Opinion
Page 4 University Daily Kansan, March 2, 1981
Large tax cuts unwise
Picture, if you will, this scenario:
Massive tax cuts, beginning in the summer of 1981, combined with consistent trimming of the federal budget in 1982 and '83, make the economy by 1985 almost a paradise.
Unemployment's down to 6 percent, inflation's even less than that, a mild 5 percent . . . and the cat's in the cradle and strawberry fields forever.
Such is the scenario painted by some of President Reagan's closest economic advisers. One of the most essential elements of their projected economic recovery would be immediate and sizable tax cuts—the subject of this page today.
The problem with tax cuts at this time is that they might be inconsistent with current economic goals. After all, the administration's biggest push appears to be a balancing of the federal budget. But does it make sense to decrease revenues at the same time expenditures are being decreased? If they're decreased equally, the deficit stays the same.
Reagan advisers point out that the proposed tax cuts shouldn't decrease government revenues, they'll just slow the current rise in tax rates. But other economists argue that some economic proposals, such as the one for increasing capital investment write-offs, could wind up costing the federal government up to $50 billion in lost revenues for fiscal year 1982—revenues very much needed to contain the traditional annual deficit.
In essence, massive tax cuts are pretty much an experiment, with the average American being the guinea pig.
As far as experiments go, it's unlikely that Congress will give Reagan the same free hand to experiment with the nation's economy as it gave Franklin Roosevelt in 1933. Times simply aren't as bad.
Such an experiment would assume that people would use the extra income after tax breaks to save and invest. Supply-side economists argue they'll also work harder and produce more. But how much correlation is there between increases in pay and greater productivity by workers?
Adding to the problem is the specter that many people, if given more money to take home from their incomes, wouldn't squirrel it away or play the stock market game, but instead would pour out into the stores and shopping centers to spend it—thereby sparking more inflation.
Rather than pushing unwise tax cut bills through Congress at this time, President Reagan should concentrate on harnessing federal spending, which was his number one priority during the campaign anyway. First let him prove to the nation that economic woes can be remedied by containing federal spending; if and when that is proven, perhaps then he may proceed into this other unknown path, the path of massive tax cuts. One experiment at a time is enough.
Tax cuts good way to begin revitalization of economy
Up and at 'em!
The other day I took a walk to a nearby city park to learn of my latest assignment from headquarters. When I arrived, I strove over to the trash can next to the park bench across the street and found a chittering children were frolling and, as usual, pulled out the secret tape recorder.
What was not usual, however, was the assignment that it contained. It was an
ERIC
BRENDE
assignment more important, more challenging than any I had ever been given as a member of the Mission Impossible troupe. It was an assignment whose mere mention was impossible.
It was the assignment to get the president's tax cut passed.
The tape began innocently enough: "Good morning, Mr. Brende."
But soon, that calmly detached announcer's voice would get down to, shall we say, the brass tax of the matter. "The principal difficulty with the Kemp-Roth cut bill, which our man in Washington -code name 'Rawhide' - recently proposed to Congress and the nation in a nationally televised debate, is that the opposition be passed when the opposition can truthfully label it as 'inequitable' and 'gamble?' "
My high-level intelligence source continued, "Yes, it is true that, as Senate minority leader Robert Byrd put it, Kemp-Roth is 'inquitable', insofar as rich people will save more dollars as a result of it than poor people. Be advised, however, that rich people will actually save a lower percentage of their income than poor people.
"And yes, it is true that, as AFL-CIO President Lane Kirkland phrased it, the constitute a high-risk gamble for the future of America," insofar as the supply-side economic theory on which they are based has never fully been tested.
"The task at hand, therefore, is to persuade the members of Congress of this fact. The task will be a formidable one even though they, of all people, should know that tax-cutting can have very desirable economic effects if only they would pay some attention to the results of any of the tax cuts they have passed in recent times.
"Take the capital gains tax decrease of 1979. A high capital gains tax had been imposed on business in 1969. Shortly thereafter, the number of new companies entering the stock market took a drastic plunge. Whereas in 1969 there were 698 new stock offerings, by 1979 there were 995 new stock offerings months of 1980, after the tax was lowered from 49 to 28 percent, the number of new stock offerings immediately shot up to 89. And the country was in a recession at the time.
"The joyous economic bounty reaped from such business starts and expansions that resulted from tax cuts was twofold. First, they increased the size of the stockpile of goods available to consumers, thereby decreasing their cost and, in turn, inflation.
"Second, they increased the number of available jobs, thereby decreasing unemployment. Indeed, 85 percent of new jobs come from new small businesses.
