NEW YORK (AP) -- The danger to the economy isn't so much from rising interest rates as from higher taxes. Higher taxes? Everyone's concerned about rising interest rates, but who's proposing higher taxes?
It doesn't take anyone to propose them, and few elected officials would try doing so in an election year. But tax increases don't need anyone's approval; they just roll on like the river until Congress builds a dam.
Blame, if it might be called that, can be assigned to productivity growth, or the more efficient production resulting from technological innovation. It suppresses inflation and improves living conditions.
Keep in mind that productivity gains are good, that they raise the standard of living and that they tend to spread the wealth. But ...
They lift taxes by means of tax bracket creep, a process in which wage gains push people into higher tax categories. And they help build budget surpluses that tempt government officials into overspending.
Economists Gary and Aldona Robbins, whose Fiscal Associates forecasts and analyses are prized by Washington officials, put the economic numbers for the 1960s and 1990s through their computer recently and concluded: ''High tax burden could end the boom, as it did in the 1960s.''
Their conclusion, published by the Institute for Policy Innovation, a Lewisville, Texas, think tank, stands out in bold relief from so much of the worried commentary about inflation.
The Robbins don't worry much about inflation. Everyone is aware of the potential danger. Besides, by raising short-term interest rates, Gary says, the Federal Reserve seems to have limited that danger.
But productivity gains are another story. Nobody limits them, or their propensity to spread wealth and swell budget surpluses -- and cause incomes to creep into higher tax brackets, and tempt officials to spend surpluses.
Tax burdens, Gary reminds us, brought the 1960s' expansion to an end. Let's not let it happen again, he says. Cut taxes. Let productivity gains create jobs and spread the wealth. Unburden them. Cut taxes.
At 37.1 percent, taxes today take a larger bite from national income than during the 1960s (under 35 percent), Gary points out, thanks in part to bigger state and local governments and the expansion of entitlements.
And taxes are still rising. In 1991, his analyses shows, federal, state and local taxes claimed 48.3 cents from the dollar value of private business output. In 1997, the comparable figure was 56.4 cents.
Robbins believes the Federal Reserve is doing the correct thing in raising short-term interest rates, that it has deftly restrained inflation, and that the economic evidence still supports expansion.
His concern is about those taxes and their potential to discourage investing in the future. He watches fixed investments to see if they show signs of weakness. He expresses concern about the choppiness of stocks.
Persistent weakness in such leading economic indicators would mean businesses no longer wish to expand in the U.S., he says. If it occurs, he would blame rising marginal tax rates as ''the one factor reducing U.S. attractiveness as a place to invest.''
Which leads to the Robbins' conclusion: ''The best way to avert a premature end to the recovery would be to cut taxes on saving and investment.''
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