THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, October 14, 1996 TAG: 9610120020
SECTION: FRONT PAGE: A8 EDITION: FINAL
TYPE: Letter
LENGTH: 33 lines
Concerning your Oct. 7 editorial decrying the ``supply-side rerun,'' I would like to offer a few clarifications:
First, the Reagan tax cut was implemented in three phases, beginning in October 1981 with the smallest reduction of 5 percent. In fairness, the measurement of GNP growth should not measure 1982-1986 (2.4 percent) but rather 1983-1986 (4.2 percent), when the tax cut had fully been implemented. The true impact of the tax cut was not felt in 1982.
Second, economist Benjamin Friedman's contention about the extent of a tax revenue feedback from a tax cut is open to dispute. William Niskanen, former member of the President's Council of Economic Advisers, has written that the Reagan tax cut resulted in a 47 percent revenue feedback.
Third, average take-home pay may have fallen in part because of increased payroll deductions for Social Security, enacted under Carter but implemented under Reagan.
Fourth, the savings rate was falling in part because of demographics. The baby boomers were entering the age (25-44) when saving becomes particularly difficult due to raising children.
And fifth, the ``magic asterisks'' of David Stockman's day are not necessary. As John Cogan, formerly of the Hoover Institute, has written, the needed reductions in nondefense discretionary spending occur over six years and amount to about 5.5 percent of a total $3.9 trillion that would be spent, not 40 percent.
BRUCE KNEUER
Virginia Beach, Oct. 8, 1996 by CNB