One of the impressive feats of intellectual tenacityin recent times is the Republicans' ability to sustain their faith in large taxcuts for the wealthy despite repeated battering from reality.
When George W. Bush first proposed this early in 2000, his justification wasthat our economy was so strong that it was producing far more revenue than weneeded. A year later, as Congress was considering his proposal, the president'srationale did a 180-degree turn: Now it was the very weakness of the economy thatdemanded a tax cut, so that the wealthy would be encouraged to engage in more ofthe economic activity that was to be our means of avoiding recession. During allof that time, Bush was as fervent as anyone else in subscribing to the view thatrevenues derived from the payroll tax should go only to Social Security and notbe used for other purposes--until it became clear that he could not have both histax cut and this commitment, whereupon the commitment began to crumble. Theconstant throughout these flip-flops, however, was the president's ardentconviction that we had too much government. In fact, the real reason he sought asignificant reduction in government revenues was his belief that this was the mosteffective way to reduce the level of government activity.
But then things changed, tragically and drastically. First, of course, itbecame clear that the tax cut was doing very little to stave off economicweakness--not surprising, since the great bulk of the reduction is not due totake effect until years in the future, far beyond the date when the currentcyclical downturn should be history. And second, cataclysmically, Americasuffered the massive, murderous tragedy of September 11.
One consequence of that horrific day is a national consensus that what we needis more government spending--to move immediately against terrorists; to engage insignificant reconstruction, compensation, and increased security; and also to dealwith a very real recession. Fairly quickly, the pressing need to spend at least$100 billion more than was authorized in the current budget gained near universalacceptance. And while not everyone has been explicit about acknowledging it, therequirement for increased government spending will not go away after we dealwith the current emergency: It will stay with us for the indefinite future. Beefingup our intelligence capability; significantly increasing the security of airtravel; indefinitely protecting vital infrastructure; developing a public-healthcapacity to deal with the possibility of chemical or biological attacks;providing a federal role as payer of last resort for reinsurance companies incase of similar catastrophes; significantly upgrading the computer capacity at alllevels of government; and, according to the Bush administration, greatlyincreasing military spending--all of these are requirements for increasedgovernment spending, not simply over the next six months but on into the future.
In short, the notion that government needs significant shrinkage (which was theonly consistent rationale for the Bush tax cut) no longer commands the support itonce did--even from the Bush administration. And I doubt that even the mostpassionate government hater on The Wall Street Journal editorial board says to himself on boarding an airplane that he feels much safer knowing that he has a tax cut in his pocket.
But because Congress acquiesced to the president's tax-cut request, thefederal revenues we will need in order to deal with the current double crisis aswell as fund significantly higher levels of protective activity in the future willnot be there.
Unless we act. Federal revenues will be more than $100 billion lower than theywould have been over the next 10 years because the president persuaded Congressto reduce the tax rate on incomes over $297,350 a year from 39.6 percent to 35percent. That's the bad news. The good news is that only a very small piece ofthis reduction has gone into effect; if Congress acts now, we can produce morethan $100 billion in additional revenue with no contractionary short-termeconomic consequences.
Under current law, the $100 billion or so in additional funding that we willspend to deal with our crises will add to the national debt unless, asconservatives have already begun to urge, we make up for this by cutting federalspending for education, housing, health care, and other critical social needs.Obviously, it makes sense to spend freely now, both to combat the deepeningrecession and to deal with the terrible events of September 11. But it does notmake sense to couple this short-term spending increase with a long-term reduction in federal revenue from the very wealthiest people in our society.
On September 21, I filed a bill with a number of Democratic co-sponsors to undothe cut in the top tax rate and to put the resultant revenues into the SocialSecurity and Medicare trust funds (in the same percentage as the current payrolltax is divided). This will allow us to proceed with the increased spending thatwe need in the short term without immediately cutting vital social programs orleaving the conservatives with a larger national debt with which to argue forsuch spending cuts in the future. Putting this money into the Social Security andMedicare trust funds has two justifications: First, unlike the "lockbox"concept--and the longer I hear that debate carried on, the more I am convincedthat if we were to make any change in the First Amendment, it should be to banthe use of metaphors in the discussion of public policy--this produces additionalactual resources to help keep the Social Security system solvent and to provideat least a small part of the additional funds that Medicare needs to rescue itfrom its current fiscal ill health. Second, it enables my elected colleagues--boththe president and Congress--to keep the promise so many of them ardently made notto spend payroll-tax revenues for general government purposes.
Of course, they now say, this promise must give way if there is no alternativefor protecting national security. But there is an alternative: telling therichest people in this country that while they will still get the same tax cutsin dollar terms on income below $300,000 that their poorer fellow citizens get,they will not get an additional $100 billion-plus over the next 10 years.
If we hadn't already reduced the resources that the government needs by morethan $100 billion over the next decade as a gift to the very wealthy, I doubtthat we would do so in the current circumstances. Sometimes mistakes are hard toundo. This time, correction can come easily, since tax cuts far in the futurethat have not gone into effect can be undone without any destabilizing effect.
Letting a mistake stand that can easily be corrected is dumber than making itin the first place.
