Cutting Debt is Key Component to Tax Cuts

The debate on tax cuts continued to rage when Treasury Secretary Lawrence Summers [1] said this week that reducing the Federal debt was the only way to continue maintaining a strong economy.

Although it is widely expected that President Clinton will veto the recommended $697 billion tax cut passed by Congress last month, Summers believes that reducing debt is important to a tax cut for families because a reduction lowers interest rates while increasing investments. As a result, jobs are created.

The recommended Republican tax cut prescribes cuts of 50 percent or greater in domestic non-defense discretionary government programs. Summers is concerned that large tax cuts could facilitate reductions in key government activities or Social Security [2] and Medicare [3].