The American economy is rebounding, and most economists credit the Bush tax cuts of early 2001, combined with the Federal Reserve’s string of interest rate reductions which brought the short-term federal funds rate down from 6.5 percent in November 2000 to 1.75 percent by the end of 2001. That’s the lowest rate in more than four decades.
So those Capitol Hill politicians who fought the tax cuts vociferously last year have some explaining to do.
A primary reason for the strength of consumer spending was the tax cut. Although designed for long-term effects, for most taxpayers the future rate reductions were a greater source of economic well being, and therefore a greater stimulus to spend.
Against this background, the nation can begin dealing with the long-term budget problems of Social Security and Medicare.
Source: Martin Feldstein (Harvard University), Tax Cuts, Rate Cuts Put the Economy Back on Track, Wall Street Journal, March 13, 2002.
For text (WSJ subscribers) http://online.wsj.com/article/0,,SB1015983449189526200,00.htm
For more on Effects Of Tax Cuts http://www.ncpa.org/iss/tax
FMF Policy Bulletin\19 March 2002
