US Economy Would Be 'Far Weaker' Without Tax Cuts, Says Chief Economist

by Mike Godfrey, Tax-News.com, Washington

11 February 2004

The Bush administration’s Chief Economic Advisor Gregory Mankiw believes that the country would be in a “far weaker” situation economically if the President had not pushed through his pro-growth package of tax cuts.

Fielding questions from the public in an ‘Ask the White House’ interactive forum, Mankiw observed that the United States is “growing faster than most developed economies around the world,” thanks largely to the government’s expansionary fiscal and monetary policies.

“The President inherited a series of contractionary shocks to the economy: the end of a high-tech bubble in the stock market, corporate governance scandals, the uncertainties associated with the war on terror, and slow growth among our major trading partners, notably Japan and much of Europe,” explained Mr Mankiw.

“These shocks led to a recession, which surely would have been deeper if the President had not responded with his pro-growth fiscal policy. The tax cuts maintained consumer spending and helped stimulate investment spending in a difficult time,” the economist argued.

In a separate development, Mr Mankiw argued in a recent report that the government should adopt a ‘dynamic scoring’ system when calculating its budget projections. This system purports to take into account the positive effect of tax cuts on revenue flows, and Mankiw argues produces a more accurate assessment of the budgetary situation going forward.

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