Long live big government!

Bush's tax cut, based on deceit and bad math, doesn't just screw us economically -- it exposes an administration that's both blind to our needs and less effective than ever.

Topics: U.S. Economy, Budget Showdown,

Long live big government!

At a dinner party recently, someone told me that the Europeans had trouble dealing with President Bush during his June visit because he was such a straight talker. But straight talk is often pretense when it comes to the new president. Bush has changed his rhetoric about energy, the environment, education, China, North Korea and Russian Prime Minister Vladimir Putin, but his policies essentially remain the same.

Argue if you care to about Bush’s other policies, but concerning the $1.35 trillion tax cut that is the centerpiece of his domestic program, I can assure you that the new president cannot be accused of uttering many straight words to the American people.

The tax cut is not essentially about tax cuts. It is about the kind of nation the American public wants. It’s about whether we, as a country, want to use our government to improve our lives or whether we’d rather try to make it disappear, forsaking in the process a long history of government-funded social programs, including scholarships, infrastructure and Social Security. It’s about whether we want a government that responds to the needs of the changing times or turns away from them.

But before we return to that issue, let me set the record straight on some of the ways the Bush administration has deceived us in supporting tax cuts.

The tax cut is premised on the expectation that the federal government will produce a few trillion dollars of surplus over the next 10 years. But the contention that the fiscal surpluses projected by the Congressional Budget Office, on which the tax cuts are based, are in any way reliable is nonsense.

The forecasting also depends on an increase in total budget expenditures that more or less only matches inflation over the next 10 years. This Congress is not likely to achieve that increase — nor should it. The result is that in order to pay for the tax cut, the federal government will almost certainly have to run down the Social Security trust fund.

Then there is this by now well-known piece of White House chicanery: Tax cut proponents have excluded from budget calculations the amount of revenue lost in the 10th year of the 10-year program, revenue that could add an additional $300 billion or so to the tax cut.



Another formidable piece of deceitfulness — an admittedly effective one — has been what we might call the “overcharge” rhetoric. President Bush tells us that he is simply giving back to the American people the money that they were “overcharged.” To those inclined to believe him, this no doubt sounds like straight talk. He is giving back “your money.” But as Sen. Edward Kennedy, D-Mass., said recently, it may be your money, but it is our social programs.

Taxes are not a fixed price one charges the public, like retailers do for a carton of orange juice. They are calculated as a proportion of incomes that rise and fall with the fortunes of the economy. If the American people are now being “overcharged” for government services, it is because the economy is strong and their incomes are high, not because they are paying more than the value of the services they are receiving. Are Americans being undercharged when the nation runs a fiscal deficit? And will President Bush therefore raise taxes if we dip back into the red?

The Bush administration claims that all taxpayers are getting a break under the plan. Moreover, these advocates say that under any tax cut, the rich will always disproportionately benefit because they pay more in taxes.

The truth is, you can distribute tax benefits any way you choose, and this tax cut is a whopping advantage to the rich. More than 35 percent of the benefits of the tax cut will go to the top 1 percent of earners. About 50 percent will go to the top 10 percent of earners. And 70 percent of the benefits will go to the top 20 percent.

It is not clear to me how history will judge a nation that gives a tax break to the rich just after the top 1 to 10 percent accrued more personal wealth than at any other time since the robber-baron period of the late 1800s.

Long ago, the nation decided that the rich would help the not so rich because financial privilege does confer advantage. A progressive income tax was adopted in the early 1900s. (It was first tried during the Civil War.) Now, when the rich are really rich, we seem to have forgotten the lessons of the past.

This remarkable piece of tax legislation was signed into law in June for several reasons. First, the media, though it made an issue of the inequality of benefits to be distributed through Bush’s tax cuts, did not make much of one. Second, Alan Greenspan, a respected Federal Reserve chairman but not one very well known for his sensitivity to the plight of the those with lower incomes, endorsed the bill publicly.

