"Continuation of the Bush tax cuts has been the subject of much discussion in US political and economic circles.
Those on the right object to most forms of increasing government revenue, while the left wants to narrow disparities of income and wealth.
The tax cuts’ two bills, in 2001 and 2003 – changed laws so that personal income tax rates were reduced, exemptions for the Alternative Minimum Tax increased, and dividend and capital gains taxes also cut.
Yet in the debate, it seems of no moment to either side whether the tax cuts were effective in achieving their goal of spurring business investment and making the US economy more competitive.
Our own examination of US non-residential investment indicates that the reduction in capital gains tax rates failed to spur US business investment and failed to improve US economic competitiveness.
The 2000s – that is, the period immediately following the Bush tax cuts – were the weakest decade in US postwar history for real non-residential capital investment.
Not only were the 2000s by far the weakest period, but the tax cuts did not even curtail the secular slowdown in the growth of business structures.
Rather, the slowdown accelerated into a full decline.
During each decade from the 1950s to the 1990s, growth in real gross non-residential investment averaged between 3.5 per cent and 7.4 per cent per decade. During the 2000s, it averaged a mere 1 per cent.
Similarly, the growth rate for investment in equipment and software ranged from 5.7 per cent to 9.9 per cent in these earlier decades. It averaged 1.9 per cent during the 2000s.
Average growth in non-residential structures ranged from 1.3 per cent to 5.7 per cent from the 1950s to the 1990s. During the 2000s, it declined by 0.8 per cent.
The stated goal of cutting taxes to spur US capital investment was not achieved.
Where did the benefit of the tax cuts go?
We have maintained that an increasing proportion of the benefits of US monetary and fiscal policy are leaking outside the US.
Washington sets policy as if the US were a closed economic system and rarely considers ramifications outside the country.
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kilde: http://www.ft.com/cms/s/0/9e6a18ec-c019-11df-b77d-00144feab49a.html
