Bush's reckless tax plan
5/15/2003
RESIDENT GEORGE W. Bush is on the verge of outdoing his father once again. The record one-year US budget deficit was in 1992, the elder Bush's last year in office. The figure was $290 billion. The nonpartisan Congressional Budget Office is predicting that this year's deficit will exceed $300 billion. The new CBO report comes just as Congress is preparing to approve a colossal $984 billion increase in the statutory national debt limit -- to $7.38 trillion.
Yet Bush's response is to brush aside worry about the deficits and push relentlessly for a tax cut that would pile on still more debt. The $350 billion, 10-year cut proposed in the Senate would add $44 billion to the deficit this year, while the $550 billion version already approved by the House would add $60 billion.
Bush argues that tax relief is needed to stimulate the sluggish economy to create new jobs. But would it? Just two years ago Bush and Congress approved a massive tax cut -- including $300 and $600 checks to provide instant stimulus -- yet the economy continued to drift downward.
When Bush took office, 6 million Americans were unemployed -- 4.2 percent of the work force. Those numbers have risen steadily, with a spike after Sept. 11, 2001, and now stand at 8.8 million and 6 percent -- a disheartening increase of nearly 50 percent in just over two years. In 1993, by contrast, a Clinton administration tax increase was followed by seven years of economic growth.
If the 2001 tax cut didn't generate new jobs, why will a new tax cut succeed? The question is all the more pressing because the current Bush plan, including its goal of freeing stock dividends from taxation, would give an enormous proportion of its benefits to the wealthy. In general, rich people save the money they get from tax breaks, which does little to boost the economy. MIT economist Franco Modigliani, a Nobel laureate, is one of those surprised that tax cut proposals have gone as far as they have this year. ''It is incredible that Congress would even consider such a tax cut,'' he said recently in an interview.
Bush said during a speech in Indianapolis on Tuesday that those concerned with deficits should support ''fiscal discipline.'' But the version of fiscal discipline contained in his budget is simply a massive underfunding of major initiatives, including education reform and homeland security.
In both cases, Washington has imposed new and weighty responsibilities on the states and localities but has not paid its share. The result is that key services are deteriorating while layoffs are widespread across the country. This is hardly a jobs program.
Congressional Democrats offer a smaller and more sensible tax cut that would help the states and lower-income people. But the best course would be no deficit-financed tax cut now and a budget that tries to keep the national debt under $30,000 per person.
This story ran on page A14 of the Boston Globe on 5/15/2003.
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