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  CBO: Extending the Bush tax cuts will hurt the economy, reduce incomes
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Last EditedRP  Sep 28, 2010 05:06pm
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AuthorEzra Klein
News DateTuesday, September 28, 2010 07:50:00 PM UTC0:0
DescriptionCBO Director Doug Elmendorf testified before the Senate Budget Committee today and dropped something of a bombshell. Extending the Bush tax cuts, he said, will "probably reduce income relative to what would otherwise occur in 2020." The reason is simple: Debt.

Elmendorf doesn't deny that tax cuts stimulate the economy. But they don't stimulate it that much, he says, and over the long run, the net economic growth from the tax cuts will be quite small. The net deficit impact won't be. "Lower tax revenues increase budget
deficits and thereby government borrowing," Elmendorf said, "which crowds out investment, while lower tax rates increase people’s saving and work effort; the net effect on economic activity depends on the balance of those forces."
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