The Heritage Foundation

News Releases on Taxes

May 9, 2003

May 9, 2003 | News Releases on Taxes

2001 Tax Cut Has Helped U.S. Avoid International Economic Woes

WASHINGTON, MAY 9, 2003-The 2001 tax cut has not only helped the economy, it likely is "saving the United States from the worst of the economic stagnation now confronting most of the world," says a new paper from The Heritage Foundation.

That's hardly the conventional view, as Heritage senior research fellow Ronald Utt readily admits. Tax-cut critics in Congress often cite the slow-growing economy to justify their opposition to approving a new cut. The 2001 cut hasn't bolstered the economy, they claim, so why pass another?

World Bank data show why: With only part of the 2001 tax cut in effect, the U.S. economy grew at twice the rate of the European economy last year. Indeed, Utt points out, the United States has outperformed 12 of the top 15 countries listed in the World Development Indicators 2002. Only Australia and Canada did better.

"Our growth is all the more impressive when you consider that it occurred in an environment of severe economic setbacks and international risks that other countries managed to escape," Utt says. "America's stock-market bubble of the late 1990s was worse than Europe's, and U.S. businesses and consumers have yet to overcome their war worries."

Critics may counter that a one-year snapshot proves little, but when Utt analyzed economic performance over longer periods of time, he found essentially the same trend. France's experience is typical: Citizens there have seen their buying power decline relative to America's over the past two decades-a period during which France embarked upon an aggressive tax-and-spend policy. Today, taxes in France consume more than 45 percent of the national economic output, compared to just over 29 percent in the United States.

"If Congress wants to ensure that we continue to lead the world economically, it will approve a large and substantial pro-growth tax cut," Utt says.

More information is available online at Heritage's "Reality Check" on taxes:

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