A Public Service Message from the American Income Life Insurance Co.Waco, TexasBernard Rapoport, Chairman of the Board and Chief Executive Officer Critical Choices For The Future Remarks of House Majority Leader Jim Wright of Fort Worth before the National Press Club in Washington, D.C. on May 4, 1981. Reprinted by permission. This week the House shall choose between two blueprints for our nation’s fiscal future the Administration budget and the House Committee budget. There are some striking similarities. Both documents call for dramatic reductions in spending. When we measure the total level of spending they would authorize by the same economic assumptions, the two totals are almost identical. Each plan contains a substantial tax cut. There are also some very basic differences, however. The first is that the committee plan, with a smaller and more targeted tax cut, achieves a lower deficit for fiscal 1982 and would reach a balanced budget in fiscal 1983. The administration plan, by contrast, eats up all the savings it achieves and more in the huge 30 percent three-year Kemp-Roth tax cut which would shower its principal benefits upon the very wealthiest in our society. Under the Kemp-Roth scheme, a family of four earning $10,000 would get back about $40 in the first full year. A $20,000 family would get back slightly less than $200 . . . while a family with $100,000 in income would reap a windfall of more than $4,000 in the first year of KempRoth. Manifestly, this is inequitable. It isn’t fair to the middle and lower income Americans who are least able to escape the cruel afflictions of inflation. The committee plan would do something for them. Moreover, Kemp-Roth is in itself inflationary. Conservative periodicals like Business Week, many conservative economists and a number of responsible Republican lawmakers realize what a disaster it could be. It easily could set in motion more than $100 billion in extra deficits over the next three years. George Bush called it “voodoo economics” last spring, and said if enacted it could bring on an inflation rate in excess of 30 percent. The House committee program also anticipates a tax cut, but a much more targeted and less costly one aimed at encouraging investments that modernize America’s aging industrial plant so as to improve productivity and make our products more competitive on world markets. Our individual tax cuts are targeted to the middle income and lower income Americans removing the marriage penalty, giving a break for savings, combatting “bracket creep” and recompensing those who’ve had to pay higher social security taxes. By reducing the deficit to less than half that originally projected by the Reagan-Stockman plan, we believe this will help to bring down interest rates which are stifling small business and consumers alike. And that is the first difference. A second big difference in the two plans is our relative emphasis on the goal of energy independence. Most responsible economists recognize our dependence upon and vulnerability to foreign oil suppliers as a major cause of the inflation we are suffering. It is much too glib to say that federal expenditures are the only, or even the main, cause of inflation. For a comparison of the dollar-draining effect, consider the following: During the past four years, federal government deficits in all were $18 billion higher than for the previous four year period. But American dollars paid out for imported oil over the past four years were $160 billion more than for the preceding quadrennium! The House Budget Committee has spared from the hangman’s noose a number of absolutely vital energy programs which would be terminated under the administration budget. The Stockman plan calls for eliminating the alcohol fuels program, the solar bank, and the energy conservation program that encourages people to weatherize and insulate their homes and buildings. It also would cut back our efforts to expedite the production of synthetic fuel from American resources. In addition to that, the current Latta plan calls for eliminating all federal money to fill the Strategic Petroleum Reserve. Less than a year ago, we boldly ordered that it be filled at not less than 100 thousand barrels a day until we had enough to tide us over for at least six months in case of another Arab oil embargo. The Latta substitute relies totally on being able to devise some nebulous scheme to get private sources to finance the strategic reserve. Maybe that will work, and maybe it won’t. I shudder to think, if it does not, of the economic consequences of a third OPEC stranglehold in a decade! The administration’s inaequate perception of the importance of energy in our over-all economic policy is painfully only 25 House members to vote against the energythe unfortunate fact that in all three of Mr. Reagan’s speeches on “Economic Recovery,” the word energy appears only once, and that in a sentence calling for elimination of any subsidy for synthetic fuels development. And that is the second significant difference. Investments in Our Human Resources Perhaps the most significant difference of all lies in the way the two resolutions respond to the programs aimed at promoting and protecting our human resources. Where the House Committee budget tries to make economies by reducing costs and eliminating those functions that haven’t worked well, the Stockman budget amputates entire programs including many which have proven their worth many times over. 18 July 10, 1981
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