Taxcut A Payoff Now, Paying the Price Later

J Weisman -- The $350 billion tax cut package that President Bush and Republican lawmakers pushed through Congress yesterday is essentially a gamble over which economic force will prove more significant: a rise in the federal deficit, or an investment boom that could create a million new jobs.

"Eventually, some sort of adjustment will have to be made to pay for all this," said Joel L. Prakken, an economist at Macroeconomic Advisers, a St. Louis-based economic forecasting firm. "That's the gamble that we're taking. It seems a little scary."

Alan Auerbach, a tax economist at the University of California at Berkeley, said: "In the long term, it's not a gamble. It's a certainty that this is a bad idea."

But Prakken warned that assessing the tax cut's economic benefit has been rendered all but impossible. Virtually all the tax breaks will be temporary, unless future Congresses extend them. If they are extended, the tax cut's eventual cost rises from $350 billion to at least $800 billion, according to the Center on Budget and Policy Priorities, a liberal think tank.

"You can't answer any of these questions anymore without deciding whether you believe these sunsets are real or not," Prakken said.

If they are real, any long-term problems with the deficit would disappear, he said, but the benefit to the economy would be tempered as well. Wyss said his short-term growth projections hold only if he assumes the sunsets are, as he put it, fraudulent.