"Ironically, although opponents of the presently proposed tax cut measures call them 'unfair' to the poor, it is the poor who will benefit more than anyone else from their effects. This is because it is the poor who are hurt most by inflation and unemployment.
"And at any rate, healthy business activity, such as that spurred on by the 1979 capital reform, is clearly the stuff of which our 'land of opportunity' has been made. Such stuff is the best example of supply-side theory in effect.
"What's more, whereas liberal members of Congress who savaged opposed the 1979 tax cut had predicted that it would decrease government tax revenues by $1.7 billion, the lowered tax rates actually increased what the Treasury took in by $1.1 billion. Lower tax rates that reap higher tax revenues is an added feature of supply-side economics.
The University Daily KANSAN
"Kemp-Roth, another supply-side measure, would have the same bountiful effects as the 1979 one, only more so. The only difference is that it would achieve those effects through less direct means. Instead of returning money directly to business, it would return it to private individuals, who would then invest in business. Here lies the 'gamble', for it is known how many recipients will invest their newly acquired funds. Those who would choose simply to spend the money would be helping to refuel the fires of inflation.
“And 'Rawhide' is having enough trouble making headway with the bill the way it stands. Though recent polls show that the popularly supported ‘tax-revolt’ he is leading a 3-to-1 backing among the populace, the ruling political group he is trying to topple remains unshakable. The Washington liberal group and its members are armed with the devastating verbal darts ‘inequitable’ and ‘risky’.
"Thus, your mission, Mr. Brende, should you decide to accept it, is to pose an IRS investigator and threaten to perform tax audits on the entire financial histories of the various congressional leaders who now oppose the bill.
"Ideally, Kemp-Roth would be targeted only at those best disposed to invest the funds—namely, the rich—but such a measure would be politically unthinkable.
I casually crunched off the stalactite of frozen perspiration that encrusted my face and upper torso, now knowing that passing through a window would be terrifying. After all, intelligence itself had told me so.
"This tape will self-destruct in five seconds. Good luck."
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Tax cuts not quite richly deserved
President Reagan's long-awaited budget proposal should have been a crowd-pleaser.
He promised tax cuts, an eventually balanced budget, higher employment and longer inflation.
budget, higher employment and lower inflation.
And who could argue with him? Anyone who doesn't like tax cuts doesn't like chicken on Sunday.
However, it seems that some are protesting a proposal, but it's not that they don't like chicken.
Last month, Reagan proposed that the federal government cut personal income tax a total of 30 percent in four years. The plan would make it easier to fund projects for businesses to write off capital investments.
Reagan's tax package should make him a man with some circles, but his plan does have drawbacks.
For example, the provision for business tax write-offs heavily favors the auto, steel and rubber industries--big businesses that make big capital investments.
On the other hand, smaller businesses don't spend much money on capital, but create nearly 90 percent of all new American jobs. Reagan's tax cut could leave them in the cold.
There are similar inequities in the proposed personal income tax reduction.
As far as the Reagan administration is concerned, all income tax reductions are equal, but, in absolute terms, some tax cuts are more equal than others.
By 1984, the proposed tax cuts would save a family that makes $200,000 a year about $11,000. A family earning $30,000 a year would save $1,038 in the same period.
Theoretically, most taxpayers will save or invest the money they are granted after April 15. But anyone with a knowledge of human nature will be deposited at the nearest shopping center.
In that case, the tax cuts would stimulate ination, not private investment as the Reagan administration had done.
The tax cuts also would immediately decrease
the amount of money in the Treasury. Eventually, Reagan says, the increased productivity of tax-reliable firms, will refill the nation's coffers.
But in the meantime, the government will have less money to spend on its programs, including
VANESSA HERRON
social services, foreign aid and energy con-
trol. He's good at building a cut-out back in his plans for a balanced budget.
Everyone likes a balanced budget. But the budget and tax cuts the president has proposed to achieve that end seem to imply that human beings, particularly the poor, are less important than cheerful quarterly reports and a macho military. This implication is disturbing.
Of course, it could be argued that in the long run, the tax and budget cut will serve the public purpose.
According to supply-side economics, the coordinated cuts in taxes and government spending are the key drivers of growth.
After the tax cuts, businesses and individuals will have more money to invest, the gross national product will increase and everyone will be happy.
Ideally, economists say, only the upper and upper-middle classes should be granted these tax cuts, because they are more likely to invest in business.
In other words, "Them that has, gets."
The only thing wrong with the theory of supply-side economics is just that—it's a theory. At the moment, it exists only on the chalky blackboards in our own classrooms, the economists cannot agree on its long term effects.
