Bush tax cuts 'may sap confidence'

The Bush tax cuts risk undermining confidence in the health of US public finances, according to the Bank for International Settlements, the forum for the world's central banks.

The BIS said in its annual report that the Bush administration and the US Federal Reserve had been right to take action to boost the economy.

But it said the $350bn tax cuts package agreed by Congress had "not been helpful" and there was a danger that debt would reach unsustainable levels.

The BIS warned that the US risked exacerbating imbalances in the US economy which could result in a painful correction in the future....

Its report also echoes private-sector economists' concerns that the US government may be reluctant to rein in fiscal policy when the economy is out of danger.

"The tax cuts should have been more short-term and reversible," said George Magnus, global economist at UBS....

--Financial Times