News Release

January 4, 2002

Sen. Daschle’s latest economic stimulus "plan" is economic bunkum, say experts

WASHINGTON, D.C.—Senate Majority Leader Tom Daschle (D-SD) today criticized the Bush Administration's economic policies and claimed the administration's $1.35 trillion tax cut has consumed the budget surplus and left the government financially unprepared to fight both a war and a recession. Daschle also presented a plan that he said would stimulate the economy, aid the unemployed, reduce the tax burden on businesses and keep interest rates low. In response to Sen. Daschle's remarks, Cato Senior Fellow Alan Reynolds said:

"Senator Daschle once again takes the side of tax collectors rather than taxpayers. 'Low interest rates,' Daschle claims, 'are the best possible tax cut.' But interest rates do not rise and fall with the U.S. budget. That is simply a hoax.

"Japan has the world's lowest interest rates and the world's biggest budget deficit. Besides, if taxes were less onerous, American families and firms would not have to borrow so much. Trying to fix the government's budget at the expense of family budgets is a bad idea that never works."

Chris Edwards, Cato's director of fiscal policy, said:

"Senator Daschle's new stimulus plan is the latest muddled attempt by federal politicians to make themselves appear relevant in the face of the current recession. His plan is a hodgepodge of spending increases and nearly useless tax cuts combined with contradictory rhetoric. Topping the list of tired rhetoric is Daschle's attempt to tie the budget situation to interest rates.

"Daschle perpetuates an urban myth when he argues that tax cuts cause higher interest rates through the federal budget balance. After all, we went from a huge surplus last year to near-zero surplus this year while interest rates have fallen. Where is Daschle's evidence that Bush's tax cut affected interest rates?

"A stranger contradiction is Daschle's straddle on the effectiveness of tax cuts. In the same breath Daschle claims President Bush's tax cut was too big, then implicitly admits that tax cuts are the best economic medicine by laying out his own tax cut plan."