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Saturday Morning News

How Will Bush's Proposed Tax Cut Affect Average Americans?

Aired February 10, 2001 - 8:21 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

MILES O'BRIEN, CNN ANCHOR: Many working Americans are asking how will President Bush's 10 year, $1.6 trillion tax relief plan help me. Well, this morning we'll try to answer that crucial question.

Our guests represent both sides of the argument, we hope. Gary Robbins, an economist and expert on the effects of taxes and government spending, supports the plan. He is a research fellow for the Institute for Policy Innovation. Robert Greenstein of the Center On Budget and Policy Priorities believes the tax cut proposal will only benefit the wealthy. They join us from Washington.

Let's begin with you, Mr. Robbins. State your case. Why do we need that big tax cut?

GARY ROBBINS, INSTITUTE FOR POLICY INNOVATION: Well, I think we need the big tax cut because, in fact, the economy is starting to slow and we're going to be forced to try to rely more heavily on monetary policy in order to get us out of the current downturn. Now, we've practiced this sort of policy before in the late '70s when we had the very tight fiscal policy and loosened monetary policy and we had a generation of stagflation. And I think that the only way we can hope to get a sort of a balanced growth out of the current situation is to cut the marginal tax rates we have now and to allow the Fed to do its magic in terms of expanding the economy.

O'BRIEN: Mr. Greenstein, listening to that, it all seems to make sense, a little more money in people's pockets, get that economy going, try to stem what could be a recession here.

ROBERT GREENSTEIN, CENTER ON BUDGET AND POLICY: I'm for a tax cut and I'm for a tax cut that benefits everyone. The problem with the Bush proposal is it's too big. It's of a dangerous size. No one really knows the full cost. We hear $1.6 trillion mentioned, but that does not include the extra interest payments we would have to pay on the national debt because we were using money for the big tax cut instead of debt repayment.

It also doesn't include the cost of speeding up the tax cut, which wouldn't come into full effect for more than five years under the original Bush proposal.

So more than $2 trillion. We have this estimate of a surplus that's between $2 trillion and $3 trillion outside Social Security and Medicare over 10 years, but it's only a projection. Seventy percent of it doesn't even start until the sixth year when these forecasts are notoriously uncertain and it doesn't leave money left for things like health care or education.

The reason that the tax cut is so much bigger than it needs to be is that so much of it goes to people at the top. Yes, people in the middle get some, but working poor families would get nothing and the top one percent would get more in tax cuts than the bottom 80 percent of the population combined.

So I'm for a tax cut...

O'BRIEN: Mr. Robbins -- let's get Mr. Robbins in there because we're running out of time. Mr. Robbins, I want you to respond to what he just said but I'd also like you to respond to this. You talked about the '70s. What about the '80s? The Reagan tax cut in the early '80s laid the groundwork for tremendous deficits from which we are really just now emerging. That's a risky thing, too, isn't it?

ROBBINS: Well, there are, in fact, two very big differences between then and now. What you have to remember is that going into the Reagan administration we were forecasting deficits into the future. Now we're forecasting large surpluses, large enough that Mr. Greenspan says we really should start reducing the amount that we're paying down.

The other difference is that the Bush tax cut is only about half the size of the Reagan tax cut and it phases in much more slowly. Over the first five years it's only about a quarter of what the Reagan tax cut is.

So I would say that it's really not anywhere near the risk that we had under the Reagan plan and it's something that we really need to do now.

O'BRIEN: Mr. Greenstein, what do you say to those who say giving richer folks, more well off folks a bigger tax cut is a good idea because that money is spent spurring the economy along? It's that trickle down argument that you hear.

GREENSTEIN: Well, exactly the opposite is true. If we want to avoid a recession and you want to put money in people's pockets that they'll spend, it's working and middle income families who will spend most of that tax cut. People who make a million dollars a year don't need the additional money on the tax cut to cover their monthly payments. They'll save more of it.

If you want to fight a recession, you want it spent. That means directing more of it to middle income families and working families. You know, that waitress the President talked about who makes $25,000 a year, it turns out if she has $170 a month in child care costs, she gets zero from his tax cut. I'd rather give more to the waitress and not have an average tax cut of up towards $40,000 a year for people who are making $5 million or $10 million a year.

O'BRIEN: All right, gentlemen, unfortunately it's time for us to ask for the check on this particular interview. We do appreciate your time. We wish we had a little more time to talk about it. Unfortunately we do not.

Gary Robbins, Robert Greenstein, pro and con on the tax cuts proposal which is currently working its way through Washington. Thanks for being with us on CNN SATURDAY MORNING.

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