Letter: Tax cuts could lead to economic downturn

Saturday, Sept. 6, 1997 | 11:36 a.m.

What I see is a severe stock market correction, if not a crash, caused by a huge influx of tax cut money into the economy and the market followed by a huge sell-off by the big boys taking advantage of the ill-advised capital gains tax cut. The middle of an economic boom is no time to stimulate the economy and this fact will become starkly evident in the coming months.

The middle of a boom is a time for tax increases -- not cuts. As any Econ 101 textbook will avow, this whole supply-side malarkey will bring this nation to its knees quicker than anything else, in my opinion.

Anyway, Glassman is correct to say we will enter a period of deflation, which will be good for those lucky enough to have jobs but bad for those not so lucky or who depend on interest income for a large part of their retirement income. This latter group will be caught by a double whammy of lower investment income at the same time benefits are being cut to avoid raising taxes. Sort of what happened after the "supply side" '87 crash, only much worse.

As to "paying down the debt" it will not be necessary or desirable to do so because of the detrimental effect on the economy, especially while cutting taxes and needed programs to do so.

Dan Olivier