Coming
Soon!
From Common Courage Press
Recent
Stories
May
29, 2003
CounterPunch
Wire
WMD: Who Said What When
Jason
Leopold
Despite Thin Intelligence Reports,
US Plans Overthrow of Iran Regime
Ron
Jacobs
Popular Uprising, Inc.
Michelle
Ciaccorra
Bush's Nuclear Policy: Do As I Say, Not As I Do
Yves Engler
The Economics of Health Care in
America: Pay More to Die Sooner
Kimberly
Blaker
Vouchers for Jesus
Harry
Browne
Stakeknife: Britain's Army Spy at
the Top of the IRA
Stew
Albert
Cops of the World
Steve Perry
Greens 04: In or Out?
May
28, 2003
David
Vest
DubyaCo.: It's Not So Funny Any More
Dave
Lindorff
My Grandfather's Medal
John
Stanton
America's Dying: Arts and Philosophy Hold the Key
Bernard
Weiner
A PNAC Primer
Robert
Jensen
Texas Dems Set a Standard for the Rest of the Party
Ahmad Faruqui
The Oil Business of Regime Change:
the CIA and Iran
Hammond
Guthrie
Disarming Conundrums
Steve Perry
What If There's No Such Thing as Al-Qaeda?
May
27, 2003
Kurt
Nimmo
Condoleezza Rice: Huckstress for Israeli
Myths
Anthony
Gancarski
Hillary: a Dem the NeoCons Could Love?
Patrick
Cockburn
Terror, Bush and Joseph Conrad
John Chuckman
an Interpretation of Bush's Character
Kathleen
Christison
What Sharon Wants, Sharon Gets
Jeffrey
Blankfort
AIPAC Hijacks the Roadmap
Steve
Perry
Trouble in the Hinterlands
Hot Stories
Cindy
Corrie
A Mother's Day Talk: the Daughter
I Can't Hear From
Elaine
Cassel
Civil Liberties
Watch
Michel
Guerrin
Embedded Photographer Says: "I
Saw Marines Kill Civilians"
Uzma
Aslam Khan
The Unbearably Grim Aftermath of War:
What America Says Does Not Go
Paul de Rooij
Arrogant
Propaganda
Gore Vidal
The
Erosion of the American Dream
Francis Boyle
Impeach
Bush: A Draft Resolution
Click Here
for More Stories.
|
May
30, 2003
Bush's Tax Cuts
A Form of National
Insanity
By ROBERT FREEMAN
Insanity, said Albert Einstein, is doing the same
thing over and over again but expecting different results. By
this measure, the latest Bush tax cuts qualify as certifiably
insane.
Where have we seen this deranged fiscal
strategy before? Remember Ronald Reagan and Supply Side Economics?
In the early 1980s, Reagan promised the nation that if we lowered
tax rates on the wealthy, the economy would grow so much the
federal budget would be balanced "within three years, maybe
even two."
Sober people were skeptical-and rightly
so. Reagan's Republican opponent for the 1980 presidential election,
George H.W. Bush called it "voodoo economics." His
own Budget Director, David Stockman, called it a "Trojan
horse," a scam intended really to funnel more money to the
already rich. Stockman was quickly dismissed.
The results, we now know, were a disaster.
In 1982, the first full year after the tax cuts were enacted,
the economy actually shrank 2.2%, the worst performance since
the Great Depression. And the effect on the federal budget was
catastrophic.
Jimmy Carter's last budget deficit was
$77 billion. Reagan's first deficit was $128 billion. His second
deficit exploded to $208 billion. By the time the "Reagan
Revolution" was over, George H.W. Bush was running an annual
deficit of $290 billion per year.
Yearly deficits, of course, add up to
national debt. When Reagan took office, the national debt stood
at $994 billion. When Bush left office, it had reached $4.3 trillion.
In other words, the national debt had taken 200 years to reach
$1 trillion. Reagan's Supply Side experiment quadrupled it in
the next 12 years.
Is there anything to compare this to?
When Bill Clinton took office he intentionally reversed the Supply
Side formula, raising taxes on the wealthy and reducing them
on the lowest wage earners. Supply Side true believers predicted
the arrival of the Apocalypse. Bob Dole said the stock market
would collapse. Newt Gingrich said the world would fall into
another Great Depression.
What actually happened?
Between 1992 and 2000, the U.S. economy
produced the longest sustained economic expansion in U.S. history.
