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Tuesday, January 14, 2003

Svenska Dagbladet, Stockholm, Jan. 8: To do away with taxes on stock dividends is of course welcome and will probably promote the U.S. economy in the long run, but the point of time is ill-chosen. The tax reductions should have been supplemented with cuts in the federal budget, especially considering a possible costly war against Iraq.
Wrong direction
Instead Bush chooses to extend the unemployment benefits, which may lessen the job application intensity among the unemployed and lead to higher unemployment. A strength of the American economy, which distinguishes the U.S.A. from for instance Germany and Sweden, is that support and subsidies are not seen as unconditional rights. It is a pity that Bush in this regard is on his way in the wrong direction.
The Sydney Morning Herald, Jan. 8: The Bush administration says U.S. share prices should rise at least 10 percent in response to the abolition of income tax on share dividends, the central component of the stimulus package.
The cost to the Treasury of this tax cut alone is $300 billion over 10 years. The immediate benefits flow to the nation's wealthiest citizens -- two-thirds of dividend income goes to the 8.4 percent of taxpayers who earn over $100,000 a year. However, some 70 million Americans own stock personally, or through pension or retirement plans. The value of U.S. stock portfolios has fallen by up to 50 percent over the past three years and any renewed investor confidence would push up prices.
Left out in the cold
Theoretically the tax cut is sound because it will end the double taxation of company profits, at the source and when they are distributed to shareholders. But the stock market and the economy are not the same things. Historically the so-called "trickle-down" effect has consistently failed to provide the hoped-for stimulus, and assist the most needy. Even a generous assessment of the package -- which considers the extra cash which modest income tax cuts will put back into the average family budget -- must conclude that many Americans will be left out in the cold. Unemployment recently hit a nine-year high of 6 percent. Consumer spending accounts for two-thirds of America's $10.5 trillion economy, so having more cash in circulation may create more jobs. However, the cost of the package is enormous -- and risky.
Liberation, Paris, Jan. 8: We might be living in the last weeks before war. Each passing day sees an improvement of the military means necessary for an action against Saddam Hussein.
Despite his careful wording, Chirac appears decided that the French military will join in the combat if the U.N. gives its support.
The French, a majority of whom are against this, do not realize that history is knocking at their door in the form of the first important war the 21st century.
All comparisons with the first Gulf War can only emphasize two immense differences. No one doubts that the forced annexation of Kuwait was a crime that the pacifist community of nations could let go unpunished.
There is no similar justification for a second conflict, even if the proliferation of terrifying weapons is a grave and lasting problem.
The other difference: a president from the left is paradoxically more free to adopt a warmongering attitude than a president from the right, because he can count on support from his opposition.
Chirac has played a double-game quite skillfully. On the one hand, he has distanced himself from Bush by making him bend to U.N. procedures. On the other, he reassured him of the solidity of the French alliance.