- The Washington Times - Sunday, January 19, 2003

The chairman of the White House Council of Economic Advisers says the economy faces serious risks of a continued slowdown if President Bush's stimulus plan is not enacted by Congress.
R. Glenn Hubbard, who has emerged as a central player in developing the president's tax-cut proposals, said in an interview Thursday that the Democrats' opposition to Mr. Bush's plan "risks delaying business investment" that is vital to an economic recovery.
He also accused the Democrats of attempting to "fine tune the economy" with a stimulus plan that he said would have little if any effect on the economy because it is too small and temporary. The Democratic tax cuts would last one year.
"We know from past studies that temporary tax cuts have a much smaller effect on people's behavior than permanent tax cuts. The Democrats' tax cut plan is temporary, and I don't expect it to have much of an effect on the economy. I don't think it's a stimulus in any sense of the word," Mr. Hubbard said.
As the president's economic adviser played up the administration's package, three Democratic White House contenders visited Iowa yesterday, criticizing Mr. Bush and wooing party activists in an unofficial kickoff to the race for the party's 2004 presidential nomination.
Sen. John Kerry of Massachusetts, Rep. Richard A. Gephardt of Missouri and former Gov. Howard Dean of Vermont began the day with public appearances in Des Moines and planned to end it together last night at a Democratic dinner in Marion.
With six Democratic challengers in the race and more expected in the coming weeks, the three candidates wasted no time yesterday before criticizing Mr. Bush's tax-cut proposals and the $1.35 trillion tax-cut package he pushed through Congress in 2001, saying it was driving up the budget deficit and weighing down the economic recovery.
Signaling that the administration is stepping up its drive to pass Mr. Bush's nearly $700 billion tax-cut plan, Mr. Hubbard said that any delay in Congress to act on the president's proposals this year posed "very important risks to our economy."
"The risks that have been on the horizon for a while are the risks of a delay in the investment recovery. We've talked to business executives, and they remain hesitant about investment plans. They want to be sure that the recovery is more viable, and that's what the president is trying to do in this package," he said.
He acknowledged that too often economic policy can come too late to affect the economy, "and that is certainly true of the Democratic plans. The government should not try to fine-tune the economy," Mr. Hubbard said.
"What concerns me when I see these plans on the Democratic side is that they have an eerily 1960s feel to them, believing that the government can zip in and out with a stimulus," he said.
At a time when Mr. Bush's approval polls have slipped from the low 60s to the low 50s and fewer jobs are being created, the shape of the economy has now become the president's biggest political problem, campaign strategists said.
Blue-chip corporate economists are forecasting that economic growth will be in the mid-2 percent range in the first three months of this year, and Mr. Hubbard said he thought that even that estimate was "a bit optimistic."
The president's economic advisers believe that the absence of new business investment is the chief reason for the economy's lackluster performance and that only Mr. Bush's long-range tax cuts, especially elimination of the tax on stock dividends, can effectively raise capital spending on equipment and plant expansion to boost future growth rates.
"The consumers have actually held up reasonably well, but business investment spending needs to be increased," Mr. Hubbard said.
At the same time, he dismissed suggestions on Capitol Hill and among political pundits that the president will have to compromise to get his tax-cut package through Congress.
"I know there are people who say there will be all these compromises. But I would invite people to look at the first two tax bills: the big tax cut in 2001 and the so-called stimulus package that passed last year. In each case, the president got pretty darn close to what he asked for," Mr. Hubbard said.
Although there have been numerous reports that Mr. Hubbard soon plans to leave his job to return to teaching or that he is willing to take a post in the Treasury Department, he said, "I'm happy here. This is an enormously fun job."


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