111 Economists Back President Bush's Tax-Cutting Agenda

Tax-News.com, Washington

21 January 2003

As the debate over competing economic recovery packages heats up in Washington, more than 100 leading economists – including three Nobel Laureates – are saying that “continued sluggishness in the American economy” demands a “bold tax and budget agenda” that could include President Bush’s proposal to end the double-taxation of dividends. These diverse members of America’s economic community made their views known last Friday in an open letter to Congress organized by the National Taxpayers Union (NTU).

“When so many of the best and brightest economic observers share the same view on tax and spending relief, elected officials should open their eyes too,” said NTU President John Berthoud, who holds a Ph.D. in Political Economy from Yale University.

The joint statement includes 111 of the most prominent economists from academic, business, and research institutions, such as Nobel Laureates Milton Friedman, James Buchanan, and last year’s Nobel recipient Vernon Smith. Among their recommendations:

On the subject of additional tax relief, the letter said that Congress should “enact changes to those tax provisions especially harmful to economic growth. One such idea is to eliminate the current double-taxation on corporate dividends” – which, along with accelerated income tax rate reductions, comprises the bulk of President Bush’s tax relief plan.

The economists also pleaded for federal spending restraint, saying that many post-September 11 spending hikes “have had nothing to do with terrorism.” The “right way to stop federal budget deficits” is to “reduce spending, end programs that have outlived their usefulness, and roll back government’s share of Gross Domestic Product.” Bush’s upcoming budget blueprint will reportedly call for a freeze on at least some federal spending (domestic discretionary programs).

The letter is in favour of making tax cuts permanent. “Uncertainty makes financial markets wobbly,” say the economists. The temporary nature of 2001’s tax cuts deprives Americans of the “confidence about what tax laws they will be facing in coming years.”

“As a rule, government cannot create wealth or expand the economy,” the signatories concluded. “Government can, however, hinder economic growth through excessive taxes, high marginal tax rates, over-regulation, or unnecessary spending. Accordingly, elected leaders should be working to adopt measures that curb or halt government policies that are hurting the economy.”

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