Third, the Bush administration gave tax cuts all its attention, using tactics that were, admittedly, brilliant. It dangled a tax reduction before the American people without providing a budget, which would have told them exactly what spending programs they were cutting.

Fourth, the economy slowed down precipitously just around the time of the presidential election. This, ironically, justified the need for fiscal stimulus, even a tax cut that was widely considered to be bad for the economy in the long run. Fifth, the Senate was still Republican. Sen. Jim Jeffords became an independent only after the tax cut vote.

One more point: The “overcharge” gambit worked, and the media was not up to the challenge. Bending over backward to give new presidents the benefit of the doubt during the transition is a time-honored tradition. But this time it was even more damaging than usual.

The deepest deceit of this tax bill, however, is that it is not essentially about tax cuts at all. As I said, it is about the kind of nation one wants. So significant are the cuts that over time they will seriously impede America’s ability to adopt new social programs, and they may even cut into existing programs. If the tax cut bill is kept intact and the estate tax is eliminated, about $3 trillion of revenue will be lost in the second decade of its enactment. So this tax cut is really about limiting government, not about giving people their money back.

There is a powerful myth at the bottom of this kind of thinking. We increasingly seem to believe that government is at best a necessary evil, and that the only way to control it is to limit it. We do not devote our energies any longer to making it better, devising exciting new programs that may work or utilizing its power to make American life more equitable.

Moreover, we seem to think that this is and always was the American way. In fact, America always had new economies, and new economies created new needs. In the past, government helped the nation adjust to those new needs. Today, it is withdrawing from that arena.

In the early 1800s, for example, America was an agricultural economy. Its $15 million payment to France for the Louisiana Purchase was intended to ensure the little guy access to land. But that was only part of it. The federal government reduced land prices, offered credit arrangements for purchases, forgave debt and even protected the rights of squatters time and again as the economy matured in the 1800s.

When large industrial enterprises were beginning to burgeon in the 1820s and 1830s, government made limited liability legal so that investors could put up money without fear of personal bankruptcy or debtor prison.

When the nation needed canals, the state governments, led by New York, built them.

When a commercial society clearly needed a more educated workforce, local government developed a free primary education system that was soon the envy of the world.

An information age? By the 1830s, the federal mails were a model of efficiency, traversing the land by stagecoach, steamships and finally railroads.

All these were responses to the new economies of their day. After the Civil War, the federal government subsidized the railroads. It built new research universities. It protected workers, established a progressive income tax and gave women the right to vote. After the panic of 1907, the sixth or seventh major panic over the course of a century, it implemented the Federal Reserve System.

The federal government did — and failed to do — a lot of controversial things as well. It could have been more aggressive about building roads and waterways in the early 1800s. It fought Native Americans in brutal wars in the name of manifest destiny. If it had acted on slavery before cotton became king, it would have avoided the nation’s great tragedy. As it was, it liberated slaves at great cost, only to deprive African-Americans of civil rights for another century. It did not cope well with poverty, and still does not.

But the government kept adjusting as economies evolved. In the 1920s, it built roads to accommodate new cars and trucks. Local government built high schools for a populace that required still-better education to compete in a more sophisticated economy.

After World War II, America sent its soldiers to college, it built the highway system, it funded massive amounts of research and development, and it subsidized student loans after the USSR’s Sputnik launch jarred the nation.

Now, a new economy has new needs and the men (and an occasional woman) in the White House are tone-deaf to them. Two-thirds of women with small children now work. Families work three months longer each year than they did in the past. Jobs are more insecure, as are health insurance and retirement income. Male wages just do not keep up on average, deeply wounding the esteem of a nation where one job was once enough to support a family. The nation faces generally increasing insecurity, and the government is nowhere to be found: Small wonder that citizens no longer trust it.

Is government the complete answer? No. But lack of government is not the answer, either. Unfortunately, that is what this tax cut bill is about. The nation’s economy changes, and the response of this administration is not to adjust but to withdraw and deplete the nation of the tools it needs — the tools with which it always faced the future in the past. Amazing, really, how divorced Washington is from American life. Do not think America will simply survive four more years of such backwardness. These years will take a permanent toll.

