The Steep Price of Victory
By Anna Schwartz
Congress Republicans pushed through a tax cut on May 23rd of $350 billion, which will help usher in highest deficits ever recorded in this nation. The bill, which is less than half the size of the president’s original proposal, passed the House with a margin of 231-200; the Senate, however, was deadlocked at 50-50, with Vice President Dick Cheney casting the deciding vote. President Bush claimed victory at the passage of the bill, although he denounced the same bill as mere pittance just a few weeks ago.
Although the Republicans have spent months pitching the tax cuts as beneficial to American families, the legislation is really intended to kick-start business investment – the people will actually benefit very little. The Democratic party’s criticism of the bill is that it is a tax cut for the rich – this is not, in fact, entirely accurate – the dividend tax reduction that was so important to Bush’s bill plays a much smaller role in this version of the bill. But the Urban-Brookings Tax Policy Center did calculate that 58% of the benefits of the bill would go to the 8.6% of taxpayers who earn over $100,000.
As the elections approach, both the White House and Congress Republicans will remind voters of how they have benefited their constituents – average Americans, who earn an income of $41,000, will get back a whopping $211 at the end of the year. The Republicans are banking on that $211 to win elections – most of the tax reductions will take place in the first three years of the bill. But just as Reaganomics, “read my lips, no new taxes,” and Bush’s first tax cut failed to resuscitate flailing economies, this too will fail. The intention of this bill is to allow people to keep their own money,” said Representative Thomas (R-California). But for the vast majority of voters, an extra $211 will not make a major difference in the amount they consume or they save.
Voters are looking for tangible assurances, and Keynesian economics has proven its implacability, although the extreme versions, in the form of massive social welfare programs, are useless and irrelevant in a nation that has turned against big government. The choice is binary: one form of economic thinking precludes the other – cutting taxes and increasing spending at the same time will create gaping deficits. However, this is exactly what Mr. Bush plans to do. Republicans, often lauded for their fiscal discipline, are actually worse than Democrats about increasing spending while in office.
Congressional Democrats have been criticized for having neither effective policy ideas nor party discipline (although the tax cut vote in the Senate was mostly along party lines, big names like Zell Miller (D-Georgia) voted for the measure). And the Democrats’ tax plan, proposed in opposition to President Bush’s, was nothing more than a blip on the radar – no break from Democratic policy of the past, other than providing working families with a larger tax credit, it did not contain any feasible measures to boost the economy. The Democratic plan was simply a piece of oppositional legislation, created in order to demonstrate dissent. Although Democratic leaders, such as Nancy Pelosi, seemed to take the plan seriously, few others did.
Regardless of whether the Democrats managed to create a viable alternative, the Republican plan will do nothing to kickstart the economy. President Bush’s approval rating may be at 66% now, but over the course of the next year, with war issues dwindling and the issue of the economy being pushed into the forefront by Democratic contenders, the current 21% economic confidence rating will diminish even further. Despite the threat of further terrorist attacks, Gallup polls show that 49% of Americans believe economic problems are a higher priority than terrorist attacks. Democrats will use this to their advantage: the Republicans’ tax plan, which will undoubtedly be ineffective in creating jobs and boosting the economy where it counts (i.e. not for those who are already Republican supporters, but for those voters who make far less than $100,000 a year and who are suffering most from economic setbacks), will serve as the focal point for Democratic criticism, and will facilitate a shot at the White House, as well as a great deal of leverage in Congressional elections next fall.
By Anna Schwartz
Congress Republicans pushed through a tax cut on May 23rd of $350 billion, which will help usher in highest deficits ever recorded in this nation. The bill, which is less than half the size of the president’s original proposal, passed the House with a margin of 231-200; the Senate, however, was deadlocked at 50-50, with Vice President Dick Cheney casting the deciding vote. President Bush claimed victory at the passage of the bill, although he denounced the same bill as mere pittance just a few weeks ago.
Although the Republicans have spent months pitching the tax cuts as beneficial to American families, the legislation is really intended to kick-start business investment – the people will actually benefit very little. The Democratic party’s criticism of the bill is that it is a tax cut for the rich – this is not, in fact, entirely accurate – the dividend tax reduction that was so important to Bush’s bill plays a much smaller role in this version of the bill. But the Urban-Brookings Tax Policy Center did calculate that 58% of the benefits of the bill would go to the 8.6% of taxpayers who earn over $100,000.
As the elections approach, both the White House and Congress Republicans will remind voters of how they have benefited their constituents – average Americans, who earn an income of $41,000, will get back a whopping $211 at the end of the year. The Republicans are banking on that $211 to win elections – most of the tax reductions will take place in the first three years of the bill. But just as Reaganomics, “read my lips, no new taxes,” and Bush’s first tax cut failed to resuscitate flailing economies, this too will fail. The intention of this bill is to allow people to keep their own money,” said Representative Thomas (R-California). But for the vast majority of voters, an extra $211 will not make a major difference in the amount they consume or they save.
Voters are looking for tangible assurances, and Keynesian economics has proven its implacability, although the extreme versions, in the form of massive social welfare programs, are useless and irrelevant in a nation that has turned against big government. The choice is binary: one form of economic thinking precludes the other – cutting taxes and increasing spending at the same time will create gaping deficits. However, this is exactly what Mr. Bush plans to do. Republicans, often lauded for their fiscal discipline, are actually worse than Democrats about increasing spending while in office.
Congressional Democrats have been criticized for having neither effective policy ideas nor party discipline (although the tax cut vote in the Senate was mostly along party lines, big names like Zell Miller (D-Georgia) voted for the measure). And the Democrats’ tax plan, proposed in opposition to President Bush’s, was nothing more than a blip on the radar – no break from Democratic policy of the past, other than providing working families with a larger tax credit, it did not contain any feasible measures to boost the economy. The Democratic plan was simply a piece of oppositional legislation, created in order to demonstrate dissent. Although Democratic leaders, such as Nancy Pelosi, seemed to take the plan seriously, few others did.
Regardless of whether the Democrats managed to create a viable alternative, the Republican plan will do nothing to kickstart the economy. President Bush’s approval rating may be at 66% now, but over the course of the next year, with war issues dwindling and the issue of the economy being pushed into the forefront by Democratic contenders, the current 21% economic confidence rating will diminish even further. Despite the threat of further terrorist attacks, Gallup polls show that 49% of Americans believe economic problems are a higher priority than terrorist attacks. Democrats will use this to their advantage: the Republicans’ tax plan, which will undoubtedly be ineffective in creating jobs and boosting the economy where it counts (i.e. not for those who are already Republican supporters, but for those voters who make far less than $100,000 a year and who are suffering most from economic setbacks), will serve as the focal point for Democratic criticism, and will facilitate a shot at the White House, as well as a great deal of leverage in Congressional elections next fall.
