“It all comes down to a gamble,” writes Daniel Altman in today’s New York Times.

“President Bush has promised that if the White House’s economic plan becomes law, the economy will flourish and deficits will shrink. But if the plan should fail, as some experts argue, the government will be handcuffed by trillions of dollars in shortfalls as it faces a difficult future.”

“Who is most likely to win? For the experts, handicapping this bet requires taking sides in a debate about the path from saving to investment and from there to innovation and long-term growth. The administration says that its policies will follow that path to its end, leading to an enduring surge in economic growth. But its argument rests on two notions that remain highly disputed among economists, including more than 400 who predicted the policies’ failure in an advertisement in The New York Times last week.”

“The first is that the proposed changes in the tax code — including an end to taxes on some dividends and expanded tax-free savings accounts — will increase households’ eagerness to save. If this proves true, the extra saving would funnel more money to companies, allowing them to invest in new capital.”

“Economic theory suggests that the economy would grow at a faster rate, though only temporarily before returning to its old rate of expansion.”

“The second notion is that the accumulation of enough capital would, by itself, lead to innovation. This happy turn of events could occur if workers, faced with lots of useful tools, find new and more efficient ways to use them. Workers’ productivity could increase at a faster rate, leading to permanent improvements in economic growth and higher standards of living.”

“The administration’s proposals assume that the first notion is correct. Richard H. Clarida, the Treasury’s assistant secretary for economic policy, asserted that eliminating the tax on some dividends would lower the cost of capital. He also said that expanding tax-free savings accounts would increase private saving. Both effects would encourage investment.”

“Mr. Clarida put a great deal of stock in the second notion, too. ‘I don’t think it’s fair to say that the jury’s still out” on the innovation effect, he said. ‘We expect that it would be positive, but we’re still in the process of quantifying what that would be.’ “

“Yet both notions have elicited skepticism from economists — even those who have generally supported the White House’s agenda so far.”

“‘ You can’t permanently raise the growth rate just by capital deepening,’ ” said Robert E. Hall, a professor of economics at Stanford who was invited to the White House last month for a symposium on its economic plan. He reiterated that more saving and investment would yield only a one-time increase in gross domestic product.”