Nobel economists back Bush

Bush is eliminating tax on dividend payouts

Three Nobel prize winning economists have stepped forward to support President George W Bush's tax cut package, in response to 10 who condemned it earlier this week.

The National Taxpayers Union has sent a letter signed by 115 economists to the US Congress supporting the policy.

Government can... hinder economic growth through excessive taxes... or unnecessary spending

National Taxpayers Union

The letter said that the "bold tax and budget agenda" would help end the "continued sluggishness in the American economy".

Among the signatories were Nobel prize winners Milton Friedman, James Buchanan, and last year's winner, Vernon Smith.

On Monday the left-leaning Economic Policy Institute placed an advertisement in the New York Times newspaper, signed by 400 economists, warning against Mr Bush's tax programme.

Deficit blow-out debate

"As a rule, government cannot create wealth or expand the economy," Wednesday's letter said.

"Government can, however, hinder economic growth through excessive taxes, high marginal tax rates, overregulation, or unnecessary spending," it continued.

"Accordingly, elected leaders should be working to adopt measures that curb or halt government policies that are hurting the economy."

The centrepiece of Mr Bush's $674bn package was eliminating taxes on shareholder dividends.

But the letter also called on the government to show spending restraint to keep the deficit under control.

Mr Bush's economic programme will push the deficit up to record levels.

The Economic Policy Institute said cutting tax on dividends was "not credible".