Economists Against Bush Tax Plan

10 Nobel laureates among them

The proposal, which has come under fire from congressional Democrats, will reduce federal revenues by nearly $700 billion over the next decade.

Meaning, that's $700 billion that won't be taken from us. This is actually one of the best ways I've seen a news report describe the budgetary effect of the cuts. It isn't going to cost the government anything beyond the obvious paperwork and manpower needed to implement it.

The economists' statement, is sponsored by the Economic Policy Institute, a liberal Washington think tank.

Not too surprising, considering some of the things it says.

The tax plan proposed by President Bush is not the answer to these problems. 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 permanent dividend tax cut, in particular, is not credible as a short-term stimulus.

From everything that I've heard, this is mostly true. Bush's plan doesn't have immediate effects which would stimulate the economy in the short-term of one year. Bush isn't being forthright about the goals of his plan. Either that, or he doesn't understand the way it would work. However, I consider permanent reductions in taxes to be an absolute good thing for the economy. Reducing the financial cost to do business, to invest, and removing distortions in the market are all excellent things.

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.

It should target both. I don't know how complex it is, but tax simplification should be very next goal after tax reduction. The "revenue-neutral" comment belies their true convictions.

Passing these tax cuts will worsen the long-term budget outlook, adding to the nation's projected chronic deficits. This 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. Moreover, the proposed tax cuts will generate further inequalities in after-tax income.

So. They would rather save the socialism in the federal government than let the free market handle these things. Their concern for deficits is certainly a valid one and Bush would do well to address it in the best way: take a chainsaw to federal spending. Their remark about income inequalities also belies their anti-capitalistic mentality.

Even worse, the economists don't support any permanent and long-term stimulus effort.

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 stimulus plan would spur growth and jobs in the short term without exacerbating the long-term budget outlook.

How this works in the country's economic interest is beyond me. Maybe I should study at MIT before commenting, but it seems more useful to offload the tax burden permanently and remove market distortions so people and businesses can make their choices with better information and more money at their disposal. THAT creates jobs and growth, not temporary spending measures and limited investment incentives.

I'm not an economist, but this sounds like bullshit to me.

Posted by Drizzten at February 11, 2003 11:15 AM