It's the Ideology, Stupid

By Bob Burnett, AlterNet. Posted May 14, 2003.

If you are a regular reader of progressive media outlets like this one, you cannot have escaped the prevailing opinion that the Bush administration's latest round of massive tax cuts are folly. But is not just the left which finds them bizarre; almost no reputable economist supports this plan.

Joseph Stiglitz, former chairman of the Council of Economic Advisers, described the tax cuts as leading to "reductions in job growth relative to what they otherwise would be." Speaking to Congress, Federal Reserve Board Chair Alan Greenspan opined that unless there are comparable reductions in Federal spending, the tax cuts will only add to the deficit, which would promote higher interest rates and depress the economy. Alternet contributors David Martin, Chris Hartman and Ben Robinson commented that "the only thing this plan 'stimulates' is more economic inequality in the United States." Even Bush appointee Douglas Holtz-Eakin, head of the Congressional Budget Office, concluded that the proposed tax cuts "might have either a positive or a negative effect on the economy, but that in either case the effect would be modest."

Yet the president and his cronies continue to push the tax cuts. Confronted with a congressional compromise that would reduce the scope of the package to $350 billion (by eliminating the provision to do away with the tax on stock dividends), the President pushed back and asked for $550 billion in cuts. Asked why the Bush administration was pushing for tax cuts when the nation is engaged in a war with a still unknown price tag, and is already facing a record deficit of more than $300 billion in this fiscal year, House Majority Whip Tom DeLay famously responded, "Nothing is more important in the face of war than cutting taxes."

Of course, DeLay's justification made no sense. Similarly, veteran economic observers assert that while tax cuts may have been appropriate when the federal government was running a surplus, it makes no sense to have tax cuts when there is a deficit, particularly when deficits seem likely to continue into the foreseeable future. Greenspan warned that "Budget deficits [lead] directly to higher interest rates" which would depress economic growth.

Many have accused the Bush administration of selling tax cuts as "snake oil," suggesting that they are a universal panacea that will fix whatever ails the economy. But it wasn't long ago that Republicans actually had an economic rationale for cutting taxes. In the eighties, under the Reagan administration, Republicans advocated "supply side" economics where there was a crude logic for tax cuts: reduce the marginal tax rate and thereby motivate people to work harder; this would, in turn, stimulate the economy and, after a few years, the net positive effect would compensate for short-term deficits caused by the reduction in tax rates.

This theory didn't work -- deficits reached record proportions -- but at least the debate was conducted in terms of an economic proposal. Not so today! The Republican appeal for tax cuts is not an economic formula, but rather a political mantra. This is not a plan for the economy; it is a strategy for reelection.

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