The economic package unveiled by U.S. President George W. Bush on Tuesday, coming on top of a huge tax cut announced last summer, is proof that the Bush administration is determined to revive the U.S. economy, which is still ailing from the collapse of a stock-market bubble. The stimulus plan is also good news for the stagnating world economy. As things stand, though, it is unclear whether the plan will show its intended effect.
The 10-year $674 billion package aims, among other things, to eliminate all taxes on corporate dividends paid to shareholders and speed up scheduled reductions in income tax rates. With the Bush administration preparing to attack Iraq, it is difficult not to regard these and other stimulus measures as a preemptive move designed to minimize the economic fallout if war breaks out.
Prospects for the U.S. economy, the main engine for global growth, are of acute concern, particularly to Japan and other countries that depend on the huge U.S. market for exports. The Japanese economy, the second largest in the world, now appears to be sliding back into recession. However, Japan will be gambling if it takes a U.S. recovery for granted. Wall Street on Tuesday showed a lackluster reaction to the tax relief plan -- as if to support the view that its effect on U.S. growth may be limited.