Masonry Magazine April 1988 Page. 30
Washington Wire
continued from page 29
the second half. For the year as a whole, real growth may rise 24%, as against 3.8% in 1987.
BOTH WAGES AND PRICES SEEM LIKELY TO REMAIN UNDER CONTROL this year, though some economists are a little wary about a revival of cost pressures. For the time being, the critical price barometers are behaving very nicely. Inflation expectations have subsided dramatically over the past few months, starting with the chilling impact of the stock-market crash in mid-October. Commodity prices have fallen back from peaks, led by large declines in oil. Lower oil prices could be an offset to any price increases in other sectors.
But some officials still worry about the danger of reviving inflation. They wonder whether the economy isn't stronger than many now believe. A return to a 4% growth path would be a signal that business is expanding too fast. With many industries now operating at or very close to-full-capacity levels, faster activity could result in new price pressure.
ANOTHER ROUND IN THE BATTLE OF THE BUDGET IS SHAPING UP in Congress, but this one promises to be considerably calmer than that of the last year. Lawmakers are discouraged because the 1988 deficit could hit $176 billion, or $40 billion higher than the target stipulated under the Gramm-Rudman law. Congress has just begun work on the budget for the year starting October 1, but legislators may be reluctant to make deep cuts in spending next year after completing action on a package to trim $36 billion in red ink in 1987. The deficit-reduction package for 1988 included spending cuts and tax hikes.
PROSPECTS SEEM DIM THAT CAPITAL-GAINS TAXES WILL BE LOWERED in 1988, despite the support of President Reagan, who has proposed such a reduction. Nevertheless, the proposal is likely to spark a lively debate in Congress. Many conservatives strongly back the move, but liberals oppose the proposal, arguing that a cut in the capital-gains rate favors well-to-do individuals. Three-quarters of the benefits would go to people earning $200,000 a year. Proponents claim that such a cut would generate additional Federal revenue by stimulating growth and encouraging investors to sell not hold-assets.
The 1986 Tax Reform Act raised the capital-gains rate to 28% from 20%. The change was part of the delicate compromise to trim over-all bracket rates. Some fear that cutting capital gains may prompt tinkering with other rates. They also worry that a capital-gains slash could worsen the deficit problem.
THE REAGAN ADMINISTRATION IS STEADILY HARDENING its trade policies. It has ended special trade preferences of four healthy third-world nations: Taiwan, South Korea, Hong Kong and Singapore-all big exporters to the U.S. The new action revokes the right to export products to the U.S. duty-free. The four countries currently sell about $52 billion worth of goods a year. They're the first nations ever to lose eligibility for all exports at once, without reaching the formal prosperity cut-off of $8,500 per-capita income or violating some other rule, such as suppressing of certain worker rights.
But this White House action sounds much tougher than it actually is. Officials concede the move will add only $450 million in new tariff costs for the four countries.
continued on page 42
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