President Clinton's Economic Plan

President Clinton unveiled his economic plan to stimulate the economy and to reduce the deficit. Although his plan calls for cutting spending, at the heart of the program is a substantial increase in tax rates for individuals as well as for corporations. Personal income tax rates will be increased up to 40% for incomes above $250,000. Corporate income taxes will be increased to 36% from 34%. On the other hand, spending reductions will accrue mostly in defense and in the trimming of administrative costs. The issue to be faced is whether the Clinton plan will serve its dual purpose of stimulating the economy and reducing the deficit, and each side has its proponents.

Murray L. Weidenbaum, a professor at Washington University in St. Louis, calls for increased budget cuts and decreased spending to address these national economic problems, and he states: "In the current environment, an increase in taxes is a confession of failure to control spending" (p. 111). He would see the Clinton plan as such a confession of failure, while Patrick M. Boarman, Professor of Economics at National University in San Diego, is much more concerned with the need to reduce the deficit and feels that increasing the marginal income tax rates on persons across the board can reduce the budget deficit. He states that increasing the marginal tax rates has an effect at the microeconomic level that is visually imperceptible and yet yields revenues that in macroeconomic terms can make a significant c

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gies to shift income into capital gains area and therefore, be taxed at a lower rate. In essence what goes on in the American two party system is that Republicans tend to lower income taxes on wealthy individuals while Democrats raise Income taxes but create large loopholes. Also, there is another problem with incentive according to the article: "Two-earner families will become one-earner families; fewer young people will bother to earn advanced degrees on risk starting new businesses; investors will shift into tax shelters and tax-free bonds; and corporations will get back into debt to minimize taxable profits." There will be less economic growth and fewer jobs, and this can be seen in the experiences of Canada, Germany, and Japan, which are not identical to the U.S. but have some similarities, all of which imposed higher income and sales tax rates in 1990, and of Herbert Hoover and Lyndon Johnson, who did the same thing in the U.S. This is why supply-siders believe that President Clinton's tax proposals will weaken the U.S. economy for years to come. They feel it will convert a manageable budget problem into a full-blown economic crisis (Reynolds, 1992, A16). In the early 1980s, critics of Clinton suggested that lower tax

Category: Economics - P