Goldman Economist Says Tax Cuts Will Have Limited Impact

by Leroy Baker, Tax-News.com, New York

30 May 2003

Chief economist at investment bank Goldman Sachs, William Dudley, has poured cold water on President Bush's tax cut package, signed into law this week, predicting that it will be unlikely to kick-start the US economy to the degree that administration officials are hoping for.

Speaking to the New York Daily News, Dudley explained that the latest package of tax cuts was skewed heavily towards high income groups who tend to save any extra cash that they may have, rather than spending it on extra goods and services as the President is hoping. Therefore, Dudley suggested, the stimulus effect of the tax cuts is likely to be "blunted."

The Goldman Sachs economist said the most noticeable effects to the economy will come when changes to withholding limits come into force in July, and when further tax cuts are initiated early next year. Despite this, he announced that he has not changed his forecast for US economic growth for the coming year which he pegs at 2.2%, and observed that: "The economy has been even weaker recently than we had anticipated."

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