Recovery Requires Personal Tax Cuts Now, Manufacturers Assert

ByJohn S. McClenahen You might expect W. R. (Tim) Timken Jr., chairman and CEO of the Timken Co., Canton, Ohio-based bearings and steel producer, and Arthur D. (Don) Wainwright, chairman of Wainwright Industries, a St. Peters, Mo.-based supplier to the aerospace, automotive, home security, and information processing industries, to have corporate tax cuts at the top of their public policy action lists. And Timken, currently chairman of the Washington-based National Assn. of Manufacturers, and Wainwright, the group's vice chairman, do advocate making permanent the R&D tax credit, lowering the nominal corporate income tax rate, phasing out estate taxes, and eliminating the alternative minimum tax. But both believe cutting individual tax rates, along the lines of President Bush's $1.6 trillion proposal, is far more urgent. It is, in fact, critically important to getting manufacturing and the rest of the U.S. economy growing again, the executives contend. "We need marginal rate cuts now," stresses Wainwright. "If we don't get that, we do have problems." Says Timken, "I'm for the marginal rate cut, too, for the very reason that what the Timken Co.'s tax rate is doesn't make any difference if we can't sell anything." Current Washington wisdom is that Congress will take until May or June to assemble a tax-cut package. Timken believes it will be sooner. "I think that by the end of April, they'll have done the job." But even with individual tax cuts retroactive to Jan. 1, Timken suggests the U.S. economy will take longer to recover from the current slowdown than is generally assumed. "I would be pleased to see us get up to a 3% [inflation-adjusted annual GDP growth] rate by the fourth quarter," he says. In contrast, Standard & Poor's DRI, Lexington, Mass., forecasts real GDP growth of 3.6% in this year's final three months. And Merrill Lynch & Co., New York, is even more bullish, with a 3.8% growth rate projected for the fourth quarter.