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Tax cuts expiry could hit economy
WASHINGTON: Treasury Secretary John Snow told Congress on Tuesday the US economic recovery could falter if lawmakers failed to make permanent the tax cuts President George W. Bush has won since taking office.
"You can't think of anything more harmful to an economy that's coming out of the difficulties this economy has had and beginning to show good progress, than a tax increase," Snow said in testimony to the House of Representatives' Ways and Means Committee.
"It could halt this recovery in its tracks," he said.
A call to make the tax cuts permanent was central to the budget proposal Bush unveiled on Monday. Some provisions for tax cuts begin to expire at the end of this year.
Democrats claim the tax cuts, which total some US$1.7 trillion over 10 years, were skewed to the wealthy and are unaffordable at a time of record-high budget deficits. All of the major Democratic presidential candidates have called for at least partial repeal.
In testimony focusing on the president's budget plan, Snow argued that consumers and businesses needed to be assured the tax cuts would not be rolled back.
"The ability of American families and businesses to make financial decisions with confidence determine the future of our economy," he said. "And without permanent relief, incentives upon which they can count, we risk losing the momentum of the recovery and growth that we have experienced in recent months."
Snow credited the tax cuts with putting the US economy on a sustainable growth path and said staying the course was the best way to boost employment.
"The life signs of this economy are all good and that always leads to jobs," he said. "I'm confident we'll see a nice pick up in jobs in the months ahead."
Democrats have blasted Bush for his economic stewardship, pointing repeatedly to the 2.3 million jobs lost since the president took office.
The president has also taken political heat for large and growing budget deficits, which reflect the tax cuts, higher defence and security spending and lower revenues because of a sluggish economy.
In Bush's budget plan, the administration forecast a record deficit of US$521 billion in the current fiscal year, but projected deficits of less than half that size for budget years 2007-09.
Snow did his best to convince the committee the administration was committed to getting the deficit down.
"Make no mistake; President Bush is serious about the deficit," he said. "We see it as unwelcome, but manageable."
"We can manage this deficit, and we can cut it in half over the next five years by controlling spending and growing our economy," Snow said.
The Treasury chief told the panel "entrenched and large" deficits could push interest rates up, but financial markets appeared comfortable with the administration's plans.
"If the tax cuts were imprudent, the financial markets would already be registering that in the price they charge for funding the debt of the United States," he said. "So the financial markets are giving us the benefit of the doubt (saying) we will solve the problem."
(China Daily 02/05/2004 page12)
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