It created more than 18 million new jobs, the highest level of
job creation ever recorded. Inflation fell to 2.5% per year compared
to the 4.7% average over the prior 12 years.
Real interest rates fell by over 40%
producing the greatest housing boom ever. Overall economic growth
averaged 4.0% per year compared to 2.8% average growth over the
12 years of the Reagan/Bush administrations. Most impressively,
Clinton reversed the mammoth deficits of the Supply Side years,
turning them into surpluses. He used these surpluses to begin
paying down the national debt.
By virtually every meaningful measure-employment,
growth, inflation, interest rates, investment, deficits and debt-the
economy performed better once the Supply Side experiment was
terminated and replaced with a more honest economic policy where
we actually pay our bills as we go.
This might all be ancient history if
the spectre of Supply Side economics had not reared its ugly
head again once Bush II took office. In selling his $1.6 trillion
tax cut-half of which went to the wealthiest 1% of Americans-Bush
promised in 2001 that it would produce 800,000 new jobs. In fact,
the economy has lost 2.7 million jobs since Bush took office,
again, the worst economic performance since the Great Depression.
The effects of Bush's tax cut on the
deficit and debt are exactly what we would expect having seen
Reagan's results-only worse. Bush inherited from Clinton a fiscal
surplus of $127 billion. In his first year he turned that into
a deficit of $158 billion. In this, his second year, he will
run a deficit of over $400 billion-a swing to the worse of over
$600 billion in only two years.
Now Bush has sold us on still another
megadose of this same Supply Side voodoo. Two thirds of his new
$350 billion tax cut will go to the top 10% of income earners.
Bush's Congressional ally, Tom DeLay, promises more such cuts
for every year Bush is in office.
The long term effects of these policies
are profoundly damaging. When Bush took office, the government's
ten year surplus was forecast to total $5.6 trillion. This was
critical to building fiscal soundness as the Baby Boomers begin
to retire.
Now, the ten year forecast projects a
cumulative deficit of $1.1 trillion, a net loss of $6.7 trillion
in only two years. With the exception of World Wars, this is
the greatest, most rapid destruction of public wealth in the
history of the world.
This is $6.7 trillion that is not available
to pay for an entire generation's retirement as we promised.
It cannot rebuild the nation's schools or retrain the technologically
unemployed. It cannot shore up a foundering Medicare system
or provide insurance to the more than 40 million Americans without
it. The interest costs of funding this debt will soon approach
half a trillion dollars a year and will retard investment and,
therefore, economic growth for decades to come.
All this torrent of debt does-and we
shouldn't underestimate the prodigious potency of this feat-is
line the pockets of Bush's already gorged campaign contributors.
Rarely in public affairs do we have the
luxury of such starkly clear, empirically proven, historically
sound contrasts. If Bush's tax cuts do not represent a fiscal
process wildly out of control it is hard to imagine what does.
And sadly, per Einstein's insanity dictum, we've seen it all
before.
Bush wants people to believe these losses
are due to a recession he inherited from Bill Clinton. But the
economy has grown for seven of the last eight quarters Bush has
been in office, hardly a recessionary environment. In truth,
the losses owe to a reckless economic philosophy, the failings
of which have been conclusively, and now repeatedly, demonstrated.
We need to wake up from our patriotism-besotted,
war-induced stupor. Losses and debts of this magnitude threaten
our nation's well being far more than do fictive weapons of mass
destruction in the hands of a two bit, third world thug. Destroying
our fiscal patrimony at the very moment we need it most-when
history shows we should know better-is nothing short of national
insanity.
Robert Freeman
writes about economics, technology and education from Palo Alto,
CA. He can be reached at: robertfreeman10@yahoo.com
Today's
Features
CounterPunch
Wire
WMD: Who Said What When
Jason
Leopold
Despite Thin Intelligence Reports,
US Plans Overthrow of Iran Regime
Ron
Jacobs
Popular Uprising, Inc.
Michelle
Ciaccorra
Bush's Nuclear Policy: Do As I Say, Not As I Do
Yves Engler
The Economics of Health Care in
America: Pay More to Die Sooner
Kimberly
Blaker
Vouchers for Jesus
Harry
Browne
Stakeknife: Britain's Army Spy at
the Top of the IRA
Stew
Albert
Cops of the World
Steve Perry
Greens 04: In or Out?
Keep CounterPunch
Alive:
Make
a Tax-Deductible Donation Today Online!
home / subscribe
/ about us / books
/ archives / search
/ links /
|