires not the timidity demonstrated by the Senate, but a larger and bolder pro-growth tax cut. There's an economic emergency.
When President Bush took the oath of officeint January, he inherited from Bill Clinton an economy in decline. The United States lost 81,000 manufacturing jobs in March alone, bringing the total manufacturing jobs lost since June to 451,000. And overall economic growth had slowed to just 1 percent in the fourth quarter of 2000, a stark contrast to the 5.6 percent rate posted during the second quarter.
Americans see their 401(k)s and their mutual funds shrinking, while their energy bills double, triple, and even quadruple. Pro-growth tax cuts beyond those developed by Mr. Bush in 1999 are needed now.
The president's plan wisely sets aside a significant amount of money for use in case of urgent necessity. I believe pro-growth tax relief is an urgent necessity. Fixing plunging consumer confidence, rising unemployment and a sluggish economy are urgent necessities. We should consider using part of this contingency fund to provide pro-growth tax relief that will revive and grow the economy.
Contingency funds are usually used to aid those hurt by natural disasters that destroy homes and businesses and ruin local economies. People are being hurt by the stagnating economy. Can't we use some of those funds to provide tax relief to create new and better jobs and improve living standards for all Americans? I think we can.
Surplus estimates continue to be revised upward. When Mr. Bush developed his tax relief plan in 1999, 10-year tax surpluses were estimated to be $3 trillion. Yet the current 10-year outlook stands at $5.6 trillion. If you compare the 1999 and the 2001 Congressional Budget Office's estimates for the same time period, the tax surplus grew by $2.1 trillion. To me, that's 2.1 trillion reasons why there's a bit of room for growth in the final tax relief number.
The Heritage Foundation conducted an analysis of President Bush's plan, not using the Washington method of static scoring, but rather the dynamic analysis that accounts for growth changes.
The Heritage Foundation found economic growth generated by tax cuts actually increases government revenues by $850 billion a fact ignored by static scoring. That gives us another 850 billion reasons to consider growing our tax relief plans.
If we continue to run huge tax surpluses and the money is not spent, we will rapidly reach a point where there is no more national debt available for retirement. Suddenly, a "surplus surplus" will result and there will be no place to put it. What happens then is the Treasury will begin investing in private assets. Very quickly Uncle Sam would become the largest owner of stocks, bonds and private real estate in the nation.
Federal Reserve Chairman Alan Greenspan finds this prospect so disturbing that he has called it "the critical" issue in long-term fiscal policy. He warns that if not addressed soon, the impending buy-up could result in "sub-optimal performance by our capital markets, diminished economic efficiency, and lower overall standards of living." Mr. Greenspan urges us to "eschew private asset accumulation, because it would be exceptionally difficult to insulate the government's investment decisions from political pressure."
Actually, it would be impossible. There would be irresistible pressure in Washington to steer the Treasury's investments to favored constituencies. The very relationship between public and private, federal and state governments, and even between government and citizen could all be altered for the worse.
Government buying up the private economy? That's another important reason why we have room for a larger tax cut. If the available surplus doesn't go back to the public, Washington will spend it.
In addition to using the tax surplus to buy up private sector assets, Washington can spend the tax surplus. And if history provides a reliable guide, it will.
We will need a larger tax cut that gets the money out of Washington before it can be spent on bigger government or used to buy up the private economy.
The tax plan we are considering now was drafted in 1999, when the economy was much stronger. But circumstances have fundamentally changed. We should no longer be restricted by a proposal or a tax cut number that was not designed for the situation we now face.
There are those in the Senate who are timid tax cutters even in the face of a serious economic downturn. But this country's tax policy should not be driven by timidity. Elected officials know that the public might forgive them if we try to improve the economy but then fail. However, the public won't forgive us if we don't try at all.
Anyone in the Senate or the House who opposes a significant tax cut in these economic times does so at his or her political peril.
In my opinion, we should do what's best for the economy and not be restricted by the $1.6 trillion number we're considering now. We can do it. We must do it.

Dick Armey, Texas Republican, is House majority leader.

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