Jeff Madrick is an economist and author "The End of Affluence."

More Related Stories

Featured Slide Shows

  • Share on Twitter
  • Share on Facebook
  • 1 of 11
  • Close
  • Fullscreen
  • Thumbnails

    Ten spectacular graphic novels from 2014

    Beautiful Darkness by Fabien Vehlmann & Kerascoët
    Kerascoët's lovely, delicate pen-and-watercolor art -- all intricate botanicals, big eyes and flowing hair -- gives this fairy story a deceptively pretty finish. You find out quickly, however, that these are the heartless and heedless fairies of folk legend, not the sentimental sprites beloved by the Victorians and Disney fans. A host of tiny hominid creatures must learn to survive in the forest after fleeing their former home -- a little girl who lies dead in the woods. The main character, Aurora, tries to organize the group into a community, but most of her cohort is too capricious, lazy and selfish to participate for long. There's no real moral to this story, which is refreshing in itself, beyond the perpetual lessons that life is hard and you have to be careful whom you trust. Never has ugly truth been given a prettier face.

    Ten spectacular graphic novels from 2014

    Climate Changed: A Personal Journey Through the Science by Philippe Squarzoni
    Squarzoni is a French cartoonist who makes nonfiction graphic novels about contemporary issues and politics. While finishing up a book about France under Jacques Chirac, he realized that when it came to environmental policy, he didn't know what he was talking about. "Climate Changed" is the result of his efforts to understand what has been happening to the planet, a striking combination of memoir and data that ruminates on a notoriously elusive, difficult and even imponderable subject. Panels of talking heads dispensing information (or Squarzoni discussing the issues with his partner) are juxtaposed with detailed and meticulous yet lyrical scenes from the author's childhood, the countryside where he takes a holiday and a visit to New York. He uses his own unreachable past as a way to grasp the imminent transformation of the Earth. The result is both enlightening and unexpectedly moving.

    Ten spectacular graphic novels from 2014

    Here by Richard McGuire
    A six-page version of this innovative work by a regular contributor to the New Yorker first appeared in RAW magazine 25 years ago. Each two-page spread depicts a single place, sometimes occupied by a corner of a room, over the course of 4 billion years. The oldest image is a blur of pink and purple gases; others depict hazmat-suited explorers from 300 years in the future. Inset images show the changing decor and inhabitants of the house throughout its existence: family photos, quarrels, kids in Halloween costumes, a woman reading a book, a cat walking across the floor. The cumulative effect is serene and ravishing, an intimation of the immensity of time and the wonder embodied in the humblest things.

    Ten spectacular graphic novels from 2014

    Kill My Mother by Jules Feiffer
    The legendary Pulitzer Prize-winning cartoonist delivers his debut graphic novel at 85, a deliriously over-the-top blend of classic movie noir and melodrama that roams from chiaroscuro Bay City to Hollywood to a USO gig in the Pacific theater of World War II. There's a burnt-out drunk of a private eye, but the story is soon commandeered by a multigenerational collection of ferocious women, including a mysterious chanteuse who never speaks, a radio comedy writer who makes a childhood friend the butt of a hit series and a ruthless dame intent on making her whiny coward of a husband into a star. There are disguises, musical numbers and plenty of gunfights, but the drawing is the main attraction. Nobody convey's bodies in motion more thrillingly than Feiffer, whether they're dancing, running or duking it out. The kid has promise.

    Ten spectacular graphic novels from 2014

    The Motherless Oven by Rob Davis
    This is a weird one, but in the nervy surreal way that word-playful novels like "A Clockwork Orange" or "Ulysses" are weird. The main character, a teenage schoolboy named Scarper Lee, lives in a world where it rains knives and people make their own parents, contraptions that can be anything from a tiny figurine stashable in a pocket to biomorphic boiler-like entities that seem to have escaped from Dr. Seuss' nightmares. Their homes are crammed with gadgets they call gods and instead of TV they watch a hulu-hoop-size wheel of repeating images that changes with the day of the week. They also know their own "death day," and Scarper's is coming up fast. Maybe that's why he runs off with the new girl at school, a real troublemaker, and the obscurely dysfunctional Castro, whose mother is a cageful of talking parakeets. A solid towline of teenage angst holds this manically inventive vision together, and proves that some graphic novels can rival the text-only kind at their own game.

