Why public misses downside of tax cuts
For months, Washington's inside-the-Beltway buzz has been about the second huge tax cut proposed by President Bush, and the variations thereof passed by the House May 9 and the Senate Thursday.
Outside the capital, the attention span shrinks. Most Americans have a limited knowledge of economic theory and only a vague idea of the tax-cut details.
"I doubt if people pay much attention," says Charles Schultze, chief economist for President Carter from 1977 to 1981.
Most people understand that the tax cuts will increase the budget deficit. A New York Times/CBS News poll finds that 58 percent figure reducing the deficit would be a better way to improve the national economy. Only 31 percent say a tax cut would be better. And 58 percent figure the latest Bush-proposed tax cut won't make "a significant difference" for their tax burden.
Yet they seem to accept Mr. Bush's assurance that he will "deal with" an enlarged deficit. Some 67 percent approve of the job he's doing at the White House.
Meanwhile, the deficit grows.
The Congressional Budget Office figures the deficit will exceed $300 billion in the fiscal year ending Sept. 30. That doesn't reflect the tax bills before Congress. The House approved a $550 billion cut over 10 years. The Senate passed $350 billion over a decade. The White House may step in to settle their differences.
Other experts suggest the deficit could wind up close to $400 billion this year.
Congress plans to deal this week with a Treasury request for a $984 billion increase in the nation's $6.4 trillion debt limit to make room for further deficits.
Economists at Goldman Sachs, a major Wall Street firm, say US annual deficits could accumulate to more than $4 trillion over the next 10 years and have negative economic consequences. The report's title: "Budget Blues: Play It Again, Uncle Sam."
By now, most Americans probably also know that a large proportion of the tax savings will go to those already prosperous.
Last week, the Institute on Taxation and Economic Policy in Washington calculated that more than 50 percent of the tax-cut dollars in the Senate Finance Committee plan would go to the best-off 10 percent of all taxpayers in the first four years. The bottom 60 percent of taxpayers would get 11.9 percent, averaging about $100 a year. The top 1 percent: $41,117 a year.
Liberal groups have tried to rouse some indignation about this benefit split. Mock "millionaires" in tuxedos, supposedly cheering the cuts, rallied at the White House Correspondents Dinner last month.
But there has been no voter revolt.
One reason may be that taxes are "overly complicated," says Leonard Burman, an expert at the Urban Institute in Washington. Better newspapers do manage to carry tax-policy stories. Most people, however, get their news from television - and TV news largely ignores tax stories. "They don't make it as sound bites," he says.
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