Even as the administration prepares for war in Iraq, Bush has revived trickle-down economics with an audacity that's leaving old supply-side fanatics breathless. He's pushing new tax-exempt savings accounts, more tax-favored retirement accounts, tax-free dividends, accelerated income-tax cuts and an end to inheritance taxes. Every reputable analysis shows that these provisions overwhelmingly benefit the very rich -- the same top 1 percent who are already flying higher than ever before. By the administration's own admission, these initiatives will generate $1 trillion in total deficits over the next five years. That's not counting the cost of going to war, occupying Iraq and defending the homeland from further terrorist attacks.
Parroting Reagan supply-siders, Bush argues that these windfalls for the rich help everyone because they encourage rich people to save and invest more of their incomes, which will grow the economy. A more likely outcome is that the rich will shift existing savings from taxable to nontaxable accounts. Whatever extra money they invest is as likely to go outside the United States as inside -- trickling out, as it were.
The only thing that's actually trickling down -- and will become a torrent in the future -- is the pain of severe cuts in social services that working people and the poor rely on. The pain is avoided at the top but grows larger every step down the income ladder.
Much of the pain is hidden from public view. To be sure, the new Bush budget squeezes domestic discretionary spending, which houses many of these services. But the cuts are proportionately larger at the state level, and larger still in the towns and cities where most working-class and poor families are clustered.
State governments, faced with sharply declining tax revenues, are already deep in the hole to the tune of some $58 billion. Rather than help them -- a logical way to stimulate the economy -- the Bushies explicitly decided to let the states go under. Tax breaks to the wealthy were deemed more important. Because almost no state has the constitutional authority to run a deficit, the direct consequence of this White House insouciance is that state budgets all across the country are being slashed.
Who gets hurt? Take a guess. State budgets are composed largely of social services. The cuts will disproportionately hit working families and the poor. States pay up to half the costs of Medicaid, most of the costs of health care for lower-income people who don't qualify for Medicaid, more than half the costs of special education, and most of the costs of prisons and law enforcement -- as well as the costs of homeless shelters, youth services, elderly services, mental-health services, K-12 education, community colleges and state colleges. All these are now on the chopping block. Not surprisingly, it's the most populous states with the largest cities and most concentrated populations of working poor -- New York, California, Massachusetts, Illinois, Ohio -- that have to cut the most.
The real burden is shifting to the cities and towns themselves. It's here that the trickle-down pain is most apparent but also least visible to the national media. The Bushies know Americans are becoming ever more segregated by income. That means relatively wealthy suburban townships will get by unscathed. They are less reliant on social services to begin with than poorer locales and they'll be able to raise property taxes to fill the funding gap for their schools, police officers and the few social services their inhabitants need. But poorer towns and cities, with growing needs and tiny tax bases, are getting clobbered. Cuts in school aid and health services are already taking a huge toll. Boston's school budget of $650 million is being chopped by $100 million, which means fewer teachers and more kids crowded into each classroom.
Trickle-down pain is amplified by the lousy economy and soaring costs of housing and health care. The U.S. Conference of Mayors reported in December that demand for food aid increased by 19 percent last year, with working families topping the list of the most needy. Nearly two-thirds of 25 cities surveyed indicated that they had had to cut the amount of food provided to the poor, rationing meals and food donations. Demands for homeless shelters also have soared. Cities report that people remained homeless for an average of six months.
In a time of peace and prosperity, further tax breaks for the wealthy (whose after-tax incomes skyrocketed 120 percent over the last two decades) would be grossly unfair, and trickle-down cuts in social services simply cruel. In a time of terrorism, war and economic hardship, these distorted policies are shameful. Bush preaches we're-all-in-this-together patriotism but practices scathing divisiveness. That the Bushies are getting away with all of this by focusing the nation's attention on external threats to America is the cruel irony of our time.
