- The Washington Times - Friday, February 9, 2001

What a difference 14 months make. In December 1999, when Texas Gov. George W. Bush unveiled his 10-year, $1.6 trillion tax-cut proposal, the July 1999 Congressional Budget Office (CBO) projected $2.9 trillion in federal budget surpluses during the next decade. Also, in December 1999 the U.S. economy was poised to complete a four-year period of average annual economic growth exceeding 4 percent. Indeed, during the second half of 1999, the economy expanded at a 7 percent annual rate.

Yesterday, when President Bush officially unveiled his tax cut plan, the budgetary and economic outlooks were significantly different from December 1999. In the first place, CBO's 10-year surplus projection, released last week, had nearly doubled to $5.6 trillion. Moreover, the portion of those cumulative surpluses that were unrelated to Social Security had increased from $1 trillion when Mr. Bush announced his plan to $3.1 trillion today. In the second place, the economy's growth rate, which rapidly decelerated throughout 2000, is now "probably close to zero," according to the Jan. 25 congressional testimony of Fed Chairman Alan Greenspan.

On the nation's political, budgetary and economic fronts, therefore, there have been three extremely important developments. For the first time since the 1952 election, voters have given the tax-cutting Republican Party simultaneous control of the White House and both chambers of Congress. Second, the CBO has projected a very significant improvement in the nation's long-term fiscal situation. Indeed, unless some of the surplus tax revenues are returned to America's workers, the federal government could, according to projections by both the CBO and Mr. Greenspan, own well over $2 trillion worth of private assets by 2011. And third, Mr. Greenspan has detected a "very dramatic" slowdown in the American economy.

The confluence of these three developments surely demonstrates that the necessity for major tax relief is even greater today than it was in December 1999. Indeed, given these developments, the plan Mr. Bush announced 14 months ago appears today to be more timid than bold. Rather than spend five years phasing in the across-the-board tax-rate reductions, Mr. Bush should accelerate the process. After all, as Mr. Greenspan has frequently argued, lowering marginal income-tax rates reduces the tax wedge that impedes savings, investment, risk-taking, efficient resource allocation and entrepreneurial activity. Moreover, all of these pro-growth benefits have the added effect of generating more revenue.

As a general principle, it is always better to implement pro-growth fiscal policies sooner rather than later. That is especially true in today's economic environment. Economic growth has stalled, and there is real danger the economy could fall into recession, in part because of the increasingly contractionary effect of the ever-growing budget surpluses.

The federal tax burden is now at its highest level since World War II. Meanwhile, budget surpluses are projected to soar even as the growth rate of the economy has dramatically slowed. It is difficult to imagine better arguments for substantial tax relief.

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