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Lindsey: Need tax cut
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January 7, 2001: 5:56 p.m. ET
Both tax and interest rates cuts needed to turn around economy, says Bush advisor
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WASHINGTON (CNN) - It will take a tax cut, in addition to interest rate trims, to turn around the nation's economy, a top economic advisor to President-elect Bush said Sunday.
Lawrence Lindsey said on Fox News Sunday that many parts of the economy "are in deep trouble" and he called for quick passage of what is expected to be a Bush proposal for a $1.3 trillion tax cut.
"I think you need both," Lindsey said on the program. "First of all, monetary policy doesn't work instantaneously either. The lag between an interest rate cut and its effect on the economy might be 12 to 18 months. Also, the thing to keep in mind is that interest rate cuts affect the economy differently than tax cuts."
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The interest rate cut of last week helps the typical credit card borrower about $2 a month, whereas Mr. Bush's tax cut for a family making $40,000, gets a $1,600 a year tax cut, 32 bucks a week.
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Lawrence Lindsey |
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Lindsey, a former governor of the Federal Reserve Board, which controls interest rates, said Bush would push to make the tax cut retroactive to Jan. 1, 2001, because consumers need the relief right away.
"The interest rate cut of last week helps the typical credit card borrower about two bucks a month, $2 a month, whereas Mr. Bush's tax cut for a family making $40,000, gets a $1,600 a year tax cut, 32 bucks a week. That's a much bigger heft."
Democrats have said it could be a tactical mistake for Bush to push immediately for such a sweeping tax cut.
Sen. John Breaux, D-La., echoed that stand on the same program. He urged a phased-in tax cut beginning in 2002.
"Certainly something that can get passed early on is important," Breaux said. "I think it's a mistake to come out with the most controversial proposal first." 
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