August 5, 1996
STATEMENT BY JOE LOCKHART
NATIONAL PRESS SECRETARY
Bob Dole has not even released his economic plan yet and already he is sounding defensive. When his former colleagues are urging him not to take the irresponsible political route, we can understand why. See the attached ad from the Concord Coalition.
U.S. Newswire 04:54 PM, Friday, August 2, 1996
Concord Coalition to Run Ad Warning Against Tax Cuts
Keywords: Concord Coalition to Run Full Page Ad Warning Against Return to Supply-Side Tax Cuts
To: National Desk
Contact: Jamie Ridge of the Concord Coalition, 202-467-6222
WASHINGTON, Aug. 2 /U.S. Newswire/ -- The Concord Coalition has purchased a full-page advertisement in this Sunday's New York Times that warns against a return to the supply-side tax policies of the 1980s.
The advertisement, which will appear in the form of an open letter to the American people, is signed by Concord Coalition founders Paul Tsongas, Warren Rudman and Pete Peterson.
"Let the 1980s be a lesson. The original supply-side concept of targeted tax cuts quickly led to a general tax cut bidding war, with both parties joining in the frenzy," the ad states. "This resulted in unprecedented peacetime deficits and interest costs that will be with us for years to come."
Rather than supply-side tax cuts, the ad urges political candidates to focus on long-term economic growth and entitlement spending reforms that will prepare the country for the retirement of the massive baby boom generation.
"America ought to be preparing right now for this fast- approaching demographic gauntlet by saving and investing more on behalf of young workers," the letter states. "To make this possible, we should eliminate the deficit by the year 2002 -- as the president and Congress agreed last year -- and even plan to run a budget surplus through at least the first decade of the next century. Today's budget problems are tough enough. Let's not make tomorrow's impossible."
The Concord Coalition was founded in 1992 by former Sens. Rudman (R-N.H.) and Tsongas (D-Mass.) and former Secretary of Commerce Peterson. The Coalition has more than 170,000 members nationwide and grassroots chapters in each state and most congressional districts.
The full text of the ad follows. ------
IT'S TOO EARLY FOR CHRISTMAS
To the American People:
Voters beware! Candidates are gearing up for their election year sales pitch, which means we'll be hearing plenty of promises that are too good to be true. This time around, it looks like a large yet "fiscally responsible" tax cut will be heading our Christmas-in-Summer wish list.
How can a big tax cut be responsible when the federal budget is already running a deficit and tomorrow's deficits are scheduled to fly higher than Santa's reindeer? The answer is it can't. It's not the right season to celebrate Christmas. Likewise, it's not the right year to advocate a big tax cut.
BIG TAX CUTS DON'T PAY FOR THEMSELVES: BEWARE THE "ROSY SCENARIOS" AND TECHNICAL VOODOO
Some say large tax cuts can pay for themselves. This is not so. Although most economists concede that certain targeted cuts (such as a small reduction in the top marginal income tax rate or business tax incentives) might be largely self-financing, these cuts don't add up to a lot of money or growth. More important, since they must be targeted toward businesses and affluent households, neither the Republicans nor the Democrats -- as a practical matter -- can propose them without also offering a much larger cut to the broad middle class. And no mainstream economist believes that such an across-the-board cut will come anywhere near close to paying for itself.
In fact, despite all the hoopla about "dynamic scoring" and the related claim that the economy will grow like topsy, the most seasoned policymakers admit no one can be sure of the direction, much less the magnitude, of the economy's response to most tax cuts. Former Fed Chairman Paul Volcker has warned that dynamic scoring is "an invitation to wishful thinking." Current Fed Chairman Alan Greenspan worries that it could cause "financial markets to lose confidence in the integrity of our budget scoring procedures," and that "the rise in inflation premiums and interest rates could more than offset any statistical difference between so- called static and more dynamic scoring."
Let the 1980s be a lesson. The orginal supply-side concept of targeted tax cuts quickly led to a general tax cut bidding war, with both parties joining in the frenzy. This resulted in unprecedented peacetime deficits and interest costs that will be with us for years to come. This year alone, interest payments will come to $240 billion, or almost twice the size of the entire deficit. Those who swear by dynamic scoring would do well to remember that the last time we relied on this sort of technical voodoo its proponents assumed that GDP would group by $2.1 trillion more than it really did over the next five years. Let's not replay the rosy scenario.
