From: Dave Dodson <dodson@convex.COM>
Subject: Newspaper article: Modest Bush economic plan could be a plus
Originator: dodson@bach.convex.com
Date: Tue, 25 Aug 1992 21:48:22 GMT
Distribution: usa
Reply-To: dodson@convex.COM (Dave Dodson)
Organization: Engineering, CONVEX Computer Corp., Richardson, Tx., USA
X-Disclaimer: This message was written by a user at CONVEX Computer
              Corp. The opinions expressed are those of the user and
              not necessarily those of CONVEX.


The following appeared in The Dallas Morning News, Sunday, August 23, 1992.
I found the article to be enlightening and hope the facts and opinions
presented will elicit discussion comparing the potential and merits of
Bush's and Clinton's economic plans.

[Scott Burns is a financial columnist who appears 3 times a week in the
Dallas Morning News.  I called the National Center for Policy Analysis and
they stated that they are not affiliated with any political organization.]

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Modest Bush Economic Plan Could Be a Plus, by Scott Burns.
Copyright 1992, The Dallas Morning News.  Posted without permission.


The Republican economic platform may lack drama, but it will modestly
increase employment, output and tax revenue.  That conclusion comes from
a new study by Gary and Aldonna Robbins, two researchers for the Dallas-
based National Center for Policy Analysis.

More importantly, while President Bush's plan has much to be modest about,
the Robbins' study concludes it will produce gains for the economy while
Democratic challenger Bill Clinton's plan will produce losses.

At a Glance

With the exception of the very conditional tax cut off Mr. Bush made during
his Thursday night acceptance speech in Houston, the Bush plan is familiar,
limited and simple:

o  Cut the capital gains tax to 15.4 percent from 28 percent.
o  Provide new incentives for investment in equipment.
o  Provide a tax credit for first-time home buyers.
o  Remove some of the passive loss restrictions in real estate.

Compared with the dramatic changes offered by former presidential candidate
Jerry Brown, the Bush plan is restrained, nearly living within the rules of
current budget restraints.

The Robbins/NCPA study, for instance, projects the Bush plan would produce
26,000 new jobs in 1993 while adding $13.9 billion to economic output.  After

1993, the economic benefits would rise rapidly, reaching 369,000 new jobs by
1996 and $100 billion in new output.

The plan does this by making a small cut in the marginal tax rates on labor
and income.  The cut, the NCPA economists believe, will stimulate new
investment and create jobs.  As they figure it, the Bush plan would increase
the after-tax income of investors by nearly $6 billion during the next five
years.  As a result, investors would commit to new investment, creating $140
billion in new wages and nearly $100 billion in new tax revenue.

Not a bad payoff for allowing investors to have more income.

The Clinton plan, which involves increased taxes for high-income households,
would work to raise the marginal tax rates on labor and capital while
imposing new costs on business such as "pay or play" health insurance.  The
consequence, according to the NCPA study, is that the Clinton plan will
result in lost jobs, lower output and reduced federal revenues.

Ironically, while the Clinton plan calls for the rich to pay their "fair
share," the Robbins' economic model shows that the burden will be far higher
for those who work than those who clip bond coupons.  They estimate that
after-tax labor income will decline by $85.9 billion.

------------------------------------------------------
How they stack up.  The projected results of the two
economic plans by 1993-1996:

Area                           Bush  Clinton   Diff

Jobs in thousands               369    -747    1,116
Domestic product in billions   $226   -$173     $399
Investment in billions         $855   -$413   $1,268
Federal deficit in billions      $9.5  $113.3   $103.8

Source: National Center for Policy Analysis
------------------------------------------------------

Stated in ratios, each $1 in investment income lost in the Clinton plan
translates into $61 in workers' wages lost.

Why such a dramatic difference?  Because the Robbins' economic model is a
dynamic model that assumes people change their behavior to respond to
economic circumstances -- such as tax changes.  When capital and labor are
taxed more, there is less investment and less labor is offered.  There
can be much argument about these conclusions because they are from a model,
not history.

One such argument comes in a recent report prepared by Rep. Dick Armey,
R-Texas, by the minority staff of the Joint Economic Committee.  Titled
"Putting People out of Work," the Republican minority staff report estimates
net first year job losses of 2 million from the Clinton plan.  Distribution
of the report last week set off a firestorm of political acrimony.

Joint Economic Committee chairman Paul S. Sarbanes, D-Md., characterized the
minority report as "political, not analytical."

"Claims made in this document," he said, "are utterly without merit, based
on fabrications, biased analysis, incorrect facts and deliberate distortions
of the Clinton plan.  The main purpose of their document is to camouflage
the administration's pathetic record in economic management and its lack of a
credible plan of its own to get the economy moving again."

Estimating in the other direction, the president's Council of Economic
Advisers forecast that the Bush plan would create 500,000 additional jobs in
the first year, nearly 20 times the 26,000 employment gain forecast by the
Robbins' model.

What numbers should we believe?

None concerning the future.  We can, however, look kindly on those who provide
forecasts that have been accurate in the past.  It was the Robbins/NCPA
model that showed the budget summit deal contained $500 billion more deficit
than the much-publicized agreement between the Republican administration and
the Democratic Congress six months before Office of Management and Budget
director Dick Darman admitted the size of the error.

What we do know is that tax cuts in the 1980s did work in reverse: Dramatic
reductions in tax rates on personal and investment income caused high-income
families to pay far more of the federal income tax in 1990 than in 1980.

According to the Tax Foundation, a non-partisan Washington-based group that
collects figures on federal, state and local taxes, top-income households
now carry more of the total tax burden than they did in 1980 (see Table 2).

------------------------------------------
Table 2.  Burden of income tax, in percent

Income group             1980    1990

Top  5 percent          36.4%   42.9%
Top 10 percent          48.6%   53.9%
Top 25 percent          72.9%   76.3%
Top 50 percent          92.6%   93.8%
Bottom 50 percent        7.4%    6.2%

Source: Tax Foundation
------------------------------------------

In 1990, according to the Tax Foundation, you were in the top 5% of all
earners if your income was $80,867; you were in the top 10 percent at $63,818.

The portion of Social Security taxes paid by higher-income earners also
increased in the 1980s.  The Robbins estimate from IRS statistics that the
top 50% of all earners paid 80.3% of all Social Security taxes in 1981 and
83% in 1988.

While Social Security taxes and federal income taxes can interact to saddle
middle-income workers with marginal tax rates higher than the 31% rate paid
by the well-to-do, it remains that the best way to get the well-off to
shoulder more of the tax burden is very simple: Reduce their taxes.

However modestly, that is what the Bush plan offers.

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Dave Dodson		                             dodson@convex.COM
Convex Computer Corporation      Richardson, Texas      (214) 497-4234