Is Ford's a Better Idea?
"The problems of inflation have been defeated...the danger of any recession is nil." --Gerald R. Ford, 1970
GERALD FORD HAS never been an alarmist about the nation's economy--at least not during Republican administrations. At first, Mr. Ford even refused to acknowledge that the U.S. was in a recession. When he became president, however, he was forced to think about the matter a little more carefully, and he grudgingly came to admit the existence of economic difficulties. President Ford then proposed a tax increase as our panacea, but when that proved unpopular he decided to look for another scheme. Now Mr. Ford has pulled together a new package, in what The New York Times calls "a 179 degree turn in economic policy." Instead of a tax increase, he now suggests a tax rebate of $12.2 billion which, combined with a regressive fuel tax, will soak the poor, help the rich and leave the middle-class even worse off than before.
Ford's proposed tax rebate, if approved by Congress, would, as Sen. John V. Tunney (D-Calif.) has pointed out, "give the most relief to those who need it least and the least relief to those who need it most." Under Ford's system, a family of four earning $50,000 a year, hardly the most needy of groups, would receive a sizable $1000 gift; at the same time, a four-person family, barely above the poverty line with a $5000 annual income, would receive a rebate of just $12. So even though an upper-income family would make ten times the salary of a lower-income family, the former would still receive 80 times more rebate money than the latter.
Not only is Ford's rebate proposal stacked so that the higher-income (and less needy) families are rewarded with larger rebates, but at the same time the proportion of the gift received by the wealthy is a substantially greater percentage of income. For example, a lower-income family of four making $5000 a year would receive a rebate representing 24 per cent of their annual adjusted gross income, while an upper-income family of four making $40,000 a year would receive a 2.39 per cent rebate--almost ten times the relative size. And under Ford's system, only 17 per cent of the population (those with incomes over $20,000) would get 43 per cent of the rebate money.
AS IF TO insure further that the middle-and lower-classes would not benefit from his economic scheme, Ford has additionally requested a sizable increase in federal fuel tax. This regressive measure, by weighing a proportionately heavier burden on the poor than on the rich, would compound the detrimental effect of Ford's rebate plan on lower- and middle-class families. Even Ford's Federal Energy Administration acknowledges that the proposed energy tax would far outweigh the proposed tax rebate--except, not surprisingly, for the wealthy. The F.E.A. estimates that Ford's tax will increase fuel costs for a family of four between $275 and $345 a year, depending upon such variables as family income and geographical location. (Wealthier families tend to spend more on fuel than poorer ones, and residents of Alaska spend more for heat than do Floridians.) Except in incomes exceeding $20,000, the amount of rebate received would be less than the increase in fuel costs. According to the F.E.A., a lower-middle class family with an annual income of $8000 would spend $311 more on energy in a year as a result of the Ford fuel tax--more than quadruple the $67 tax rebate they would receive. And an uppermiddle class family with an income of $14,000, while receiving, a $183 rebate, would spend the entire rebate, plus an added $150 out of their own personal pockets, to pay for Ford's new fuel tax. Such a proposal is not, as Ford would have us believe, a program designed to aid the middle-and lower-classes; rather, it is a poorly veiled attempt at welfare for the wealthy.
Nor would Ford's program help stimulate the economy, as is maintained by administration officials. While helping the rich and hurting the lower-and middle-classes, the Ford proposal would give less to those more likely to spend their money and more to those less likely to spend it. The lower-and-middle classes, after all, would spend their rebate either to pay bills or buy much-needed items; but under Ford's system, their rebate would be so small (and so slow to take effect) that its influence on the economy would be negligible. The wealthy, however, would not be substantially affected by Ford's rebate (a family making $50,000 a year is no more likely to buy a new car than before), and would consequently be more likely to save rather than spend their larger rebates. "If that happens," White House Press Secretary Ron Nessen frankly admitted, the Ford program "won't have done much good."
FORD'S ECONOMIC plan is not without its enticement, however--at least for those on Capitol Hill. Because there is a maximum rebate of $1000 per family, those who would benefit most from Ford's tax rebate would be those families able to maximize their rebate while minimizing their income tax. By what seems more than just coincidence, veteran congressman Gerald Ford has arranged his economic package so that those who would gain most would be those making $41,855 a year--surprisingly high and suspiciously close to the congressional salary of $42,500. It would certainly seem that Mr. Ford is less desirous of appealing to congressional hearts and minds than to congressional pocketbooks.
But despite such an overt attempt to trade capital support for the support of those in the Capitol, the outlook for the passage of Ford's economic package is not bright. Republican Congressman Barber Conable, a former Harvard Institute of Politics Fellow, has expressed dissatisfaction with the Ford proposals, and House Ways and Means Chairman Al Ullman has predicted that Congress will not accept Ford's regressive fuel tax plan as is. Nor have the people shown any inclination to accept the image of Ford as a kindly Santa Claus, dispensing gifts to his little children. In a study conducted by the Gallup organization for Newsweek, only four per cent of the pollees rated Ford's new economic program as excellent, and only ten per cent thought it good. A majority of respondents rated Ford's proposals as fair or poor.
Ford's economic package should not fool many. It is a give-to-the-rich, take-from-the-poor, Robin Hood-in-reverse type of a scheme. Once again, Ford's better idea has been low on performance and high on p.r. But at a time like this--when the nation can ill afford frivolous items of any sort--we truly cannot afford solutions based on ready smiles, simple panaceas and WIN buttons. We need statesmanship, not showmanship.