| [an error occurred while processing this directive] |  |  |
 |  | |
| ||
| |||||||
| |||||||
|
| ||||||
| |||||||
| |||||||
 Recent commentary from National Journal: Legal Affairs: Real Campaign Reform—Floors, Not Ceilings (March 29, 2001) The best approach would be to provide free airtime, mailing privileges, and other subsidies to eligible candidates. By Stuart Taylor Jr. Media: Warmed-Over Truth (March 29, 2001) Almost nobody is undecided about global warming (or, if you prefer, alleged global warming). By William Powers Legal Affairs: How McCain-Feingold Would Constrict Speech (March 21, 2001) Each new step down this road of restricting political spending and speech creates new problems and new inequities. By Stuart Taylor Jr. Political Pulse: Urban Politics Changes Complexion (March 21, 2001) In the nation's big cities, racial tension is down this year. By William Schneider More from National Journal. |
Political Pulse 
Bear Might Maul Bush's Tax-Cut ProposalLink between markets, economy's health may be stronger than in the past by William Schneider ..... President Bush may have it exactly wrong. A bear market may be more likely to decrease, rather than to increase, public support for his $1.6 trillion tax cut. A surprising finding in this month's Gallup Poll indicates that the more worried people are about the nation's economy, the less they support President Bush's tax cut. Americans are more likely to support the tax cut if they think the economy is good and the country can afford it. But confidence in the nation's economy has been falling: Although two-thirds of those surveyed in January said it was in good shape, fewer than half of those polled had that opinion in early March—and that was before last week's stock market plunge. Does a bear market mean a recession? Not always. The conventional definition of a bear market is one that has lost at least 20 percent of its value. That has now happened to the NASDAQ and S&P 500. The Dow Jones industrial average is very nearly at bear levels. The United States has had eight bear markets since 1960. Four resulted in a recession within the year; the most recent example is the bear market that started in July 1990 under President George H.W. Bush. Four other bear markets, including the 1987 crash under President Reagan, did not lead to a recession within a year. But there may be a stronger connection between the stock market and the economy now than in the past. That's because most Americans are now active investors. As a result, we're seeing the reverse of what economists call the "wealth effect." Lower stock prices make people feel less wealthy—so consumer confidence and spending fall. That can trigger a recession. More than 60 percent of Americans say they're actively invested in the stock market. That is why more than 40 percent say the fall in the stock market has affected their family's financial situation—up from 30 percent in 1997, and from 27 percent when the market crashed in 1987. Nevertheless, most of those affected think that the financial impact will be minor. In fact, a majority of Americans and almost 60 percent of stockholders still describe themselves as "bulls"—people who think the market will rise—rather than "bears." Most Americans and, indeed, most stockholders have not lost confidence in their own financial situations. Nor have most Americans lost confidence in the stock market. Americans take stock market gyrations in stride. They've seen it all before. But most Americans and most stockholders do feel less confident about the nation's overall economy. Most people believe that Bush's tax cut will cause the federal government to go from surplus back into deficit. And among those who support the tax cut, the argument most likely to sway them against it, according to Gallup, is that it would cause a federal deficit, which could easily happen in an economic slowdown. More people will be out of work, hence there will be lower revenues from income and payroll taxes. More people will be selling stocks at a loss, hence there will be lower revenues from the capital gains tax. The safety net will need reinforcement, hence there will be higher government spending on unemployment compensation, welfare benefits, job training, and food stamps. Recent state experiences with tax cuts are not encouraging. Texas is facing a revenue shortfall in the wake of former Gov. Bush's tax cut. The state now has to consider tough spending cuts that, in the view of some observers, could result in the election of a Democratic governor next year. What an embarrassment that would be for now-President Bush. In Virginia, Gov. James S. Gilmore III is standing firmly behind his commitment to abolish the car tax. He has to. It's the issue that got him elected in 1997. Not only that, but President Bush has made Gilmore chairman of the Republican National Committee. What an embarrassment it would be if the GOP national chairman agreed to compromise his signature tax cut or allow it to become tied to revenue triggers, as moderates in Congress are urging the President to do with his tax cut. But Virginia does not have the revenues to replace the car tax. And state law requires a balanced budget. What an embarrassment it is for the Republican governor to be squabbling with the state Legislature, which Republicans took control of last year for the first time in more than 100 years. The Legislature has to go back into special session to consider controversial spending cuts in education and transportation. Nothing is more likely to enrage voters in Northern Virginia, which faces an intractable congestion crisis. Here's where Bush's tax cut stands in the latest Gallup Poll: 41 percent of Americans want the Senate to pass the same tax cut that passed the House. Only 17 percent want to see the tax cut defeated in the Senate. The balance of power rests with the 35 percent who want the Senate to pass a tax cut with major changes. They're the swing group. This group is worried about whether the country can afford a tax cut. By 61 percent to 35 percent, they do not think that, after funding education and Social Security and paying down the national debt, the federal government will have enough money left over for Bush's tax cut. Right now, concern about the economy is creating doubts about the tax cut. Bush has to turn that argument around by convincing skeptics that the tax cut will boost the economy—and not throw the country back into deficits.
What do you think? Discuss this article in the Politics & Society conference of Post & Riposte. More from National Journal. More on politics and society in Atlantic Unbound and The Atlantic Monthly. William Schneider is the Cable News Network's senior political analyst. He is also a resident fellow at the American Enterprise Institute in Washington, D.C., and a contributing editor for the Los Angeles Times, National Journal, and The Atlantic Monthly. His column appears every week in National Journal, a weekly magazine covering politics and government published in Washington, D.C. For information on National Journal Group publications, see NationalJournal.com. Copyright © 2001 by The Atlantic Monthly Group. All rights reserved. | [an error occurred while processing this directive] | ||
|
Home |
Current Issue |
Back Issues |
Forum |
Site Guide |
Feedback |
Subscribe |
Search
| ||||
