http://archive.nytimes.com/2003/03/26/national/26TAX.html
Study Says Tax Cuts Will Make Deficit Soar By EDMUND L. ANDREWS WASHINGTON, March 25 � The Bush administration and Republican lawmakers, who have long argued that tax cuts can at least partly pay for themselves by speeding economic growth, heard some bad news today. In its first effort to estimate the economic effects of President Bush's proposed budget, including its plan for $726 billion in tax cuts, the nonpartisan Congressional Budget Office said that even counting any stimulus deficits would run more than $1 trillion over the next five years. The shortfalls are essentially identical to the ones that Congressional analysts calculated through old-fashioned methods. "The overall macroeconomic effect of the proposals in the president's budget is not obvious," the budget office said. The main reason, it added, is that cuts that might increase growth would be almost entirely offset by spending increases that would reduce it. The report is a setback for the administration, which has justified a return to big deficits by contending that the best way to balance the budget is by increasing growth through tax cuts. The report today was the first time that the budget office has accommodated Republican requests for "dynamic scoring" to estimate the effects of cuts, as opposed to traditional "static" approaches that estimate only the direct revenue effects. It was prepared under the auspices of the office's new director, Douglas J. Holtz-Eakin, who had been chief economist at Mr. Bush's Council of Economic Advisers. Shortly after Mr. Bush announced his tax plan in January, the council published calculations that its main tax cuts would generate enough added economic growth to replace 40 percent of the revenues that would be lost. Mr. Holtz-Eakin said the new analysis did not necessarily refute contentions about tax cuts, because the report examined the effects of Mr. Bush's spending increases, as well as his tax proposals. "It's apples and oranges," Mr. Holtz-Eakin said today after testifying to the House Budget Committee. "We looked at the whole budget here." Democratic lawmakers said the report vindicated their opposition to Mr. Bush's tax cuts at a time the government plans to spend at least $75 billion fighting in Iraq and incur a budget deficit this year that could exceed $400 billion. "This throws cold water on all those people who thought there could be easy answers," said Representative Chet Edwards, Democrat of Texas. Supporters of supply-side economics said the new analysis showed that Mr. Bush's spending plans would offset the growth generated by his tax cuts. "They did not analyze the impact of the tax cuts by themselves," said William Beach, chief economist at the Heritage Foundation. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
