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Stimulate the Economy With Tax Cuts

July 15, 2001

Your July 11 editorial "Surplus? What Surplus?" fails to recognize that the main rationale for a tax cut should not be whether the U.S. Treasury has a budgetary surplus. Rather, it is the need to help reverse the downward trend in the economy that has prevailed for the past 12 months.

The Times also failed to consider the secondary effects of tax cuts. When cuts are made, disposable income increases; spending then increases and job growth is stimulated. Idle economic resources are returned to use. Furthermore, job growth means more income for the Social Security and Medicare trust funds, income that is greatly needed because the future liabilities of these programs are so seriously underfunded.

Finally, to help meet the future spending needs of the U.S. Treasury, it will be much better to have a healthy economy than one that is operating at a subpar level.

Theodore A. Andersen

Professor of Finance (Emeritus)

UCLA

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