NEWS SOURCES | ARCHIVES OF PAST MONTHS

Fed's Greenspan Says Forecast of Faster U.S. Growth Is `Not Unreasonable'

Washington, May 21 (Bloomberg) -- Federal Reserve Chairman Alan Greenspan said forecasts for the U.S. economy to pick up in the second half are ``not unreasonable'' and the risk of deflation is remote.

The chairman's testimony to Congress suggests central bankers will refrain from lowering interest rates at their late-June meeting. The economy may grow at a 3.8 percent annual rate in the fourth quarter, up from 1.6 percent in the first three months, based on the median forecast in a Bloomberg News survey.

``The consensus expectation for a pickup in economic activity is not unreasonable, though the timing and extent'' are uncertain, Greenspan said. ``Readings on production and employment have been on the weak side, but the economic fundamentals -- including the improved conditions in financial markets and the continued growth in productivity -- augur well for the future.''

Report Finds Tax Deductions Spur Charitable Giving

A new report from Independent Sector, a D.C.-based coalition of philanthropic organizations dedicated to strengthening the nonprofit sector, finds that the ability to take a deduction for charitable contributions plays a major role in donors' decisions about how much they give to charity.

Although current U.S. tax law permits those who itemize their charitable contributions to claim a deduction, approximately two-thirds of all taxpayers take the standard deduction and do not itemize their returns. The report, Deducting Generosity: The Effect of Charitable Tax Incentives on Giving, examines the differences in giving patterns between households that itemize and those that do not and finds that the former donate 37 percent more than non-itemizing households. The Senate recently approved legislation designed to encourage charitable giving by allowing non-itemizers to claim a charitable deduction, but the bill must go back to the House for approval before it can be signed into law by the president.

"This report illustrates the connection between tax policy and philanthropy," said Independent Sector president and CEO Diana Aviv. "Indeed, it is evident that tax policy is a powerful tool to encourage giving. Now that the Senate has passed the CARE Act legislation to encourage greater charitable giving through the use of tax incentives, we urge the House of Representatives to move expeditiously with the same legislation, so the president can receive a bill on his desk as soon as possible."
Independent Sector Report Details Influence of Tax Itemizing Status on Charitable Giving. Independent Sector Press Release 4/15/03.

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House Republicans Retreat From Plan to End Dividend Tax

House Republican leaders agreed today to abandon President Bush's plan to eliminate all taxes on dividends, forging instead a plan to reduce the taxes on both dividends and capital gains.

The plan, developed by Bill Thomas of California, chairman of the Ways and Means Committee, would lower the tax on dividends to equal that on capital gains, and would lower the gains tax for most investors to 15 percent from 20 percent.

House leaders acknowledged that today's plan was born of the Senate's refusal to accept Mr. Bush's full tax package. It won lukewarm support from the White House, where a spokeswoman called it a "positive step forward" while saying that Mr. Bush still preferred the full tax cut.

Senate leaders also promised to get more of the administration's tax cut in the final plan. Bill Frist of Tennessee, the Senate majority leader, said he preferred even a temporary repeal of the dividend tax to the House approach, in the hopes that the repeal would later be made permanent.
Taken From the NY Times David Firestone and Richard W. Stevenson 5/1/2003

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Reduce Dividend Taxes, Not End Them

Ways and Means Chairman Bill Thomas, R-Calif., "is honing a plan to replace" Bush's proposed $396 billion cut in dividend taxes "with a slimmer plan that would trim the top rate of dividend and capital gains taxes to 18 percent," Roll Call reports.
Government Executive Reports 4/30/03

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Both Sides May Be Wrong About the Budget

Listening to senators and representatives argue about the budget this month, one might have thought that the future of the United States economy was hanging in the balance.

J. Dennis Hastert, the speaker of the House, asserted that the budget, including most of the large tax cuts that President Bush had proposed, "lays down the blueprint for the future of the country."

Senator Don Nickles, the Oklahoma Republican who is chairman of the Budget Committee, declared: "The economy has not been growing. Frankly, we will never balance the budget if the economy is not growing. This budget allows and provides for a growth package."

Then Senator Kent Conrad of North Dakota, the top Democrat on the committee, took the floor, calling the budget "radical, reckless, dangerous and extreme." He added, "The best economists in America tell us that this budget proposal hurts long-term economic growth and threatens our economic security."

So which side is right? The answer, which could never have been gleaned by listening to the Congressional debate, is probably neither. In a report last month that went largely unnoticed with all the war news, the Congressional Budget Office, which provides Congress with impartial, expert economic counsel, concluded that President Bush's tax and spending plan "would provide a relatively small impetus in an economy the size of the United States."

The budget was indeed important, but not because of its effect on the economy. All the talk about the wisdom of tax cuts and the dangers of deficits was a smoke screen masking the fundamental philosophical divide that has separated Democrats and Republicans since the New Deal.

Republican politicians, by and large, want to shrink the role of the government outside the military. They have never much cared for Social Security and Medicare, the crown jewels of Democratic lawmaking. They dislike most aid to education, environmental regulations and labor laws. They want to cut taxes not so much to buoy the economy as to take money away from the government. Budget deficits, in the Republican view, are better than surpluses. If there is extra money, they believe, the government will waste it.

Democratic politicians generally want to expand the government other than the military. They want universal medical insurance and more generous Medicare benefits. They want more environmental protection and stricter regulation of business. They are comfortable with high income taxes because the poor and the middle class bear little of the burden. And most worry about budget deficits, not because of their economic effect but because deficits prevent the government from offering more services. If the deficits expected over the next decade grew out of a new national health insurance program, say, instead of income-tax cuts, few Democrats would complain.
Taken from the NY Times By David E. Rosenbaum 042703