The Congressional Budget Office says that extending the Bush-era tax cuts through 2011 would boost economic growth.

But CBO director Douglas Elmendorf says that would provide the “least bang for the buck” when compared with (in order of impact): extending unemployment benefits, reducing payroll taxes, increasing business investment tax credits, providing more aid to states and investing in infrastructure.

Extending the Bush tax cuts permanently (through 2020) would create “large negative effects” – drag down economic growth – if they were deficit financed because larger deficits would “crowd out” private investment.

“In sum, and as CBO has reported before, permanently or temporarily extending all or part of the expiring income tax cuts would boost income and employment in the next few years relative to what would occur under current law. However, even a temporary extension would add to federal debt and reduce future income (economic growth) if it was not accompanied by other changes in policy.

"A permanent extension of all of those tax cuts without future increases in taxes or reductions in federal spending would roughly double the projected budget deficit in 2020….Without significant changes…federal debt would be on an unsustainable path that would ultimately reduce income (economic growth).”