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EDITIONS
 Tuesday, 7 January, 2003, 19:09 GMT
Experts sceptical about Bush plan
Incoming House Minority Leader Nancy Pelosi and John Spratt
Democrats say the plan is an "illusion" to help the rich


President George W Bush's package is about politics as much as economics.

His father won a war and lost an election on the strength of the recession that followed the Gulf conflict a decade ago - Mr Bush sees the danger of repeating the mistake.

The centre-piece of the policy the president outlined in Chicago is the removal of taxation on the dividends shareholders receive.

His hope is that this benefit to stockholders will raise stock prices and so restore confidence in the whole economy.

Doubts

Whatever their merits, economists are sceptical that Mr Bush's measures will transform the economic climate overnight.

Firstly, the proposals do favour the better-off, and the better-off are not the people most likely to increase their spending when windfalls come their way.

Secondly, other factors are dominant at the moment, namely the fall in investment by companies as they try to realign after the glut of the 1990s.

On top of that, the prospect of war and its effect on oil prices and consumer confidence is an inescapable backdrop.

'Political clarity'

Not that consumers are lacking much confidence despite all the gloomy talk.

Spending is still rising at more than 4% a year whatever the pessimism of pundits appears to be about the future.

Whatever the economics of the current situation, we do now have some political clarity.

The lines for the 2004 presidential election are drawn.

Democrats favour some tax cuts, targeted at the poor but not at the expense of public spending on social programmes like education and health.

Mr Bush will go to the poll promising "to give the people back their own money", as he puts it.

It's the age old right-left argument, which voters see in different ways at different times, depending on how secure they feel and how much they feel they need the safety net of the state.


Talking PointTALKING POINT
 US economy
Will the Bush plan work?
See also:

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