Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: CYBERKEN who wrote (150124)	6/1/2001 2:15:23 PM
From: asenna1	Read Replies (3) \| Respond to of 769667

The Zero-Sum Tax Cut By David Brooks - June 1, 2001 NYT WASHINGTON -- As I'm sure you do all the time, I recently spent an evening browsing through some old essays from the tax-cut debates of the 1980's. What was striking about those debates, especially compared to the arguments that now surround the Bush tax cuts, was how epic they were. The supply-siders considered themselves Reagan revolutionaries. They wrote tracts with grand names like "Wealth and Poverty" and "The Way the World Works." They believed they were leading a moral and cultural reformation, not just boosting the gross domestic product. Their central argument was that taxes must be cut in ways that encouraged risk-taking. "The primary and essential character of wealth is metaphysical, not physical," wrote Warren T. Brookes, a Washington Times columnist, "and is the direct result of the creativity of mind, not the availability of raw materials." Marginal rate cuts were designed to unleash the creative juices in America's most daring individuals. The hero and moral exemplar in the supply-side world view was not the passive consumer, but the entrepreneur, who drives the economy and the country. The grandiose rhetoric drove the critics of supply-side economics crazy. But the themes, translated into Reagan speeches, hammered home the point that tax cuts were intended to revive the national spirit. They overwhelmed Democratic arguments that the top income quintile was benefiting the most. At their best, the supply-siders also reinforced a core value of the Republican Party. The early Republican leaders believed in the sanctity of work and ambition. "I hold the value of life is to improve one's condition," Lincoln declared. Through policies ranging from the Homestead Act to support for the transcontinental railroad, the Republicans encouraged and lionized industry and productivity. Following the model of Alexander Hamilton, they believed that one of government's primary tasks was to incite vigor in the populace. Under the Bush administration, the tone has dramatically changed. President Bush lionizes the nurturer, not the producer. He celebrates the teacher, the faith-based volunteer. The nation's greatness, Mr. Bush has declared, will be preserved through "small, unnumbered acts of caring and courage and self-denial," with the emphasis on small. These are not the values of the daring entrepreneur, but of the middle-class parent. In a country plagued by divorce, this family-oriented compassionate conservatism has a lot going for it. But it doesn't offer much in the way of guiding principles for reforming a major national institution like the tax code. Mr. Bush's main argument for the cut was that the surplus is "the people's money," not the government's money. Unlike the supply-side argument, this is a straight zero-sum proposition. There's a pot of money and we should have it, not the folks in Washington. No wonder the polls show only moderate support for a tax cut. "I want that money" is not exactly an inspiring rallying cry or a coherent organizing principle for tax reform. Substantively, the original Bush plan was ambitious, but it was chewed up in Congress by Republicans and Democrats alike. The bill that has emerged is a hodgepodge of slow-motion phase-ins and phase-outs, exemptions, deductions, and entitlements. Most of the cuts don't take effect for several years, and the whole bill becomes void in 2010. Meanwhile there are so many little goodies that reporters are still combing through and finding them. As a few economists have noted, rarely has such a big tax cut had so little social effect. Meanwhile, a once-in-a-decade chance at serious tax reform has been blown. The grubbiest part of the tax cut was foisted on Mr. Bush by the Democrats — the checks that will go out to taxpayers later in the year, at $300 for singles and $600 for married couples. This bit of pump-priming is exactly the sort of thing Reagan Republicans always fought. Instead of rearranging incentives to encourage innovation and production, it encourages more shopping. It treats wealth as a purely material thing: We've got some money. We're going to give it to you. We hope you'll vote for us. You may have loved supply-siders, or you may have thought they were ideologues and buffoons, but at least they had a theory of how to use fiscal policy for the common good. Every proposal was designed to produce entrepreneurial vigor and creativity. Now what we may be getting in divided Washington is not ideological gridlock but a mishmash of small-scale ideas and freely distributed goodies. In this way the surplus, and the remarkable opportunity it represents, are frittered away.

To: CYBERKEN who wrote (150124)	6/1/2001 2:23:46 PM
From: ThirdEye	Read Replies (2) \| Respond to of 769667

Bad Heir Day By PAUL KRUGMAN There's a scene in the 1966 British comedy "The Wrong Box" in which the son of an irascible plutocrat pushes his father's wheelchair along the top of a cliff, responding with a dutiful "Yes, father" to each outpouring of verbal abuse. Then the old man waves his hand at the industrial landscape below, and declares, "When I'm gone, all this will be yours." "Yes, father," replies the son — and pushes him off the cliff. That scene came back to me as I delved further into the absurd piece of tax legislation that a House-Senate conference devised and that George W. Bush triumphantly signed last weekend. The Bush tax plan was always peculiar: in order to hide the true budget impact, its authors delayed many of the biggest tax cuts until late into the 10-year planning period; repeal of the estate tax, in particular, was put off to 2010. But even that left the books insufficiently cooked, so last week the conferees added a "sunset" clause, officially causing the whole bill to expire, and tax rates to bounce back to 2000 levels, at the beginning of 2011. So in the law as now written, heirs to great wealth face the following situation: If your ailing mother passes away on Dec. 30, 2010, you inherit her estate tax-free. But if she makes it to Jan. 1, 2011, half the estate will be taxed away. That creates some interesting incentives. Maybe they should have called it the Throw Momma From the Train Act of 2001. That's by no means the only weird element in the tax bill. Almost as bizarre is the sudden tax increase for upper-middle-income families scheduled for the end of 2004. Anyone who has been following the tax debate — in particular via the extremely informative Web site of the Center on Budget and Policy Priorities — knows that the alternative minimum tax is a major land mine lurking in the road ahead. Under the tax bill just passed, the number of taxpayers subject to this tax will balloon from 1.5 million to more than 36 million, with the result that many people — typically well-off but not rich families who already pay high state and local taxes — will find the tax cut they thought they were getting snatched away. So why not fix the law? Because that would raise the budget impact of the tax cut by hundreds of billions of dollars. Still, the conferees felt they had to do something; so they included a partial fix for the A.M.T. problem. But even that partial fix, if maintained over the whole decade, would have made the tax cut too big to fit the budget resolution. So guess what? The A.M.T. fix is scheduled to expire in 2004, which means that according to the law millions of families will face a sudden large tax increase. In short, the tax bill is a joke. But if the administration has its way, the joke is on us. For the bill is absurd by design. The administration, knowing that its tax cut wouldn't fit into any responsible budget, pushed through a bill that contains the things it wanted most — big tax cuts for the very, very rich — and used whatever accounting gimmicks it could find to make the overall budget impact seem smaller than it is. The idea is that when the absurdities become apparent — when mobs of angry junior vice presidents from New Jersey start demonstrating against the A.M.T., or when elderly multimillionaires develop a suspiciously high rate of fatal accidents — Congress will always respond with further tax cuts. And if the result of all those tax cuts is to prevent the government from ever providing the things Mr. Bush promised during the campaign, like prescription drug coverage under Medicare or increased aid to education — well, that was also part of the plan. Someday, responsible politicians — or is that an oxymoron? — will have to untangle this mess. And yes, that means that some of the tax cuts Congress just approved will have to be rescinded. (How about a deal that fixes the A.M.T. and pays for the fix by returning tax rates on the top bracket to their 2000 level? Just a thought.) But for now, it's a defensive game. The administration, having successfully rammed through a ridiculous tax bill, will try to bamboozle us on other matters. So the next question is whether men of honor will insist on honest accounting when it comes to Social Security reform. Yes, Senator Moynihan, this means you.