NCPA - National Center for Policy Analysis

Tax Cuts Nixed As Economy Heads For Recession

October 15, 1998

A number of economists think the U.S. is headed for a sharp business slowdown, with a recession in sight for next year. This could be averted by a meaningful, across-the-board tax cut. But there are no signs Congress will enact one before it goes home for the year.

Experts believe that waiting until next year for a cut will be too late.

  • Taxes this year were at unprecedented levels, higher even than at the height of World War II -- consuming 20.5 percent of gross domestic product.
  • Meanwhile, net farm income is down 16 percent from last year -- representing a decline of nearly $8 billion.
  • Jobs in the manufacturing sector are down 114,000.
  • Exports of all kinds are falling at their fastest rate since 1986 -- and were down 4.7 percent in July from their year-earlier level.

Retail sales are slowing and inventories are beginning to pile up. Job growth in the service sector is slowing, experts report.

Few are predicting a vicious recession, but many economists think even a mild downturn might be avoided if the Federal Reserve continues to lower interest rates and Congress acts quickly in the new year to provide a tax cut.

Source: Anna Bray Duff, "Is the U.S. Headed for Recession?" Investor's Business Daily, October 15, 1998.


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