    Ten spectacular graphic novels from 2014

    NOBROW 9: It's Oh So Quiet
    For each issue, the anthology magazine put out by this adventurous U.K.-based publisher of independent graphic design, illustration and comics gives 45 artists a four-color palette and a theme. In the ninth issue, the theme is silence, and the results are magnificent and full of surprises. The comics, each told in images only, range from atmospheric to trippy to jokey to melancholy to epic to creepy. But the two-page illustrations are even more powerful, even if it's not always easy to see how they pertain to the overall concept of silence. Well, except perhaps for the fact that so many of them left me utterly dumbstruck with visual delight.

    Ten spectacular graphic novels from 2014

    Over Easy by Mimi Pond
    When Pond was a broke art student in the 1970s, she took a job at a neighborhood breakfast spot in Oakland, a place with good food, splendid coffee and an endlessly entertaining crew of short-order cooks, waitresses, dishwashers and regular customers. This graphic memoir, influenced by the work of Pond's friend, Alison Bechdel, captures the funky ethos of the time, when hippies, punks and disco aficionados mingled in a Bay Area at the height of its eccentricity. The staff of the Imperial Cafe were forever swapping wisecracks and hopping in and out of each other's beds, which makes them more or less like every restaurant team in history. There's an intoxicating esprit de corps to a well-run everyday joint like the Imperial Cafe, and never has the delight in being part of it been more winningly portrayed.

    Ten spectacular graphic novels from 2014

    The Shadow Hero by Gene Luen Yang and Sonny Liew
    You don't have to be a superhero fan to be utterly charmed by Yang and Liew's revival of a little-known character created in the 1940s by the cartoonist Chu Hing. This version of the Green Turtle, however, is rich in characterization, comedy and luscious period detail from the Chinatown of "San Incendio" (a ringer for San Francisco). Hank, son of a mild-mannered grocer, would like to follow in his father's footsteps, but his restless mother (the book's best character and drawn with masterful nuance by Liew) has other ideas after her thrilling encounter with a superhero. Yang's story effortlessly folds pathos into humor without stooping to either slapstick or cheap "darkness." This is that rare tribute that far surpasses the thing it celebrates.

    Ten spectacular graphic novels from 2014

    Shoplifter by Michael Cho
    Corinna Park, former English major, works, unhappily, in a Toronto advertising agency. When the dissatisfaction of the past five years begins to oppress her, she lets off steam by pilfering magazines from a local convenience store. Cho's moody character study is as much about city life as it is about Corinna. He depicts her falling asleep in front of the TV in her condo, brooding on the subway, roaming the crowded streets after a budding romance goes awry. Like a great short story, this is a simple tale of a young woman figuring out how to get her life back, but if feels as if it contains so much of contemporary existence -- its comforts, its loneliness, its self-deceptions -- suspended in wintery amber.

    Ten spectacular graphic novels from 2014

    Through the Woods by Emily Carroll
    This collection of archetypal horror, fairy and ghost stories, all about young girls, comes lushly decked in Carroll's inky black, snowy white and blood-scarlet art. A young bride hears her predecessor's bones singing from under the floorboards, two friends make the mistake of pretending to summon the spirits of the dead, a family of orphaned siblings disappears one by one into the winter nights. Carroll's color-saturated images can be jagged, ornate and gruesome, but she also knows how to chill with absence, shadows and a single staring eye. Literary readers who cherish the work of Kelly Link or the late Angela Carter's collection, "The Bloody Chamber," will adore the violent beauty on these pages.

  • Recent Slide Shows

Comments

0 Comments

Comment Preview

Your name will appear as username ( settings | log out )

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>