NCPA - National Center for Policy Analysis

A Plea for Fiscal Stimulus Now

March 4, 2003

Economist Martin Feldstein, who was chairman of the Council of Economic Advisers under President Reagan, is urging Congress to advance President Bush's tax cuts -- which are scheduled to phase in over the next five years -- to take effect this year. Doing so, he argues, would reduce the risk of slow growth and possible decline in the months ahead.

  • He notes that consumer spending over the next few years is particularly vulnerable if households raise their savings rates to rebuild the wealth lost through stock-price declines.
  • He points out that weaknesses in Europe and Japan are suppressing American exports.
  • Low capacity utilization will restrain business investment even after the uncertainties of the Iraq war are resolved.
  • Then there are the budgetary problems of the states -- which must be met by reduced spending, he advises.

In contrast to the president's plan, notes Feldstein, "Congressional Democrats would prefer to stimulate demand by one-time aid to state and local governments and by one-time payments to low-income households."

Source: Martin Feldstein (Harvard University), "Stimulate Now," Wall Street Journal, March 4, 2003.

For text (WSJ subscription required),,SB1046742441384513520-search,00.html


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