If you work for a living in George W. Bush's America, you're a sap.
Take a quick look, or a long one, at the tax code as Bush has altered it during his three years as president, and you're compelled to conclude that work has become a distinctly inferior kind of income acquisition in the eyes of the law. Bush tax policy rewards investment and inheritance. Relying on work for your income, by contrast, turns you into a second-class citizen.
In his first round of tax cuts in 2001, Bush got Congress to phase out the estate tax by 2010. Last year, with Republicans in control on Capitol Hill, he reduced the top tax rate on dividends from 39.6 percent to 15 percent, and brought the capital gains tax rate down from 20 percent to 15 percent as well.
This year, his new budget proposes that families be allowed to shield as much as $30,000 yearly on their investment income, which will abolish all remaining taxes on such income. Meanwhile, the income tax cuts to most middle-class families don't exceed a couple of hundred dollars, and payroll taxes for employees remain untouched. In part, this devaluing of work is simply an expression of Bush family values. As Kevin Phillips points out in his new biography of the Bush dynasty, the Bushes don't do anything so vulgar as going into professions. Rather, the clan lives by its connections. For George W. and his brothers, work has meant riffling through Pappy's Rolodex. Theirs is the cronyest form of capitalism.
But a broader theory is at work here, too. It says that investment, rather than labor, powers economic growth, so rewarding investment is merely the most direct way to help the economy. As Ernest S. Christian, a former Treasury official in the Reagan administration, recently told The Post's Jonathan Weisman, the tax reform proposals advanced by the Democratic presidential candidates -- most of which restore some of the taxes on investment and cut the tax rates for work-derived income -- won't do the economy any good. "Tax reform is supposed to mean removing barriers to economic growth," Christian said.
A lovely theory, but if anyone thinks the Bush tax cuts have spurred economic growth, I have a low-tax investment in a bridge to Brooklyn. To be sure, investment income and corporate profits are high. But just 278,000 new jobs have been generated since June, which means the recovery is about 7.5 million jobs shy of the norm for post-World War II recoveries. Bush's Council of Economic Advisers had predicted job growth of 510,000 from the 2003 tax cuts, plus another 1,335,000 new jobs, during the second half of last year.
To say that reality is lagging behind the theory of investment-led growth, then, is to understate. The problem is that to invest today in stocks or mutual funds doesn't mean you're investing in job creation in the United States.
Outsourcing has turned the phrase "investment-led growth" into the grimmest of oxymorons. It means that Bush's tax policy subsidizes job growth in India and China rather than the United States. And in failing to create more employment here at home, the tax cuts have also helped depress wages. Real wages in the United States actually fell 0.7 percent in the fourth quarter of last year.
To all this, the Democratic presidential candidates have proposed a reversal of the Bush tax priorities. John Edwards is the most explicit, calling for an increase in taxes on most forms of investment income while lowering the taxes on employment. Wesley Clark has proposed eliminating income taxes for more than half the households in the United States, and Howard Dean is reportedly mulling over a plan to cut payroll taxes.
All that is good in itself, but doesn't really grapple with the conundrum of job creation in a globalized economy. This afternoon a broad array of unions, environmental groups and Democratic politicos will unveil a proposal to do just that. Treming itself a new Apollo Project, this Teamster-Turtle coalition calls for using tax credits and public investment, totaling $300 billion over a 10-year period, to promote energy independence by investing in clean energy sources and in energy-efficient public and private transportation systems, office buildings, factories and homes. They calculate this will create 3.3 million jobs, which is a good deal more than President Bush's own neo-Apollo Project, sending men to the moon and to Mars, could possibly create (not to mention the benefits to national security that would accrue from reducing our dependence on Middle Eastern oil).
The notion of job creation through public investment rather than private is anathema to conservatives, of course. But the burden of proof is on those on the right to demonstrate how private investment in a global economy creates jobs here at home. And why the hell our tax policy should boost income in Bangalore, not Baltimore.
Harold Meyerson is the Prospect's editor-at-large. This column originally appeared in Wednesday's Washington Post.
