The $670 billion "stimulus" proposal that the president made
his first order of business for 2003 is sort of a microcosm -- or to
use language familiar to the Austin Powers fan in the Oval Office, a "mini-me" -- of
all Bush administration economic policies.
It's not designed to stimulate the economy as a whole -- virtually
all economists agree about that -- and at best would mildly stimulate
the stock market, creating nice headlines but not necessarily more jobs
or productivity.
Its centerpiece -- in this case the abolition of taxes on corporate
dividends, along with an acceleration of the individual tax rate cuts
enacted in 2001 -- is a tax cut heavily targeted to the wealthy.
It includes a few scraps for other worthy beneficiaries, including low-to-middle-income
taxpayers, inflated by hype, anecdote, and phony accounting into a banquet
of goodies.
It's shockingly expensive, adding another $670 billion over 10 years
in red ink to a federal budget already staggering into deficits in part
caused by the $2 trillion tax cuts of 2001. Moreover, the new tax cuts
are permanent, not temporary.
And its transparent purpose is to create a bidding war in Washington
that will lead to one of three politically pro-GOP scenarios: a competition
between Republican tax cuts and Democratic spending proposals; a fight
over how tax cuts should be distributed, in which the president will get
what he can for the wealthy while taking credit for benefits for everybody
else; or a legislative logjam that will enable the administration to shift
blame if the economy continues to struggle.
The pretense that this proposal has anything to do with the economy doesn't
run very deep, even in the West Wing. About halfway through a briefing
on the plan, White House spokesman Ari Fleischer started defending the
regressive distribution of the dividend proposal as an inevitable part
of any "tax relief" initiative, as if it were still early 2001
and there were still a big sack of future budget surpluses that needed
to be divvied up.
Moreover, the tax break for corporate dividends that is the centerpiece
of the plan will create a serious economic undertow in the form of higher
borrowing costs for state and local governments, whose tax-exempt bonds
will suddenly face new competitive pressure in the marketplace. According
to California Treasurer Phil Angelides, the higher costs could amount
to about $155 billion over the next 10 years. Far from heeding the pleas
of state and local government officials from both parties for help in
meeting such important national challenges as creating a homeland security
system, maintaining health care for the uninsured, and implementing the
president's own education reform bill, the White House has managed to
come up with a proposal that would actually make things much worse, with
low-to-medium income Americans bearing the brunt of both higher taxes
and lower services.
But while the short-term beneficial impact of the Bush proposal would
be somewhere on the scale that leads from "little" to "nothing,"
the long-term costs to the public treasury, to the ability of the federal
government to meet our common needs, to our ability to keep long-term
interest rates low, and to the confidence of investors and consumers in
the economic management of the country, are all large and real. This package
is proof positive that the administration literally does not give a damn
about fiscal discipline. If enacted, it would doom the president's own
supposed agenda of Medicare and Social Security reform to a starvation
diet.
This proposal should be dead on arrival in Congress, which should focus
on putting security first for all Americans rather than securing tax breaks
for a few.
That means a major expansion of funds for state and local "first
responders" to terrorist attacks, as part of a comprehensive homeland
defense plan.
But a security-oriented plan could also include other investments that
we know will contribute to victory in the war against terrorism and a
stronger country in the future, including domestic counterintelligence,
better security at our ports, and energy independence.
There's no question, absolutely no question, that post-9/11 insecurity
is the single most important cause of short-term and long-term uncertainty
among consumers, investors, businesses, and trading partners alike. To
the extent that we can reduce insecurity without ruinously mortgaging
our fiscal and economic future, we will have created the conditions for
a return to 1990s levels of economic growth, innovation, productivity,
and income gains.
The administration has no economic plan, no fiscal plan, and no security
plan to accomplish this paramount goal. Instead, it remains committed
to the bizarre and disreputable goal of becoming the first society in
the history of the human race to make tax cuts for its most fortunate
citizens its top wartime priority.
The most maddening aspect of the administration's marketing campaign
for these and other tax cuts for the wealthy is its effort to denounce
any criticism as "class warfare," as the president has personally
done in comments to the press. We are second to none in our opposition
to class warfare tactics among Democrats, and we have the scars from intra-party
fights on the subject to prove it. But if there's anything worse -- much
worse -- than old-fashioned Democratic schemes to "soak the rich,"
it's Republican schemes to redistribute income from the middle classes
to the comfortably rich, at a time when we are fighting a war on terrorism
and are facing a huge fiscal crisis associated with the retirement of
the baby boom generation.
All the talk in the White House that its "stimulus" proposal
is focused on the "investor class" is an amazingly brazen admission
of its class warfare tactics. Those tactics are clearly aimed at bribing
just enough middle-class and retired citizens to join the wealthy in chowing
down on tax cuts to constitute something like a political coalition.
That's an odd but revealing priority at a time when we may be sending
our men and women to war in Iraq, while continuing to guard against the
ever-present possibility of new terrorist attacks here at home. Moreover,
even an Enron accountant could see the gathering damage from exploding
deficits, not only to the nation's long-term economic prospects, but also
to the other important demands with a call on our national resources,
from Medicare reform to stabilizing Social Security.
But maybe that's the whole idea. After all, some of the president's closest
allies, led by |ber-lobbyist Grover Norquist of Americans
for Tax Reform, are openly advocating serial tax cuts as a strategy for
permanently paralyzing the federal government. They seek to accomplish
through the indirect means of reducing revenues what former House Speaker
Newt Gingrich failed to achieve through the direct means of shutting down
public buildings and cutting off services.
Instead of attempting to outbid Republicans by offering their own tax
cut or spending "bribes" to key voting groups, Democrats should
make the big picture of values and priorities the centerpiece of their
critique of the president's economic policies. It's time to emphasize
the national interest in security, fiscal discipline, and long-term economic
growth, instead of continuing to sacrifice it to the narrow special interests
of the Republican Party and its hungry constituency groups. The GOP's
weird and inverted agenda of class warfare, aimed at encouraging people
to strengthen their bank accounts by weakening their country, contradicts
every word the president has said about American pride and unity in the
face of threats domestic and foreign. It's long past time to demand that
the administration and the Republican Party make their policies match
their rhetoric and their promises. At a time when we are at war with terrorists,
we should not be at war with our own commonwealth.
