Thursday, September 16, 2004

Bush's bankrupt tax policy

My conservative sparring partner, Mark Harden, in the comments for the previous post links to an op-ed piece in the Detroit News written by Donald (I’m not a stalker) Luskin, that purports to “debunk” the notion that Bush’s tax cuts favor the rich.

Luskin, an investment banker who writes for National Review Online, argues that a recent report by the Congressional Budget Office, which produced headlines such as “Reports contend Bush tax cuts benefit rich” and “Tax Burden Shifts to the Middle,” actually shows that the overall federal income tax burden has been shifted toward the wealthy and away from lower-income earners.

Now the problem with Luskin’s piece and particularly with the way that Mark uses it to try and counter Robert’s statement -“while there have been tax cuts for the wealthy” - is that Robert is talking about all of Bush’s tax cuts as a whole and Luskin is referring strictly to income taxes alone. In fact, Luskin even admits in his piece that when you include Bush’s 2002 tax cuts which allowed for greater deductibility of capital expenses for corporations it skews the numbers very sharply in favor of the wealthy.

“Naturally, the highest-income earning taxpayers will get the bulk of this,” Luskin admits. But he then tries to excuse this by arguing that “all taxpayers enjoy the many benefits of a stronger economy...” Yeah, right. More trickle down B.S.

The problem with Bush slashing federal income taxes, besides running up the deficit, is the way it shifts the tax burden on to other more regressive forms of taxation. As federal revenues dry up, there is less available to pass on to state and local governments in the form of federal grants. That forces state and local governments to jack up property taxes and sales taxes and fees and other hidden forms of taxation. State-run schools jack up tuitions, poor kids are cut from federal health programs which drives up health costs at the state-run emergency clinics. And it goes on and on.

Here is an excellent web site that details many of the problems with Bush’s tax policy. And while we are swapping op-ed pieces back and forth, here is one from The Seattle Times that I will quote extensively:

“Bush's performance is the worst for job creation in the first two years of an economic recovery and second from last in gross domestic product (GDP) growth, as compared with the eight earlier postwar recoveries from recession.

No president in the past 60 years, save George Herbert Walker Bush, has failed so miserably in his economic performance. But to see how bad President Bush's economic policies have been, we must work through the numbers. It's worth the effort.

Consider the percentage change in jobs from the bottom of each of the postwar recessions to 28 months into the recovery. Before the early 1990s, job increases averaged over 7 percent; the elder Bush gained only 2 percent; and the current recovery, as of March 2004 (the report's cutoff date), had produced no job growth.

Later information shows an increase of 1.5 million jobs in the past 10 months. It is still a tepid performance after an unprecedented postwar record of no job gains for the first two years into the recovery.

The Bush record also pales compared with Bill Clinton's average of 236,000 additional jobs per month, or 2.3 million in 10 months. Clinton's average gain per month is 50 percent greater than the average of Bush's gains in the past 10 months.

Finally, Stephen Roach, chief economist for Morgan Stanley, has pointed out that over four-fifths of total job growth in the past year has been in low-end occupations.”

Did you catch that? Four-fifths of the jobs that Bush is touting right now as proof that his tax cuts have helped the economy “turn the corner” are in low-end occupations. Terrific.

“In assessing Bush's performance, deleterious consequences clearly resulting from the three tax cuts also need to be taken into account. Most important was the swing from a budget surplus in 2000 of $236 billion, or 2.4 percent of GDP, to a Congressional Budget Office-projected deficit of $477 billion, or 4.2 percent of GDP, in 2004.

As Shapiro and Friedman underscored: "The swing of 6.6 percentage points of GDP is the sharpest deterioration in the nation's fiscal balance since World War II."

Despite Bush's efforts to blame the size of the deficit on the economic downturn and increased defense and homeland security spending, the authors wrote that his three tax cuts "account for more than half of the 2004 deficit."

Without the three tax cuts, the deficit in 2014 is projected to be under $100 billion. In contrast, the projection 10 years out is a whopping $675 billion with the Bush tax reductions, they said.”

In other words, while 9/11 was certainly a blow to the economy, we would likely have turned things around a lot quicker without Bush’s tax cuts dragging us down.

“Bush's three tax cuts add up to the worst major income-tax legislation in American history and are the major policy factor in the least successful economic performance of the postwar years.

Nor is the poor performance a mystery. The Bush administration has refused to abandon an economic theory that did not pan out. The largest three-year tax cut in the nation's history produced record yearly budget deficits, but failed to generate lots of good jobs or high economic growth.

The bottom line is that Bush refuses to accept the hard facts showing the failed policy performance and instead relies with blind stubbornness on a bankrupt economic theory that threatens to bankrupt the nation.”

I’ve said before that Bush is an ideologue. He governs by blind faith. Faith in failed ideas that have resulted in a failed presidency.

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