For example, the plan could lead to prosperity.
as Reagan believes. In his speech, he predicted that 5% and unemployment would fall to 8.5 percent.
Or else, Reagan's four-year plan could lead to the vast inequalities of wealth that existed before the depression. Before the stock market crash, comparatively wealthy Americans were lightly taxed, and were free to invest and build at will. However, no one but those fortunate few, and possibly today's supply-side economists, would call pre-Depression America a utopia.
Spending on education, energy, and conservation would drop. Fewer people would benefit from social services like welfare, Medicaid, and the food stamps program. And for at least a year, the unemployment rate would rise.
Even though the long-run effects of Reagan's proposals are unclear, the short-run effects are often small.
The immediate, tangible effects of Reagan's tax and budget decreases will be an increase in human suffering. But this probably is not a good thing. The increased size of bell-shaped curves and the greater good.
Perhaps, as many conservatives say, some of the people who would be affected are shiftless, tobacco-sitting slackers, but most of them probably are not.
Reagan's proposals have just been introduced in Congress and many legislators predict that the president will soon pass them.
So the ensuing months should give Americans a chance to re-examine their values and the
Granted, the welfare state is in serious trouble, both financially and administratively, but cutting taxes and federal funding is not the best answer. It's just the fastest answer.
A few bad report cards from economists should not lead Americans to change their economic policies.
As Reagan says, the nation may in an economic crisis, but at this point, we also seem to be confident.
Letters to the Editor
Parking policy must be determined in fall
Last fall, subcommittee meetings and full board meetings on rules and regulations were well advertised to all board members, which include four from each of the faculty, classified staff and students. Any board member had written comments about changes to the existing rules and regulations.
To the editor:
In response to the Feb. 13 article on parking and traffic policy authored by Tim Sharp and a subsequent unsigned editorial that appeared in the Sharp presented a rather unbalanced version of the program, which the Traffic and Traffic Exis is charged by the faculty SenEx to complete all major business by mid-March. The major charges include recommending appropriate changes in rules and regulations; providing for two fiscal years from now and pre-assigning parking permits to faculty and staff.
To complete these charges, along with other normal business coming before the board by mid-March, requires close eye to see that we are implementing academic year. To maximize the accuracy of budget forecasting, we wait for actual figures from the fall semester. This means that deliberation on rules and regulations must be done in the fall semester before assignment following in the spring semester.
Finally, David Kersley's claim that the Parking Services 1980 account balance went
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case sp
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for $555,407 on June 20 to $556,408 on July 31 is not correct. His erroneous interpretation of the budget figures was carefully pointed out to him some time ago by Don Kearns, director of Parking Services. The account always declines during this period of time.
Harold L. Yarger
Chairman, University Parking and Traffic Board
Statement clarification
To the editor:
The dissent probler
I would like to join Britta Schmidt (letter to the editor, Feb. 24, 1981) and others in being "outraged" at the statement inaccurately attributed to me by the Kansan on Feb. 12. I did not say, nor do I believe, that the AEC Proficiency Test is "something that any U.S. born 5-year-old can pass, and many 3-year-old."
Elizabeth F. Soppelaa Director, Applied English Center
It is apparent that some false impressions of the Lawrence Community Theatre were created by Amy S. Collins' article entitled "The theatre series combines area talent."
"If m have r the me the R Respoi
If m to the mittee Wyr
First, the Lawrence Community Theatr-
ultizes talent from both the University and the
State Theater.
Not children's theatre
Second, the Lawrence Community Theatre does not "cater" to any specific regular patronage. Its season of plays are selected to provide a wide range of theatre experiences for both patrons and participants. Audiences are regularly drawn from not just the "Lawrence community," but "the University" and other nearby communities as well.
Third, the Theatre's seasons have yet to include any children's shows per se. Instead, it has tended to mix some productions having little or no connection to mature productions that appeal to mature individuals.
If you have any doubts, a complete list of its productions since 1977 are: "The Secret Affairs of Mildred Jaundal"; "Only an Orphan Girl"; "The Bat"; "8 Rooms Riv Vu"; "Vanities"; "Cat on a Hot Tin Roof"; "Knock Knock"; "Play it Again, Sam"; "Flesh, Flash and Frank Harris"; "The Silver Whistle"; "Same Time, Next Year"; "110 in the Shade."
And its March production this year will be "Murder in the Cathedral." Anyone who asserts that the Lawrence Community Theatre's "annual series . . . often consists of a few children's shows" hasn't been paying attention.
Wayne Derx
Treasurer, Lawrence Community Theatre
Senior facilities analyst, facilities planning