New Taxes Are Precisely What Doctor Didn’t Order : Economy: They said America wasn’t saving enough. Fact is, too many Americans can’t afford to spend anymore; and those who can, don’t.

Only yesterday, it seems, President Bush was pointing with pride to the performance of the economy. Then overnight, his apologies for its slowdown unsealed his lips on the sensitive subject of taxes.

Bush aired his alibi at his June 29 press conference. “We’ve had a much slower economy than anybody predicted.” Therefore, as he explained, revenues have shrunk along with earnings.

The President’s embarrassment parallels that suffered by Gov. Michael Dukakis in 1988 when his “Massachusetts Miracle” collapsed into just another voodoo show. The Massachusetts economy went bad when retail sales went bad. Sales-tax collections dropped, and Dukakis’ claims to fiscal responsibility were discredited.

But Bush’s advisers did not realize then that the failure that benefited them in Massachusetts would catch up with them within two years throughout the country. Accordingly, he has operated with no contingency plan to use once the national economy confirmed the evidence that it is following Massachusetts into a slump.

Meanwhile, eminent economists in academe were bombarding media and policy-makers with warnings that America’s consumers were over-borrowing and overspending the country into a recession--or worse. The cure they recommended called for more savings, forced by taxes if necessary. The most articulate of them have been Democratic, specifically those taken seriously by Dukakis.

Oddly enough, the reason given by the President for his retreat on taxes proves that this accusation is a bum rap. Indeed, he put the country on notice that it would be better off today if consumers had all along borrowed and spent even more.

Recessions have been given a number of definitions, such as “two successive quarters of negative GNP.” But the functional definition--when consumers run out of cash, credit and nerve--is the best and simplest. They ran out of all three before the 1989 Christmas shopping season. The President’s complaint that no one around him “predicted” the slowdown that has spread since then is an understatement.

Of course, the President’s advisers also have an alibi. They have been going by the statistics. But to paraphrase what the President told that same press conference about his own job, his advisers are paid to anticipate statistics. Hard evidence of the slowdown has been surfacing for the better part of a year. Since last September, businesses and property owners have been putting up hard money to counter the claims of economists against supposed consumer profligacy. Advertising has featured bargains calculated to lure consumer dollars out of hiding. Quality stores routinely guarantee to meet price competition from anywhere. Big-ticket items are to be had for “no down payment.” Banks waive credit scrutiny to move foreclosed homes.

Business overconfidence about consumer spending is the direct cause of every economic downturn. Business managements can also offer their creditors and stockholders an alibi for 1990’s disappointing results. They can blame them on the dogmatic obsession with the myth of consumer overconfidence held by their economic advisers.

The economy is caught in the stalemate between those who would spend if they could, and those who could spend but won’t. Slowly but surely, financial pressures from cost inflation and servicing debt have stalled or scuttled discretionary spending by the gainfully employed. Now, suddenly, political pressures have sharpened against Bush to increase Treasury collections. But he’s missed the boat on raising taxes. Now the economy is clearly seen to be weakening.

Before the end of 1989, the moneyed minority had salted away personal holdings of income-bearing cash reserves amounting to $2.65 trillion. The pre-inflationary rule of prudent budgeting called for saving 25% of annual income. Such a prodigious pool of idled liquidity approximates half of gross national product. It’s a lot of made money even by Japanese or German standards. This accumulation challenges both the claims of economists and the assumptions of budget summiteers.

Any taxes intended to cut consumption will cut revenues instead. Businesses already wounded by price wars cannot hope to pass on tax increases aimed at consumers or, to the contrary, absorb them. Tax increases speed up business slowdowns.