President George W. Bush has been in office for half a year, so I can now provide an interim report card on his economic programs. His major accomplishment, of course, is the income-tax cut, which receives high marks for removing lots of money that Congress would otherwise spend on "worthwhile social programs." Unfortunately, most of the revenue reduction for 2001 takes the form of a rebate, which is a way to lower taxes without providing incentives for work and investment. Another troublesome feature is the gradual phase-in of the tax-rate cuts. Just as in the 1982-83 recession, the expectation that future tax rates will be lower than current rates provides an incentive to postpone work and production and, thereby, worsens the economic contraction. It is a little surprising to see this mistake repeated during the possible recession of 2001. However, in the long run, the tax-rate cuts and the elimination of the inheritance tax will be major positive forces.
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