Posted on 03/08/2004 4:30:47 PM PST by Indy Pendance
WASHINGTON (AP) -- The tax cuts and other policies President Bush proposed in his $2.4 trillion budget would probably have a minimal impact on the economy, the nonpartisan Congressional Budget Office said Monday.
In its annual report on the president's budget, the agency that provides fiscal analysis for lawmakers said Bush's proposals could either increase or reduce economic output through 2009, and improve it in the following five years.
"However, the differences are likely to be small, affecting output by less than one-half of one percentage point on average," the study said.
The conclusion by the budget office comes in the early stages of Bush's re-election campaign, in which the core of his plan for strengthening the economy has been his call to make earlier tax cuts permanent. The economy and a dearth of job creation in his administration have emerged as major issues this election year.
Congress' Republican leaders have already decided to ignore Bush's proposal for permanent tax cuts this year because it would boost record federal deficits even higher and because they lack the votes to prevail.
The Senate on Monday began debating a $2.36 trillion GOP-written budget for 2005 that includes just some of the tax cuts Bush proposed, plus lower deficits and spending than his plan mapped. The House Budget Committee will debate a similar plan later this week.
The analysis attributed the budget's scant effect largely to the small size of the policies Bush proposed compared with the $12 trillion-a-year U.S. economy. For example, its proposed tax cuts would total only 0.3 percent the size of the economy over the next five years and its spending cuts would be 0.4 percent.
In addition, the economic impact of some of the budget's proposals offsets the effect of others. Douglas Holtz-Eakin, the budget office's director, said Bush's plan for a health-insurance tax credit would help people spend more money, but his proposal to establish tax-free savings accounts for retirement and other purposes would encourage them to save - muting the economic effects of the two ideas.
"When you start lumping stuff together, it's not surprising" that they might cancel each other out, Holtz-Eakin said.
Underscoring the uncertainty of some of its analysis, the budget office cited conflicting views among experts on the economic impact of Bush's proposal to keep tax rates lower on capital gains and corporate dividends. It also said Bush's plan to keep the estate tax repealed after 2010 "could have varying effects on consumption and saving."
The budget office began examining the economic impact of White House fiscal blueprints last year in response to congressional conservatives eager to see the "supply-side" effect of Bush's budgets. They say tax cuts spur the economy, in turn generating federal revenue, by more than analysts have credited.
Many other Republicans - including Federal Reserve Chairman Alan Greenspan - have agreed that tax cuts have such an effect, but cautioned that there is no accurate way to measure it. Holtz-Eakin said he believes such analysis provides useful information, but said the budget cannot yet be exclusively measured that way because "the science isn't ready."
A year ago, the Congressional Budget Office examined Bush's 2004 budget and concluded that its impact was "not obvious."
As the Senate began its budget debate, Budget Committee Chairman Don Nickles, R-Okla., said his plan would help cut deficits in half in three years by clamping down on some spending.
"Deficits are far too high," he said, referring to this year's projected shortfall of about a half-trillion dollars. "It's time to be responsible."
But North Dakota Sen. Kent Conrad, the top Democrat on the budget panel, said the plans by Bush and the Senate GOP hid the real danger - the long-range deficits that loom as baby boomers begin to retire.
Bush's policies "are truly dangerous to the economic security of our country," Conrad said. "We have a responsibility to alter that course."
My eyes are seeing red already...
But what can we do? I'm sure in the hell ain't staying home or voting for Hanoi Kerry.
Neither am I. But it pains me to cast a vote for Liberal Lite over MA Liberal.
Oh, man ... And I can remember when everyone was in shock when the national debt crossed 1 trillion.
OTOH, the money isn't actually worth anything: we just borrow it into existence out of nowhere.
Oh, yeah, did they ever get rid of that part of the Constitution requiring all debts to be paid in gold and silver coin?
That's why the Gipper insisted no one use the term "tax cuts". He called it tax reform.
Newt and Kasich made a huge huge mistake by changing the terms of the debate from economic growth to deficits. We're all Democrats now.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.