Reformer with (regressive) results
Anyone struggling to understand the economic reasoning behind Bush's latest plan is wasting mental energy. This plan's aim is the same as that of almost any other economic proposal emanating from this White House: to make America's tax regime more regressive. In keeping with the media strategy that Karl Rove has followed since the very beginning of the Bush presidential campaign in 1999, this upper-class warfare, which seeks to return us to the political norms of the 19th century, is marketed as "reform."
Rove would very much like to slash taxes on the corporate contributors whose financial support has been so essential to Bush, but in the aftermath of Enron and WorldCom that wouldn't look so good. The alternative is to cut taxes on dividends -- another means to reward the same tiny clique of contributors and friends, while insisting that a broad "investor class" will enjoy the benefits. Paul Krugman has been explaining these unpleasant facts of life for some time, which is why he comes in for such abuse from the right. He does so again today.
But Reason magazine -- a libertarian organ whose editors never saw a tax cut they didn't like -- is also skeptical of the White House justification for this one. Today's Reason editorial calls the new Bush plan "just weird," noting that claims it will stimulate the economy have "already drawn hoots of derision from across the economic landscape."
The Reason editors candidly admit that too few people actually pay dividend taxes for the cut to create a stimulative effect. It will, as they point out, favor big business at the expense of smaller, newer companies (and it will also, as they don't point out, place a competitive financial burden on cities and states that are already destitute).
"Compassionate conservatism" reappears as a new kind of unemployment benefit that rewards workers for finding jobs sooner. That would be great if there were any jobs -- and if the Republicans hadn't already screwed the unemployed by failing to renew benefits before Christmas. This proposal reportedly will cost about $3 billion -- or roughly 1 percent as much as the estimated cost of the dividend tax cut.
Meanwhile, the administration has ordered the Labor Department to stop reporting mass layoffs. See no evil, hear no evil, pay no taxes.
[9:03 a.m. PST, Jan. 7, 2003]