Taxing Rhetoric:

"A lot of people feel as if they have been looking through the window at somebody else's party," empathized President Bush at a recent tax-cut pushing event. "It is time to fling those doors and windows open and invite everybody in.''


He further pronounced, "I strongly believe that a tax relief plan is an important part of helping our country's economy recover."


Democrats agree on both counts. It's just that the plan President Bush will send to Capitol Hill today would achieve neither inclusiveness, nor economic recovery. The kind of proposal that would accomplish both -- and more -- closely resembles the one for which Democrats have been pushing.


Here's why:


Bush's tax cut is mostly for the rich. If there's one thing W. knows, it's partying. And he knows very well that the people who would benefit the most from his tax cut -- by far -- are those who have guzzled half the keg straight from the nozzle, and are grooving to their favorite CDs with lamp shades on their heads. (They are also his family, his friends, his classmates, his campaign contributors, and yes, himself. Bush recently boasted at a campaign event, "I'll be in the top bracket.")


Bush's plan would give the largest tax cut to those in his own bracket -- a 6.6 percent cut, compared to between 0 and 6 percent cuts for taxpayers in the other brackets. In actual dollars, the top 1 percent would get almost half of Bush's largesse. In addition to the income tax cut, Bush would gradually repeal the estate tax, which also benefits primarily the rich -- the tax only kicks in for estates worth $675,000 or more.


Democrats have been pushing for a tax cut that benefits the middle class, and many oppose repealing the estate tax. In other words, they target the people who really have been looking in on the nearly decade-long party.


Bush's plan won't fix the economy. When using fiscal policy to speed up the economy, the goal is to increase the amount of buying, fast. (As consumers demand more goods, businesses increase production and hire more workers, thereby stimulating economic growth.) Government spending -- not tax cuts -- is usually the quickest method. If government is gunning for tax cuts, the cuts should go to people who will spend their windfall right away -- not those who will save it.


Understandably, the rich are the last people to whom you want to give a tax cut under these circumstances. They will save a large percentage of their money, while the poor (out of necessity) are likely to spend a large chunk of theirs. Since Bush's plan gives the bulk of the tax cuts to those who can already afford the Mercedes, the vacation home, and the Palm Pilot, his tax cut is the dumbest, slowest way to spur the economy. Democrats are pushing for progressive tax cuts that benefit the poor and middle class more, and the rich less. Their proposals are targeted to quicker spenders, and would speed the economy more effectively.


Paying down the debt saves people money, and it's responsible too. The larger the tax cut, the less is left over to pay down the debt -- and debt reduction is better policy than huge tax cuts. First, a promise to reduce the debt with the current surplus is one that is easy to keep. When government revenues fall (due to a recession), it is simple to stop paying down the debt; it is politically problematic and economically errant to raise taxes from their surplus-era levels during a recession. And a smaller debt means that government can spend less on interest payments.


Furthermore, paying down the debt will allow people to keep more of their earnings, just as tax cuts will -- but in a fiscally responsible way. Why? When government is borrowing trillions, demand for money is high. The price of borrowing -- i.e., interest rates -- is steep. When the debt goes down, so do the rates. Mortgages and car payments become more affordable. Lower-interest loans reduce the cost of a college education and encourage business investment, strengthening the economy as a whole. Democrats have pushed for more restrained tax cuts and proactive debt reduction, while Bush has under-prioritized the debt.

Reflecting the unpopularity of his plan, Bush has adopted liberal rhetoric to push his conservative policies. And he's hoping that no one will notice. So far, few have. The Bush administration clearly wants to keep it that way.


Tuesday, Treasury Secretary Paul O'Neill told The Washington Post, "I don't think this society should still be operating with a robber-baron premise as the basis for how we discuss public policy. I think it is really corrosive to have this argument about the rich and the poor." In other words, the Bushies want to give the bulk of the tax cut to the rich -- and a comparative pittance to the poor -- but they want to keep it a secret. It's not class warfare to say so -- it's the reporting of empirical fact. (Next thing you know, Bush will declare that the proponents of his plan have good hearts, and that to call them on the boondoggle is to engage in the "politics of personal destruction.")


Perhaps the Bush team is sensitive about accurate media coverage of the plan because if people knew the truth, they would oppose it. In fact, according to a late-January Washington Post poll, more than half of those polled prefer a "smaller tax-cut plan" to a larger one. In a Los Angeles Times poll last May, only 16 percent of those polled wanted to spend most of the surplus for a tax cut, while 81 percent said we should "use the surplus for a small tax cut and use most of the money to strengthen Social Security and Medicare and to reduce the national debt."


It's not only polls that reflect skepticism about Bush's plan. Recall that during the campaign, even members of Bush's own party viewed his tax cut as a joke. Republican congressional candidates ran from the tax-slashing image of the man at the top of their ticket. In fact, so preposterous seemed Bush's proposal, that even House Speaker Dennis Hastert had given up on Bush's "supersize it" philosophy and was calling instead for targeted tax cuts done piecemeal. In his confirmation hearings, Treasury's O'Neill said he would not "make a huge case that [the tax cut Bush promised during the campaign] is the instrument to ensure that we don't go into recession."


Republicans have made much of Alan Greenspan's tepid endorsement of tax cuts. (Greenspan actually refused to endorse Bush's own plan, and said tax cuts would only help in the unlikely event that the economy went into a full-blown recession.) Nevertheless, the Bush team has used the threat of economic slump to drum up support for the plan. And the media has helped turn the tide by giving the impression that Bush-sized tax cuts are inevitable.


Huge, recessive tax cuts are only inevitable if the powerful treat them that way. The next few months present a choice for Washington: Support a plan that is a windfall only for the rich, and that will do little to head off an economic downturn. Or, push a progressive and fiscally responsible proposal that could strengthen the economy. The facts -- and public opinion -- are on the progressives' side. But if they're not careful to stifle the melodiously misleading Bush rhetoric, their political advantage may slip away.

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