Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: T L Comiskey who wrote (11190)	1/7/2003 6:34:12 PM
From: American Spirit	Read Replies (2) \| Respond to of 89467

Market down today on Bush's tax cuts news. Well so much for that big stimulus to the market. Anyone buying Phillip Morris today?

To: T L Comiskey who wrote (11190)	1/7/2003 8:09:59 PM
From: stockman_scott	Respond to of 89467

UPDATE - War worries loom over Bush stimulus plan Tuesday January 7, 7:34 pm ET By Glenn Somerville WASHINGTON, Jan 7 (Reuters) - The Bush administration expects its stimulus plan to pep up U.S. economic activity but analysts said fears of an Iraq war and a ballooning deficit could dampen hopes for stronger growth and consumer spending. The $674-billion plan would sharply accelerate income-tax cuts and end taxation of dividends -- centerpieces of President George W. Bush's bid to reinvigorate the economy and heighten his chances of reelection next year. "This would be a massive amount of stimulus if the entire package was in fact enacted with an immediate reduction in income tax rates," said economist Lynn Reaser of Banc of America Capital Management Inc. in St. Louis, Missouri, possibly adding a full percentage point to growth this year and next. But the rub will be winning Congressional approval for the proposals, which would extend over a 10-year period. Democratic opponents and some financial analysts said the proposals were too narrowly focused on providing benefits to wealthier Americans and could also swell the budget deficit. "It's not designed to stimulate the economy as a whole ... and at best would mildly stimulate the stock market, creating nice headlines but not necessarily more jobs or productivity," the Democratic Leadership Council said in a statement. It accused the administration of pursuing a "bizarre and disreputable goal" of cutting taxes for the wealthy by eliminating dividend taxes so that money is redistributed from the middle class to the rich. In addition to speeding up the across-the-board rate cuts agreed in 2001, the Bush proposals offered immediate tax relief for married couples and families with children, and more incentives for small businesses to spend on new equipment. The White House says it will give 92 million taxpayers an average tax cut of $1,083 this year. Up to 35 million people who get income from dividends could benefit. MARKETS ARE WARY Financial markets were wary of the plan, evidently concerned that lawmakers will try to substantially alter it as seemed likely. The Dow Jones Industrial Average closed down 32.98 points at 8.740.59 but the high tech-laden Nasdaq Composite Index eked out a 10.25-point gain to close at 1,431.57. Mark Vitner, an economist with Wachovia Corp. in Charlotte, North Carolina, said he strongly favored moving the proposed income-tax rate reductions forward, even if that means less tax money flowing into Treasury's coffers. "I know there's going to be damage in the budget, but I favor reducing tax rates now mainly because the primary need is to sustain the recovery now," Vitner said. Wall Street economists have forecast the U.S. budget deficit may hit a record $300 billion in the current financial year ending Sept. 30 -- surpassing the previous record $290-billion shortfall set in fiscal 1992. Analysts said that if hoped-for growth does not quickly materialize to generate more tax revenue or is muted by lingering fears about war and terrorism, the government might then have to borrow more to pay its bills -- and to pay higher interest rates to do so. "We clearly have a very substantial deficit problem without adding another round of tax cuts," said Bob Bixby, executive director of the Concord Coalition, a budget deficit watchdog founded in the 1990s."It just looks like the deficit will balloon." The U.S. economy, after enduring a shallow recession in the first three quarters of 2001, began a slow recovery late in the year that continued through 2002, but at a sluggish pace. Most economists think the nation's fourth-quarter gross domestic product grew at only a 1 percent to 2 percent annual pace. "I think the timing of this package is especially good because it gives business people and consumers confidence that policymakers are going to be there to help when we work through a variety of geopolitical problems," economist Mark Zandi of Economy.com in West Chester, Pennsylvania. JOBS MAY GET BOOST Zandi estimated the proposals, if enacted into law, could add a half percentage point to U.S. economic growth in 2003 and create "probably close to a million jobs by early 2004." A White House fact sheet outlining the plan said Bush's Council of Economic Advisers projected the package will help the economy create 2.1 million jobs over the next three years. Eliminating dividend taxes -- thus ending the effective double taxing of money that companies report as profits and shareholders receive as dividends -- will definitely perk up stock markets, Zandi said. "There should be somewhere close to a 10 percent pop in stock prices from this package," he said, adding that some of that already has occurred in the early trading sessions of 2003 in anticipation of the stimulus proposals. But casting a shadow across economic prospects is the risk of war with Iraq, said Rajeev Dhawan, director of Georgia State University's economic forecasting center in Atlanta. "The stimulus package is a good one that could add a half percentage point a year to the long-term growth rate and if you combine that over a 10-year period it's very, very significant," Dhawan said. He said putting a stimulus package into place appeared to be a secondary priority for businesses and consumers worried about potential disruption from war with Iraq, reduced oil supplies from Venezuela and other issues. "If and until you get those resolved, all this stimulus could go to waste if businesses feel scared about investing and consumers are afraid to spend," Dhawan said.