Nobel winners attack Bush economics

Bush seems unconcerned by record budget defecits

Ten Nobel prize winning economists have attacked President George W Bush's tax cutting policies.

On Monday, Mr Bush sent his budget - designed to help revive the US economy and boost military spending - to Congress for approval.

Overcapacity, corporate scandals and uncertainty have and will continue to weigh down the economy

Nobel economists

But the combination of cutting taxes and increasing spending will mean that the US is set to notch up record budget deficits greater than those run-up by his father more than 10 years ago.

The most pointed criticism by the economists is that the proposed tax cuts will not deliver what they are meant to do - to provide a boost to the US economy which is struggling to recover from a recession in 2001.

"Regardless of how one views the specifics of the Bush plan, there is wide agreement that its purpose is a permanent change in the tax structure and not the creation of jobs and growth in the near term," the economists said in a statement published by the Economic Policy Institute.

Nobel economic laureates Joseph Stiglitz, Franco Modigliani and Lawrence Klein reserved much of their scorn for the proposal to cut the tax on share dividend payouts.

Stock market gains?

This was a key component of President Bush's plan, aimed at helping to shore up the struggling stock markets.

"The permanent dividend tax cut, in particular, is not credible as a short-term stimulus," the statement said.

"Moreover, the proposed tax cuts will generate further inequalities in after-tax income," it said.

The statement, which has been signed by almost 400 economists, will be formally released at a news conference by the Washington-based think-tank on Monday 10 February.

"Overcapacity, corporate scandals and uncertainty have and will continue to weigh down the economy," they said

Alternative plan

The economists offered an alternative economic plan.

"To be effective, a stimulus plan should rely on immediate but temporary spending and tax measures to expand demand and it should also rely on immediate but temporary incentives for investment," they said.

The seven other Nobel winners who signed the statement were George Akerlof, Kenneth Arrow, Daniel McFadden, Paul Samuelson, Robert Solow, Douglass North and William Sharpe.