Like many Americans, I was quite impressed with President Clinton's proposals in his State of the Union speech. Reducing the deficit is crucial to our long-term economic health. Yet careful reading of the text of his address, put into context with his overall belief in the ability of government to solve all of our woes, lead me to believe that this program in its final form will do much more harm than good, especially to the middle class he purports to help.
In fact, the middle class will end up bearing the brunt of the financial cost of the new taxes as the cost of goods and services rise to offset the higher energy costs. In addition to the estimated direct cost of $17 monthly, a typical family with take home pay of $500 per week would see additional indirect costs of about $20 per month for every 1% increase in the inflation rate. If inflation exceeds 10% as it did in the late seventies, this program could wind up costing the average middle class family in excess of $1,500 annually.
On the spending side, only $5 billion of Mr. Clinton's $73 billion in annual spending cuts are scheduled for the first two years of his plan. I doubt that we will ever see these cuts. Beyond that he has called for $30 billion in short- term stimulus, $27 billion to increase the Earned Income Credit over five years, $13.8 billion for Head Start and $3.6 billion for the Women, Infants and Children program, not to mention his yet to be unveiled health care plan.
Mr. Clinton's proposals are bold, but I am afraid misguided. Instead of real deficit reduction, we will see increased spending and risky tax increases. Instead of a growing economy, the only things likely to grow are government, taxes, prices and eventually unemployment lines. If we are truly concerned about reducing the deficit and fixing our economy, the public should demand spending cuts first, taxes later.
