Bush’s Budget Lunacy

Bush’s Budget Lunacy

In The Right Man, a memoir of his experience as a speechwriter in the Bush White House, David Frum claims that after September 11, “There was no more domestic agenda. The domestic agenda was the same as the foreign agenda. Win the war-then we’ll see.” Although the image of a president transformed by that terrible day is one Bush would like to cultivate, there is little evidence that it is true. Domestic policy has not been eclipsed by foreign policy. Rather, the administration’s domestic policy is being pursued with the same recklessness that characterizes its foreign policy.

Everything about the Bush administration’s tax and budget policy is wrong. The tax breaks are excessive. They go to the wrong people. They will not stimulate the economy. Their effect on domestic social spending will be horrendous. Their long-term effect on the economy will be damaging. The arguments made on their behalf are laughable.

The budget that George W. Bush sent to Congress had a record $307 billion deficit for 2004, on top of a $304 billion deficit this fiscal year. Asked about the ballooning budget deficits, Glenn Hubbard, the departed chair of the president’s Council of Economic Advisers, said deficits are neither good nor bad. “What matters is what you’re doing with the money.”

Hubbard is right. It’s not the size of the deficit but what the deficit is used for. And that is precisely the problem (well, one of the problems) with the president’s budget: The Bush administration is doing the wrong thing with the money. It is cutting taxes on wealthy people when it should be increasing public and private spending and stimulating demand by giving relief to consumers and aiding state budgets.

The combined cost of the administration’s new tax-cut package, the proposal to make the 2001 tax cut permanent, is at least $2.7 trillion through 2013.The sources for this article are the useful reports from the Center on Budget and Policy Priorities, Citizens for Tax Justice, and the Economic Policy Institute. The two major pieces of the package are the elimination of individual taxes on corporate dividends and the acceleration of certain pieces of the 2001 tax cut-such as the cuts in income tax rates for upper income filers and the expansion of the child tax credit-so they take full effect in 2003. Supposedly a response to the slow economy, the package is very poorly designed as an economic stimulus. For example, more than 90 percent of the dividend tax cut would not take effect until after 2003; that is, after the economy is expected to have recovered from the current downturn.

Never has a tax plan been so skewed toward the rich. The 226,000 Americans with an income of over a million dollars would get an average tax cut of almost $90,000 from the Bush growth package alone-while someone in the middle of the population (with an income of $37,000) would get a tax cut...