Chorus for a Tax Cut

As doubts increase that the Nixon Administration will achieve its goal of a $1,065 billion gross national product this year, the debate is heating up over whether the Government should change policy and use its fastest-acting economic stimulant: a tax cut. Congress last week put more money into consumers' pockets by voting a retroactive 10% increase in Social Security benefits but postponing until next year a boost in Social Security taxes. Beyond that, economic activists want the Government to bring forward into 1971 some of the reductions in personal income taxes scheduled under present law to take effect in 1972 and 1973. Two weeks ago, Federal Reserve Chairman Arthur Burns suggested that the Government may have to do that, as well as reinstate the 7% investment tax credit for business. Last week Senator Edmund Muskie, front runner for the Democratic presidential nomination, said that "we must accelerate some of the personal tax savings now scheduled for 1972 and 1973." Economist Alan Greenspan, a onetime Nixon adviser, figures that the odds are 2 to 1 in favor of the Administration's doing that. Estimated annual savings to taxpayers: $4.5 billion.

Administration policy framers are still undecided. Proposing a tax cut would force the President to swallow some of the cheery rhetoric of his budget and economic messages. He would probably have to accept a full employment deficit in the budget--which he said the Government should tolerate only in times of emergency. On the other hand, the latest cost of living figures might lead policymakers to think that they could stimulate business without risking much extra inflation. Consumer prices in February rose at an annual rate of 2.4%, down from 3.6% in January; the rise was the smallest since last August. Politically, a tax cut would be even more tempting than usual. The latest polls show Nixon's popularity at a record low, with the performance of the economy his weakest point and persistent unemployment especially dismaying to voters.

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