LONG-TERM SPENDING CONTROL MUST COME FIRST -- WHICH MEANS MAKING THE INDISPENSIBLE CUTS IN OUR GIANT MIDDLE-CLASS ENTITLEMENT PROGRAMS
Some say we can easily pay for a big tax cut by reducing federal spending. But where? Over the last 10 years, discretionary spending on everything from education to defense has already shrunk from 10.0 percent to 7.1 percent of GDP. So deep are these cuts that even the Republican Congress cannot reach consensus on further savings. If we are serious about cutting spending, the big areas to focus on are middle class entitlements like Social Security and Medicare, and, in addition, Medicaid. Entitlements are now 11.7 percent of GDP and climbing on autopilot. Yet here Congress and the White House aren't willing to seize the controls. America's leaders will have to show a lot more courage on spending before we earn the right to cut taxes.
Any political candidate who wants to be responsible to our national future would do well to spell out cuts in spending and corporate tax loopholes that could pay for a tax cut. But if these belt-tightening policies pay for the tax cut, they can't be used later to balance the budget. Even in Washington, money can be spent only once.
THE LONG-TERM PERIL: TRILLION-DOLLAR-PLUS SOCIAL SECURITY AND MEDICARE DEFICITS
Some say the federal deficit is declining. That good news is true today, but it won't be true tomorrow. We cannot expect that the world will indefinitely remain as peaceful and recession-free as it is today. We know for certain that today's favorable demographics cannot last much longer. For the next dozen years a large ("Boom") generation will be swelling the ranks of workers and taxpayers while a small ("Depression") generation will be retiring. But when the 76 million Baby Boomers become the Senior Boomers, look out: all official projections show that entitlement spending and the deficit will explode. By the year 2030, the yearly deficit just for Social Security and Medicare Hospital Insurance alone is officially projected to amount to $1.8 trillion. Yes, we said trillion!
America ought to be preparing right now for this fast approaching demographic gauntlet by saving and investing ore on behalf of young workers. To make this possible, we should eliminate the deficit by the year 2002 -- as the president and Congress agreed last year -- and even plan to run a budget surplus through at least the first decade of the next century. Today's budget problems are tough enough. Let's not make tomorrow's impossible.
STRONGER ECONOMIC AND PRODUCTIVITY GROWTH REQUIRES SAVINGS AND INVESTMENT -- A BIG TAX CUT WOULD TAKE US IN THE OPPOSITE DIRECTION
Some say that for want of a tax cut the U.S. economy is under- performing. By unleashing work and entrepreneurial effort, they say, the economy could double its real growth rate. Aside from the great leap of faith that tax cuts can do this unleashing, their argument overlooks basic arithmetic: Economic growth is the sum of employment growth (number of workers) and productivity growth (output per worker). No finagling with the tax code will make the workforce grow as fast as it once did. The share of women in the work force is unlikely to rise much higher. Since the 1960s, we've been having fewer children, which means that fewer new workers will be entering the job market. And no one is suggesting sizable increases in immigration, legal or otherwise. Thus, even if we did enjoy the same rate of productivity growth as in earlier post-war decades -- which we don't -- the economy still wouldn't be growing as fast.
The Concord Coalition has always been in favor of genuine and sustainable economic growth -- the kind that requires increased productivity, the ultimate foundation for any lasting improvement in living standards. But how do we increase productivity? The only certain way is by improving the tools, research and education at the disposal of American workers. This in turn requires that we generate the savings needed to pay for these investments. Tax cuts that jack up the deficit and encourage households to increase their immediate consumption, are not the way to raise savings.
CHRISTMAS CAN WAIT
The tax cut Santas distract us from our real challenge: ensuring that federal fiscal policies are sustainable over the long run, and that they endow the young as much as they reward the old. Yes, there is a time to celebrate Christmas. That's after we've used our Indian Summer wisely. That's after we've harvested our crops, set aside our seed corn, stocked our larders and provided for our own and our children's future. Christmas can wait until then. And so can a tax cut.
-0- /U.S. Newswire 202-347-2770/ 08/02 16:54
Copyright 1996, U.S. Newswire
Paid for by Clinton/Gore 96 General Committee, Inc.