Proposed Tax Change Essay, Research Paper

Right now the economy is experiencing moderate growth. We believe that, given the current situation, taxes should be kept the same. Alan Greenspan and the others in the FOMC have similar views as we do for the future of the economy. In the latest FOMC meeting the Federal Reserve Board decided that they are not going to be changing monetary policy. The Federal Funds rate (6.5%) and the discount rate (6%) will not be changing . This supports our position to keep policy the same. The FOMC understands that the economy is doing well, even amongst the beginning of what some call a recession. As the chief economist at Merrill Lynch, Bruce Steinburg said that the economy has gone from great to good, or maybe great to OK. So even in the midst of an overly concerned media, the economy is not in need of change.

Government spending is produced a surplus of about $124 billion last year. And this number is estimated to increase steadily . If there is no change in monetary or fiscal policy, this trend should become reality. The surplus should be taken advantage of to begin paying off the enormous national debt.

Two major indicators are showing that the economy is in good condition. The first of these is the Product Price Index (PPI). The PPI is showing no pressures of inflation. The PPI is up only 0.1% from last month as expected . This means that the economy is in good shape and doesn t need the influence of a change in taxes. The Consumer Price Index (CPI) has increased by only 0.3%. This number is small enough to ensure that monetary policy will remain unchanged . Unemployment is very low, about 3.9%. Some people think that with such low unemployment, there is a higher risk of inflation getting out of control. However, Greenspan felt that There are signs that the unemployment rate is creeping up from its current low level of 3.9%, reducing the chances of a sharp rise in wages that might ignite inflation.

The current decisions by the FOMC and the Fed support our decision to keep taxes the same. Also powerful market indicators support this view, showing that the economy is doing just fine. These examples give no indication that the economy would benefit from a change in taxes.

Mark Zandi. FOMC Meeting, Analysis. http://www.dismal.com/economy/releases/print_release_2k.asp?r=usa_leading, November 15, 2000

David Lenonhardt. Drop in Spending by U.S. Consumers Signals Slowdown. New York Times, Dec. 3, 2000.

Thorsten Fischer. PPI, Analysis and Business Implications. http://www.dismal.com/economy/releases/print_release_2k.asp?r=usa_ppi, December 14, 2000

David Ingram. Consumer Price Index, Analysis. http://www.dismal.com/economy/releases/print_release_2k.asp?r=usa_cpi, December 15, 2000

Richard W. Stevenson. Greenspan Signals The Fed Will Act To Ease Slowdown. New York Times, December 16, 2000. 3(A).