WASHINGTON (AP) _ Treasury Secretary Paul O'Neill said Friday that Democratic leaders who criticize President Bush's proposed tax cuts because most of the money would go to higher-income people do not understand how the economy works.

``The idea that higher-income people are going to buy another car (with their tax cut) is just lunacy,'' O'Neill said on ABC's ``Good Morning America.''

He was reacting to Democratic congressional leaders' argument that Bush's plan would give a person with a $1 million income a $46,000 tax cut, more than enough to buy a new luxury car, while a typical wage-earner would get about $227 _ just enough, the Democrats say, to buy a muffler for a used car.

``The idea that somehow people are going to buy a Lexus if they have a substantial reflow of money they sent in (as taxes) just seems to me to indicate a lack of understanding of how they economy works,'' O'Neill, a former Alcoa chief executive, told CBS' ``The Early Show.''

``People who have substantial amounts of money are going to take any tax break they get and reinvest in America's economy,'' he said.

Bush's proposal, whose outlines were sent to Congress Thursday, would gradually reduce each of the five individual tax brackets, double the $500-per-child credit, eliminate the ``marriage penalty'' that requires many two-earner couples to pay more tax than if they were single, and repeal the estate and gift tax.

By most estimates, more than half the total $1.6 trillion 10-year total of the tax cut would go to those whose with the highest 5 percent of incomes, who pay most of the taxes.

O'Neill agreed with the assessment of Federal Reserve Chairman Alan Greenspan that the economy has slowed to the point of virtually no growth. The treasury secretary said the tax cut will help revitalize growth.

``From the data I see, real growth is some place in a band between -0.5 percent and plus 0.5 percent, which is to say about break-even basis, and putting the money back into the hands of people now can have a useful effect in allowing lower-income people to pay off their credit card debt and get ready for the next consumer-led expansion,'' O'Neill said.