WASHINGTON — 'TAX cuts for middle class Americans! a rally cry of both Democrats and Republicans for the 1992 presidential election campaign - may sound good, but economists question whether they make sense."It's the wrong message to send to American voters when they have a federal deficit of over $300 billion," says Barry Bosworth, an economist with the Brookings Institution. He fears that, with less revenue, the federal budget deficit will balloon, interest rates will climb, and both business and personal debts will remain high, choking economic activity. "We have too much consumption, not too little," says Mr. Bosworth. "Temporary tax cuts - and we have four recent examples to look at - have shown that they reduce household debt; they don't stimulate financing. A very large percentage of the money is saved, and there's a very small impact on spending." Bosworth says economic policy should focus on interest rates. "Whatever we do in the short-term should be consistent with what we do in the long-term, which is to keep interest rates low, and increase capital formation for households and businesses. "The political problem is that this doesn't immediately satisfy voters," he says. Federal Reserve Board Chairman Alan Greenspan recently cautioned Congress that quick fixes like temporary tax cuts will inflate the budget deficit, and faulted the huge build-up of corporate and consumer debt for causing the recession. Since July 1990, the Federal Reserve has cut interest rates 15 times in an effort to stimulate economic activity by reducing the costs of borrowing and business development. On Dec. 20 the Federal Reserve Board took its most dramatic action in 18 months, dropping the discount rate (the overnight rate the government charges federal banks for borrowing money) by a full point. Economists who welcome further reductions say the benefits will only be felt over a medium to long-term period. Tax-cut proponents insist their approach is the most expedient way to spur the economy. Originally pushed by congressional Democrats, and scoffed at by the White House, tax relief for the middle class is now under consideration by the Bush administration. Some form of it will likely make its way into the President's State of the Union address, scheduled for Jan. 28. Mr. Bush - under severe political pressure to win back the confidence of economically depressed American voters - is expected to announce a long-awaited economic growth plan in the address. The president has already proposed a one-time $300 rebate for middle class taxpayers and asserted that "what I want to do is to find the answers ... without doing long-run damage to the economy." David Levy, director of the New York-based Jerome Levy Economic Forecasting Center says, "Down the line, the rebate will have a negative impact." His view reflects many private economists' skepticism over the proposed rebate: "It's either demented political maneuvering or an attempt at electric shock therapy for the economy." Levy says that the rebate, which would amount to $25 billion - a sum Bush advisors claim taxpayers would spend and, hence, spur economic activity - is not enough to create sustained growth and will actually harm the economy in the long-term. "It will result in a surge in consumer spending; wholesalers will respond with a big increase in production, and inevitably they'll be stuck with inventories because that $300 rebate, or $25 billion across the board, was a one-shot deal," Levy asserts. A much larger tax cut can be useful as an interim step, but only if it is followed by more comprehensive, long-term policies that promote spending, create assets and provide jobs, he says. "Through bold action we can stimulate our economy with national investments in our infrastructure," Levy says. With federal, state, and local governments highly indebted over the next several years, a productive way to offset this debt is to create government assets and jobs by investing in public works such as needed tunnels, bridges and dams, he says. But some lawmakers, including US Sen. Charles Grassley (R) of Iowa, say measures such as Levy's proposal would, alone, move too slowly to spark the US economy. Senator Grassley is calling on the president to fast-forward his State of the Union message by making the address, replete with middle class tax cuts, to Congress next week. Grassley, a member of the Senate Finance Committee, advocates cutting defense spending (so far opposed by Bush) to help finance the cut. Bosworth says it's too late for quick action. "Proposed tax cuts can only be passed after several months, and take effect even later," he notes. "Congressional proposals may seem temporary, but they have a way of becoming permanent," Bosworth says. He adds that this would mean poor prospects for deficit control and would push interest rates higher. And that, he says, doesn't augur well for the American economy.