http://blogs.wsj.com/washwire/2007/07/22/cbo-tax-cuts%e2%80%99-impact-has-faded/The stimulative effect of Bush’s tax cuts has worn off and the supply-side benefits are “small,” the Congressional Budget Office says.
At the request of House Budget Committee Chairman John Spratt (D., S.C.), the CBO analyzed the impact on the economy of the Economic Growth and Taxpayer Relief Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), other than through the direct impact on tax revenues.
In a letter to Spratt released Friday, CBO director Peter Orszag said, “The short-term effects of EGTRRA and JGTRRA in stimulating aggregate demand in the economy have largely dissipated by now, and the supply-side effects of those policies are uncertain but are probably small.”
Some of the tax cuts’ provisions “increased incentives for people to work and save (which can increase growth), but other provisions had no effect on incentives. In addition, the two tax laws increased the budget deficit, and doing so tends to reduce economic growth over the medium and long term. At this point in time (several years after enactment), once those various factors have been taken into account, the overall impact of the tax legislation on the economy is likely to be modest,” Orszag wrote.
Orszag concluded that the tax cuts’ indirect impact on economic growth, investment and saving and could affect this year’s budget deficit anywhere from an increase of $3 billion to a reduction of $14 billion, depending on the assumptions used. That is separate from the direct boost to the deficit trhough lost revenue and the added interest on borrowing to cover the gap of $211 billion.
Printer-friendly format
Email this thread to a friend
Bookmark this thread
(1000+ posts)
Send PM |
Profile |
Ignore
