Economists attack Bush's 'madness'

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Jul 7, 2002
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More than 400 economists, led by 10 Nobel prize winners, have criticised President George W Bush's economic policy in the US press.
In a full-page advertisement in the New York Times newspaper, the economists said that proposed tax cuts would not help the economy in the short term.

They also said the planned cuts would benefit rich people the most.

Nobel laureate Joseph Stiglitz told the BBC's World Business Report that Mr Bush's plans were "fiscal madness, fiscal irresponsibility".

President George W Bush could spend less than a sixth of what he is planning to on stimulating the economy, Mr Stiglitz said.

"When you are designing a tax programme, you look for the biggest bang for the buck," he said.

"So rather than spending $600bn on the tax proposal that Bush has, the kind of proposals I'm talking about would cost under $100bn and deliver enormous amounts, directly and in the short run, without delivering huge long-run deficits."

Trouble

Mr Stiglitz is a well-known thorn in the side of more conservative economists.

Formerly a senior figure in both the World Bank and the International Monetary Fund, he stepped down in order to criticise both agencies, and the US too, for their policies towards the developing world.

He is also a staunch critic of the current White House - and a signatory of Tuesday's advert in the New York Times.

The campaign is backed by the Economic Policy Institute, a liberal Washington DC think tank.

Retrograde step

Mr Stiglitz was at pains to stress that far from improving the situation, the package Mr Bush is pushing would make things worse by stocking up massive deficits for the future.

The tax cuts would mostly benefit taxpayers who are already wealthy, and are therefore the most unlikely immediately to spend their windfall - which, he said, is what the economy needs.

More than half Mr Bush's planned spending is devoted to removing tax on share dividends, but most taxpayers are already exempt through holdings in pension funds and similar vehicles, he said.

"You should get money out to people who will spend it and spend it quickly," he said.

"So that means getting money to the unemployed, who have had their consumption cut back, so that would make a big difference."

A proper stimulus package would also give money to the individual states, almost all of whom are experiencing a revenue crunch as the tax take falls and so - under balanced budget rules - must slash spending.