Citation URL: http://www.urban.org/SamaraRPotter

Establishing a sustainable fiscal policy is central to the nation's long-term economic prospects, but requires a clear understanding of how past and current policies affect future resources. The federal budget should, but does not, provide this information, both because the task is difficult and current accounting practices are deficient. This paper shows that adjusting the official budget for many accounting and economic issues implies a bleak fiscal outlook that presents policymakers with difficult choices. We also explore options to restore fiscal sustainability directly and to improve the budget process that governs fiscal decisions.

[© Brookings Institution] Last June, President George W. Bush signed the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). This policy brief provides an assessment of the tax cut. Our findings suggest that EGTRRA will reduce the size of the future economy, raise interest rates, make taxes more regressive, increase tax complexity, and prove fiscally unsustainable. These conclusions question the wisdom and affordability of the tax cut and suggest that Congress reconsider the legislation, especially in light of the economic downturn and terrorist attacks that have occurred since last summer.

[© Brookings Institution] This paper summarizes and evaluates the Economic Growth and Tax Relief Reconciliation Act. Enacted in 2001, EGTRRA is the biggest tax cut in 20 years, and features income tax rate cuts, new targeted incentives and estate tax repeal. Our central conclusions are that EGTRRA will reduce the size of the future economy, raise interest rates, make taxes more regressive, increase tax complexity, and prove fiscally unsustainable.

Return to list of authors