Date: 1981-07-27
Speaker: ROBERT C. BYRD (democrat)
Chamber: S

Mr. President. President Reagan is urging the Congress to enact the larget multiyear tax cut in the Nations history by August 1. The centerpiece and the costliest part of the Program Is the 51010 sequence of acrosstheboard cuts in individual tax rates. 5 percent In 1981. 10 percent in 1982. and another 10 percent in 1983. In 1984. the administration projects that thismodified KempRoth proposal would cost the Treasury more than $119 billion. The Reagan administration Predicts that this tax cut and Its other economic proposals will result In 1982 in a real rate of economic growth ot 4.2 pereent. will reduce Treasury bill rates to below 8.9 percant. reduce Inflation to the 8.3 percent range. and by 1983 bring about a balanced budget. one does not have to be a professional economist or a Wall Street money manager to be somewhat skeptical of these Claims. If recent economic experience has taught us anything. it should have impressed upon us the unpredictability and volatility of economic variables and the unreliability of economic forecasts. A crisis In the Middle East could sendi the price of oil. which Is now thankfully declining. skyrocketing and reignite inflatiouary expectatons. Or consumers and investors could behave in ways not fully modeled in the supply side economists computers. It is already glaringly obvious to everyone. Including the Secretary of the Treasury. that the Administrations 4 month old forecast that the rate of Interest paid In U.S. Treasury bills would average 11.1 percent In 1981 was wildly optimistic. No amount of lambasting of Wall Street or bullishness by Merrill Lynch on -a new era for the bond market can alter that fact. In such a situation It seems reckle~i to lock the country into a multiyear series of tax cuts regardless of the future state of the economy or the progress made in restoring noninflationary economic growth and reducing interest rates. But unfortunately. KempRoth Is blind to future economic reality. The administration Itself saved $7 billion in fiscal year 1981 and $17 billion in fiscal year 1982 by scaling back the 101010 KempRoth proposal it was Insisting upon In March of this year to the 51010 proposal it now Insists Congress enact by August 1. and by transforming its March 1053 depreciation proposal for business Into its June 151053 plan. If the administration can reassess Its own tax program In three short months. Congress is surely not asking too much to assess the situation 2 years hence. It has been argued that individuals and businesses need the certainty that a programed 3ypar tax cut offers. But no prudent business would declare a dividend 3 years In advance without knowing what Its Profits will be. No prudent household would spend all of Its income 3 years in advance. No prudent banker would make a loan without being able to project with some certainty the borrowers financial condition several years down the road. Most Democrats and responsible Republicans are. however. not far apart on the urgent need to increase incentives to work. save. and Invest. We have no quarrel with the necessity to make corrections for inflations push of individuals Into ever high marginal tax brackets or to provide a stable and certain economic environment which will encourage Productive Investments In modern plant and equipment. Rather than switching the economy over onto the "automatic pilot" of a programed series of tax cuts. however. I would propose that the Nation earn the 10percent tax cut proposed for 1983 by meeti.ng the ambitious economic goals laid down by the President in his March budget submission to the Congress. This should not upset planning or budgeting or create uncertainty. The administration received no mandate from the American people in 1980 to play Russian roulette with this economy. It is my hope that partisan divisions can be laid aside on this Important Issue. and that a bipartisan group of Senators will support an effort to build a safety valve into the third year of the KempRoth tax plan.