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Bush tax cuts for rich, job losses, budget deficits are class war on workers




September 9, 2003
The Oregonian

Dear Oregonian Editor(s):

Your spin on the "economic stimulus" plan presented last January by President Bush ( Sort of a stimulus,1/8/03,) is that "most of what ails the economy has to do with business spending and business confidence in the future" - and therefore Bush's tax breaks are reasonable therapy. Nine months later, Bush is still promoting a second round of tax cuts as the best fix for the economy. How can this be when for over two years businesses have been guaranteed something like $1.3 trillion from Bush tax cuts, and yet job creation has gone steadily down. (Recall the great Bush tax-cut victory in 2001?) One would think this rosy future would have raised business leaders' spirits just a little. The question is, do the negative results make the case for adding another $400 billion to the inducement to create jobs? Will $1.7 trillion do what $1.3 trillion would not?

Instead, it has been the intrepid (or foolish) consumers who have carried the economy along by continuing to spend on cars and homes and improvements. Even now, as workers limp into the third year of economic downturn and the "gloom and doom view of the economy" gets harder to avoid, the President's Rx calls for workers to get short term help on the cheap, to hell with how they regard the future. But your editorial says that if consumers loose confidence, "no recovery package is likely to help much." Again, how does that make the case for giving the bulk of the stimulus package to the wealthy?

When individuals get into financial trouble and need community help, one of the first things business people insist on is that people who get assistance should also work toward overcoming the difficulty. Applying that attractive philosophy to the project of helping the business community do its part to end the recession: it calls for businesses to get off their behinds and, using their enormous tax breaks, contribute to ending the recession and create jobs. So far this has not happened.

Repeating the mistake of two years ago and expecting tax breaks for the rich to fix the economy is just throwing good money after bad. It is as if trickle-down is the only way, the one and only pipe down which money can flow to the workers who are doing their patriotic best to keep spending. Since it is consumer spending, and not business investment, that is keeping our economy from going into a tailspin, it makes sense for the government to create jobs directly through public works projects, public service work, and infrastructure construction and repair.

Update: as this item finally goes to press (to "upload" in modern language), Bush has just asked Congress for $89 billion in additional money to pay for the Iraq war and the rebuilding of the destruction and chaos we have created in that country. The new request will push the 2003 federal budget deficit to over $560 billion. That is almost twice the record deficit ever amassed - $290 billion in 1992. What happened to the trillions of dollars of surpluses that were in the pipeline at the end of the Clinton administration? Very little of this vast deficit will go toward creating jobs. Since GW Bush took office (I do not say "was elected"), 2.7 million jobs have been lost. This is the first administration since Herbert Hoover (1934-1938) to have failed to create a single new job.

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http://www.nytimes.com/2003/01/21/opinion/21KRUG.html?todaysheadlines

A Touch of Class

By PAUL KRUGMAN

New York Times

January 21, 2003

A liberal and a conservative were sitting in a bar. Then Bill Gates walked in. "Hey, we're rich!" shouted the conservative. "The average person in this bar is now worth more than a billion!" "That's silly," replied the liberal. "Bill Gates raises the average, but that doesn't make you or me any richer." "Hah!" said the conservative, "I see you're still practicing the discredited politics of class warfare."

Am I caricaturing the debate? Alas, not at all. Whenever anyone points out the systematic tilt of the Bush administration toward the rich, the administration and its defenders immediately raise the cry of "class warfare." Yet when you look at the arguments the administration actually makes on behalf of its policy, they are as silly as that of the conservative in the bar. The difference is that the administration knows exactly what it's doing.

For example: On Saturday, in his weekly radio address, George W. Bush declared that "the tax relief I propose will give 23 million small-business owners an average tax cut of $2,042 this year." That remark is intended to give the impression that the typical small-business owner will get $2,000. But as the Center on Budget and Policy Priorities points out, most small businesses will get a tax break of less than $500; about 5 million of those 23 million small businesses will get no break at all. The average is more than $2,000 only because a small number of very wealthy businessmen will get huge tax cuts.

So the latest round of Bush tax cuts, like the previous round, mainly provides benefits to the very, very well off - and once again the administration is shamelessly misrepresenting the content of its own policies. But aside from the honor and integrity thing, should we care?

There's been a concerted effort to convince us that we shouldn't - that anyone who even pays attention to who gets what must be motivated by envy. Consider a recent cover of Business Week. Under the headline "Class Warfare," it asked: "Suppose Bush's tax plan works: It raises long-term growth, reduces unemployment, boosts workers' wages, and eventually cuts a rising deficit. ... Now suppose the rich get richer, and income inequality gets worse. Time to vote."

As Superman used to say, "What th'?" Does Business Week really think that's the argument - that opponents of the Bush plan agree that it will do great things for the economy, that the increase in inequality it will cause is their only objection? In fact, those who oppose the Bush plan think it will work no better than the 2001 tax cut: that it will do little for growth or employment, and will sharply raise the deficit. (These guys now have a track record, and it's not encouraging. In the year and a half since that tax cut, which was sold as the perfect economic stimulus, the economy has lost 1.4 million jobs.)

Meanwhile, let's look at what the administration isn't doing. It's not allocating enough money to meet its own goals for homeland security, or to provide adequate funding for Medicare. It has scaled back promised pay increases for the military. It's not providing a penny in aid to desperate state governments - it isn't even helping them meet the new burden of homeland security spending mandated from Washington. (Remember those promises, after Sept. 11, of aid to fire departments and police? That was then.)

And bear in mind that the budget deficits of state and local governments are forcing cuts in medical care for the poor and public services for everyone. Many states, even those with Republican governors, will be forced to raise taxes too - but the burden of those increases will fall on the middle class, not the rich.

The only beneficiaries of the latest Bush plan will be those who receive tax cuts big enough to offset all these negatives. Those beneficiaries are the usual suspects - the same small, wealthy minority that got the big benefits from the last tax cut. Does pointing this out constitute class warfare?

The administration and its defenders will, of course, insist that it does - because that charge helps confuse the public about what's really going on. But for the record: When people like me stress how few Americans will gain from the Bush plan, we're not talking about envy; we're talking about priorities.

http://www.nytimes.com/2003/01/21/opinion/21KRUG.html?todaysheadlines