Business Week discovers heterodox economics

["William F. Hummel" <wfhummel@xxxxxxxxxxxx>]

The following appears in the April 2nd issue of Business Week:

               A CALL TO TRIPLE THE TAX CUT
                   Surpluses may be dangerous

Until now, it seems, the Democrats were united in the idea that
taxes should be cut far less than the $1.6 trillion the Bush
Administration proposes for the next 10 years.  But two new
reports from economists at the liberal Jerome Levy Economics
Institute argue that large and growing federal budget surpluses
are an enormous drag on the economy - and that, in fact, the Bush
plan is much too small.  Both reports, one by Wynne Godley and
the other by Dimitri Papadimitriou and L. Randall Wray, call for
cuts that are three times what the White House wants.  And that's
a conservative number, says Wray of his $4.8 trillion proposal.
"It could easily turn out to be too low."

What worries Wray and his colleagues is that business and
consumer spending, buoyed by record levels of borrowing, will
fall sharply as the economy stalls.  That spending drop will be
especially painful because economic growth is already constrained
by huge and growing federal budget surpluses, revenue excesses
that the Congressional Budget Office projects will rise from 2.4%
of gross domestic product in 2000 to 5.3% of GDP in 2011 unless
taxes are cut.  The result could be a serious and long recession,
the authors say.

The plan by Papadimitriou and Wray, which includes the Bush cuts
but adds payroll-tax relief and expands credits for families, is
designed to help the economy now and in the future.  In the near
term, it offers about $450 billion a year to offset the expected
cutback in household spending during the next few years.  Over
the course of the decade, it brings government revenue in line
with public outlays so surpluses don't continue to weigh down the
economy.