It's your economy

No real commentary here, just that a column in the November 30 NY Times argues that the recent uptick in the economy was not mostly due to the tax cuts:

70 years of experience has demonstrated that rising demand is crucial, and must come first. Only then do suppliers really become active, to satisfy the customers knocking on their doors.

The Bush tax cuts encourage this customer demand, though not efficiently. They work best if every dollar of forgiven taxes is spent. Unfortunately, only a third is being spent, according to Joel Slemrod and his colleagues at the Office of Tax Policy Research at the University of Michigan. The rest has been saved or used to pay down debt, the office found in recent surveys.

By this reckoning, the Bush tax cuts will not do much to lift the economy. The $117 billion in fiscal 2003 gives birth to only $40 billion in effective stimulus. Much more of the cuts, perhaps every nickel, would have been spent if the money had been channeled to the states instead, to pay the salaries of teachers who were fired to balance budgets. The economy surged in the third quarter, but as Mr. Slemrod notes, "the tax cuts were not a major part of that growth."

The same analysis says that even that limited stimulus has already peaked and that by sometime in 2006 "the stimulus aspect of the Bush tax cuts thus shifts into reverse."

Interesting reading.