Congressional BudgetOffice:Bush plan wont help economy

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Bush's Tax Plan Won't Boost

Economy, CBO Analysis Finds

By a WALL STREET JOURNAL Staff Reporter

WASHINGTON -- The Congressional Budget Office said that President Bush's tax and spending proposals will do far less to spur economic growth in coming years than the White House suggests -- and might not provide any kick at all.

For the first time, CBO used what's known as "dynamic scoring" to estimate the favorable macroeconomic and revenue effects of budget proposals, a move tax-cut advocates have long urged and deficit-phobes feared. The range of estimates released Tuesday by CBO said adding supply-side effects could add as much as 10% to conventional estimates of the five-year cost of the Bush budget or subtract as much 17%, depending on the model used.

The administration plans this week to release its own estimates that suggest Mr. Bush's proposed dividend and other tax cuts would recoup some 30% to 40% of their cost by generating more economic growth and tax revenue, a senior administration official said Tuesday.

Looking at the overall Bush budget, not just tax cuts, CBO said its analysis "suggests the proposals, on net, would probably increase labor supply [or total hours worked in the economy], but decrease investment and the stock of capital."

In any event, the effects would be small, it said. "Under most assumptions, the proposals' supply-side effects would raise or lower" the total size of the economy "by less than a percentage point, on average, from 2004 to 2013," depending on the economic model used.

Updated March 26, 2003