Bush's Proposed Tax Cut Would Damage Fiscal Responsibility
26 January 2001 By Stentor Danielson There were times this past year when it seemed like George W. Bush was campaigning against Bill Clinton instead of Al Gore. Now that he has taken over Clinton's office, Bush seems intent on following up on the central theme of his candidacy: "I am not like Clinton."
Among Bush's first acts in office was to reinstate the policy of barring U.S. foreign aid to organizations that advocate abortion. He has promised to revisit many of Clinton's eleventh-hour executive orders, which, though often accomplishing good ends, were made on shaky legal grounds. He will doubtless sign many bills that would already be law were it not for Clinton's veto pen. And we would hope he can keep his pants on in office.
But Bush also seems intent on undoing one of the best legacies of the Clinton years: the fiscal discipline that turned a seemingly endless string of defecit spending into several years of record budget surpluses. His proposed tax cut plan has already gained bipartisan Senate support in Phil Gramm (R-Tex.) and Zell Miller (D-Ga.).
Granted, the budget surplus was not as much Clinton's doing as many of his boosters would have us believe; the Republicans who stormed into control of Congress after the 1994 elections were instrumental in securing fiscal discipline, as were Federal Reserve Chairman Alan Greenspan and the jump in revenues as the Internet drove the economy sky-high.
Bush has made a swift change in his tax cut rhetoric since the election. During the campaign, his line was that a surplus meant that the government was "overcharging" its citizens, and therefore the money should be given back.
But the recent faltering in wildly overpriced tech stocks has brought the President back to the more traditional argument that tax cuts stimulate the economy. Bush and his supporters have cleverly begun forecasting economic doom and gloom, setting themselves up for either "see, we told you the economy was going down the toilet" or "the economy did as good as it did because of us." The "people deserve a tax cut" line has fallen by the wayside. A more cynical columnist might suggest that Bush sees his tax cut as an end in and of itself, rather than a means to some loftier goal of justice or economics.
The first thing to do is look at the numbers. Bush campaigned on a tax cut of $1.3 trillion over 10 years. White House spokesman Ari Fleischer recently upgraded the tax cut to $1.6 trillion by pushing the time frame back a year, to 2002 through 2011. The estimated budget surplus over the next 10 years is optimistically estimated at $2.3 trillion, assuming that the government does not the violate the consensus that the surplus generated by Social Security ought to remain in a "lockbox."
This leaves Bush with something under a trillion dollars over 10 years to increase spending for the military, create a prescription drug plan for seniors and fund his education plan.
On top of this, the narrow Republican majority in the House, the 50-50 split in the Senate, and the illegitimacy of his victory in the eyes of many Americans has given rise to a widespread belief that the Bush administration needs to compromise with Democrats. If he pushes ahead with a straight Republican agenda, expect to hear the words "a uniter, not a divider" repeated sarcastically by liberals over and over until you wish someone would start talking about "chads" again. So we can expect Bush and congressional Republicans to compromise from time to time. Compromising with Democrats generally doesn't involve less spending.
Tax cut opponents ignore the consistent advice from Greenspan, the nation's economic Dalai Lama. Greenspan, revered by the Left, Right and Center, has long insisted that reducing the debt is a more effective way to help the economy than cutting taxes.
Reducing the debt would have two additional benefits: it would make modest tax cuts possible and also prepare us better for any coming recession. Each dollar we use to pay back the national debt takes a few cents' worth of interest off our next bill. Smaller and less controversial tax cuts like reducing the estate tax and the "marriage penalty" would pay for themselves if passed in tandem with a debt-reduction measure. The money that we would otherwise have paid in interest can return to the taxpayer.
One might ask those conservatives who were so outraged by the example set by Clinton's personal behavior, "what kind of example does a government uninterested in paying off its debt set?" And those who denouce the government taking the public's "hard-earned money" might well wonder why we let so much of that money go to waste on avoidable usury instead of freeing it up to be used for good or given back.
The surplus is the proverbial seven years of plenty that proceed the seven of famine. Though I disparaged Bush's references to impending economic doom just a few paragraphs ago, there is truth to the idea that our economic outlook is not so rosy as it once was. Every year there are more elderly Americans and fewer young ones to support them. This is bound to increase the government's social services bill (thus leaving less money "left over" as a surplus), while reducing the tax base of working people. Economic hardship will only exacerbate the situation.
But a low national debt gives the government more leeway to begin borrowing again should rising costs overtake falling revenue. Granted, Greenspan prefers tax cuts over increased spending, but this assumes that those who benefit from the tax cut will spend their bonus. Hard economic times do not encourage spending by the rich to create jobs for those who have lost out. Furthermore, the situation may often arise in which the people who need the most help have no taxes to reduce. Paying down the debt simply opens up one more option in the government's bag of tricks.
We are lucky to have experienced the recent economic good times in the event that things turn ugly. Like Joseph (of many-colored-coat fame) we must use these times of plenty to prepare ourselves for the coming famine.
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