Posted by Esperanza from 66-52-14-42.lsan.dial.netzero.com (188.8.131.52) on Saturday, February 08, 2003 at 2:49PM :
Bush economic plan slammed
WASHINGTON: Nobel prize-winning economists on Thursday attacked US President George W. Bush's 10-year US$674-billion plan to revitalize the US economy.
"Regardless of how one views the specifics of the Bush plan, there is wide agreement that its purpose is a permanent change in the tax structure and not the creation of jobs and growth in the near term," the 10 economists said in a statement released by the Economic Policy Institute.
Harshest criticism was reserved for Bush's proposal to abolish the tax on share dividend payouts.
"The permanent dividend tax cut, in particular, is not credible as a short-term stimulus," the statement said.
"As tax reform, the dividend tax cut is misdirected in that it targets individuals rather than corporations, is overly complex and could be, but is not, part of a revenue-neutral tax reform effort."
The statement will be presented at a news conference on Monday by three of the laureates: Joseph Stiglitz (Nobel winner 2001), Franco Modigliani (1985) and Lawrence Klein (1980).
As of Wednesday, it had been signed by 358 economists, according to the Washington-based think-tank's Internet site.
Economic growth was positive but had been insufficient to generate jobs and prevent unemployment from rising, the economists said in the statement. Two million private sector jobs had been erased by the recession, they said.
"Overcapacity, corporate scandals and uncertainty have and will continue to weigh down the economy," they said.
"The tax cut plan proposed by President Bush is not the answer."
Passing the tax cuts would worsen the long-term budget outlook, adding to projected chronic deficits, the economists said.
"The fiscal deterioration will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure and basic research," they said.
"Moreover, the proposed tax cuts will generate further inequalities in after-tax income.
"To be effective, a stimulus plan should rely on immediate but temporary spending and tax measures to expand demand and it should also rely on immediate but temporary incentives for investment."
Such a plan would spur growth and jobs quickly without exacerbating the long-term budget outlook, the economists said.
The seven other Nobel laureates who signed the statement were: George Akerlof, Kenneth Arrow, Daniel McFadden, Paul Samuelson, Robert Solow, Douglass North and William Sharpe.
Bush sent a budget to Congress on Monday that would massively boost military expenditure, lower taxes and run up record deficits even without a war in Iraq.
The budget forecast record deficits of US$304 billion in fiscal 2003, which began October 1 last year and another US$307 billion in fiscal 2004.
Over the next five years, the cumulative budget deficit would amount to US$1.08 trillion, the budget papers said. A five-year outlook showed no surplus in sight, with a deficit of US$190 billion in 2008.
The budget forecast real economic growth of 2.9 per cent in the calendar year 2003 and 3.6 per cent in 2004.
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