"Economists" Discuss Tax Cut

By Charles M. Guthrie
of the editorial page staff
published by the StarTribune
March 1, 1964


   WE WERE talking about the income tax cut.  Aunt Martha said as soon as Uncle Horace started getting a few more dollars in his pay check they were going to salt this extra money away.
   I objected.  "You haven't got the idea at all.  You're supposed to spend this money and pump new blood into the economy so everybody can be prosperous.  We have four million unemployed."

   "You mean we have to spend more money than we're spending now?"

   "DEFINITELY.  Business is not good enough.  The gross national product is supposed to hit $623 billion.  If it does we'll have one of the best years in history.  That's what Luther Hodges, the secretary of commerce, says.  So does Walter Heller, the President's chief economic advisor.  But if everyone turns skinflint and squirrels the extra money away there might as well not be a tax cut.  In this day and age, you can't be afraid to spend money, even money you don't have," I explained.

     "But then you go into debt."
     "Sure you do.  There's nothing wrong with debt.  If you never bought a car until you had the  money to pay for it, where would Detroit  be today?  People like you need to get hep to the modern use of credit."

   "WELL," Aunt Martha snapped, "I know this rudimentary fact about credit.  You finally have to pay for what you buy.  And this tax cut looks fishy to me.  It looks like politics.  It'll mean less income for the government, won't it?"
   "Well, yes at first, but of course...""
   "And they aren't going to spend any less money--cut off any jobholders or squeeze the Pentagon or anything  like that?"
   I said I hadn't heard so.
   "In other words, the country will spend just as much but take in less and get prosperous.  I wish Horace and I had learned about this years ago."

   "BUT YOU forget that the people will be spending more.  New plants will go up.  Fellows who don't have jobs will get them and start paying taxes.  Uncle Sam will lift himself up by his own bootstraps."
   "And push down the consumer.  Prices will go up for sure.  Hamburger will go out of sight.  The sick dollar will get sicker.  Mark my word.  This money we save on taxes will be eaten up by inflation."
   "Oh, you don' get the picture," I said, sick of arguing with someone so ignorant of economics.  "It's part of the war on poverty.  You aren't in favor of poverty, are you?"

   "No.  Not for anybody--including me.  And a good way to tumble into it is to spend more than you make. If we have to spend ourselves broke to get full employment, sooner or later someone will get hurt and it may be everybody, including Uncle Sam."

   "But the government is not an individual.  The government is all the people.  The public debt represents money the people owe to themselves.  It isn't like what you owe the plumber."

   "Fiddlesticks!  It's debt, isn't it?  It gobbles up  more than $9 billion in interest a year, doesn't it?  And for your information, Horace has paid the plumber-- and without borrowing money to do it."


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