Economic Effect of Tax Cuts

Output and Efficiency
Before President Bush took office, his aides began arguing in favor cutting taxes to offset a likely recession. That raises several issues. First, is (or was) there a recession? Although the economy undoubtedly slowed, whether it entered a recession or not remains unclear. Moreover, Johns Hopkins University economist Christopher Carroll has presented evidence suggesting that the administration's rhetoric may, in part, be responsible for declining consumer sentiment and the resulting slowdown in economic activity.
Second, as Bush economic advisers Larry Lindsey and John Taylor have acknowledged in the past, tax policy is a clumsy tool for fine-tuning the economy. Recessions can come and go in the amount of time it takes to implement changes in taxes.
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