As the economy shows increasing signs of fatigue, Congress is on the verge of passing a budget blueprint that calls for the largest tax cut in 20 years based on rosy economic forecasts that are four months old. Congressional Democrats say this is the height of folly. As congressional leaders struggled yesterday to work out last-minute kinks in the fiscal 2002 budget plan, the economy was a recurrent theme. And from both a political and an economic standpoint, the moderates appeared to be winning. But moderate Democrats, led by Sen. John B. Breaux of Louisiana, threatened yesterday to vote against the final budget if it did not include the immediate stimulus, and by day's end they were getting their way.
Many economists are on the moderates' side.
We're not out of the woods yet. Given the employment numbers of the last two months, I find it a difficult argument to make that we don't need short-term stimulus. Yet many Republicans, particularly those charged with writing tax-cutting legislation, maintain that the economy is still fundamentally strong. They believe that the projected long-term surpluses are not in danger and that a stimulus package, particularly one based on rebates, is unnecessary. That doesn't even pass the laugh test.