KIPLINGER RECOMMENDS

Home > Taxes

COMMENT

DEL.ICIO.US

DIGG

CHECK OUT:

EXECUTIVE POLL

Should Congress lift the ban on drilling offshore and in the Arctic National Wildlife Refuge?

OUR PREMIUM CONTENT

The Kiplinger Tax Letter
The Kiplinger Agriculture Letter
The Kiplinger California Letter
Kiplinger's Biofuels Market Alert
Kiplinger's Retirement Report

SUBSCRIBER HELP

CURRENT LETTER

By Knight Kiplinger

The Kiplinger Washington Editors

July 3, 2008

The largest U.S. banks are hurting badly, and the pain is starting to spread. Most small and midsize banks are still ready to lend to businesses, but they're getting nervous. This week's Kiplinger Letter examines the outlook.

ALSO IN THIS ISSUE: Jobs, Employer Health Costs, Estate Taxes, Retail Retrenching, Legal Trends, Infrastructure Spending

PREVIOUS ISSUES

TRY THE LETTER: Subscribe | See Sample | Get Free 30 Day Trial

YOUR FEEDBACK

SUBSCRIBERLOG: Got a topic you'd like to discuss? Or a problem or question? Please join our exclusive forum for Letter subscribers only.

ASK US: A Kiplinger Letter editor will promptly answer subscriber questions.

OPEN FORUM: Share your insights and analysis with other visitors.

I am a strong believer border security, keeping track of work and student visas, etc but do you think that deportation of illegal immigrants is a waste of money?

-- Dingobiscuit

Do Tax Cuts Really Spur Stronger Growth?

Everybody loves tax cuts in a campaign. But they may not always give the economy as much oomph as supporters claim.

Worth Reading: The Quick Take from Kiplinger

October 2007

Center on Budget and Policy Priorities

The Center on Budget and Policy Priorities is a nonpartisan, nonprofit policy organization that examines how state and federal fiscal policy and public programs affect low- and moderate-income people. This report was compiled by Aviva Aron-Dine, Chad Stone and Richard Kogan.
Aron-Dine is a policy analyst who specializes in federal tax policy. Chad Stone is the center's chief economist and specializes in the economic analysis of budget and policy issues. Richard Kogan is a senior fellow at the center, specializing in federal budget issues.

Republicans have long credited the tax cuts that President Bush pushed through Congress in 2001 and 2003 with leading to the long, happy economic expansion. And with the economy slowing, Republican presidential candidates say even discussing the prospect of not extending those cuts at the end of the decade could make things worse.

But did the tax cuts put an extra roar into the recovery that followed the slump of 2001? Maybe not, cautions the Center on Budget and Policy Priorities (CBPP). After studying a broad range of indicators, the center concluded that "the current recovery has, on balance, been somewhat weaker than average. In fact, with respect to GDP, consumption, investment, wage and salary, and employment growth, the current period is either the weakest or among the weakest since World War II."

The CBPP says the economy "has overall been weaker than its performance in the early 1990s" -- following substantial tax hikes. Those increases had been enacted as part of a deficit reduction plan that eventually led to budget surpluses. But the 2001 and 2003 tax cuts "have contributed to an exceptionally sharp deterioration in the fiscal outlook," the center says. "Since the last economic peak, the budget has swung from a substantial surplus to a deficit equal to about 2 percent of GDP in fiscal year 2006."

READER COMMENTS