Now
Available!
Dime's
Worth of Difference:
Beyond the
Lesser of Two Evils
Order Here!
Today's
Stories
August 30,
2004
Justin Podhur
The
Disappeared Mayor
Shaun Joseph
The
Hypocrites at TheNaderbasher.com
Mike Whitney
Israeli Moles in the Pentagon: What More Could They Possibly
Want?
Ron Jacobs
Live, From New York: the Majority of Protesters Claimed No Candidate
David Lindorff
Sunday in Manhattan: the Sound of Marchin', Chargin' Feet, Boy
Dave Zirin
USA Basketball: The Team White America Loved to Hate
Sam Husseini
Israeli Spying on the US: a Long History
Sex,
Drugs & the Blues!
Serpents in the Garden
CounterPunch's
Sizzling New Book on Culture and Sex is Now Available
Click here to purchase
August 28 /
29, 2004
Alexander Cockburn
Zombies
for Kerry
Patrick Cockburn
Najaf Ceasefire Good for Iraq, But Weakens Allawi and US
Ray McGovern
Blowing Smoke on Intelligence
Dr. Juan Romagoza
From El Salvador to Abu Ghraib: Reflections of Torture Survivor
Ray Hanania
An Israeli Spy in the Pentagon? Ridiculous!
Fred Gardner
Eddie Lepp Busted by DEA: Facing Life for Growing Medical Pot
Diane Christian
Big Men: the Better Leader Lets You Live
William S. Lind
The Desert Fox
Paul D'Amato
The Left Takes a Dive for Kerry
Joshua Frank
Greens at the Crossroads
Mickey Z.
Media Declares War on Anti-War Protests
Winslow T. Wheeler
Sen. McCain's Pork Chops: an Exchange
Justin E.H.
Smith
The New Age Racket and the Left
Thomas St. John
Burning Slaves at the Stake: On "Sinners in the Hands of
an Angry God"
Ali Tonak
Help the NYPD?
Mark Engler
New York Says "No"
Justin Felux
Haiti: the Attica of the Americas
Poets' Basement
Gelman, Albert, Ford and Hamod
August 27,
2004
Gary Leupp
Neocon
Musings
Robin Cook
The
Ghosts of Abu Ghraib
Diane Christian
Disarming
Michael Donnelly
Situational Democracy: the Show Me the Green Party?
Jack Random
4F and Other Heroes: an Army of War Resisters
Mike Ferner
"To the Swift Boats!"
Mazin Qumsiyeh
7000 Palestinian Political Prisoners
Veronza Bowers, Jr.
"You Won't Be Leaving Tomorrow"
August 26,
2004
M. Shahid Alam
The
Clash Thesis: a Failing Ideology?
Diane Christian
War
Rules: Bush is No Sun Tzu
Derek Seidman
"They're As Bad As Wal-Mart:" Starbucks Workers Get
Organized
David Lindorff
Court to RNC Protesters: Drop the Rally
Christopher
Brauchli
Signs of Dissent: the Bush in the Bubble
Stew Albert
Reporting Suspicious Activity
Mark Donham
Judgement in Athens: Give the Koreans Their Day in Court
Saul Landau
Pinochet:
the Al Capone of the Southern Cone
Website of
the Day
The Kerry 527 Ad You'll Never See
August 25,
2004
Amelia Peltz
Can
I Have 9.8 Seconds of Your Time?
Noah Leavitt
Defining and Redefining Torture
Ron Jacobs
Takin' It to the Streets: It's Not About the Election, It's About
Democracy
James Brooks
Coronado Crosses the Jordan
Akiva Eldar
How to Win the Jewish Vote: Turn Gaza into a "Mini-Afghanistan"
Gemma Araneta
Chavez's New Brand of Populism
Philip Cryan
Uribe's Boys: the Death Squads of Colombia
CounterPunch Wire
Cheney Opens the Closet Door
August 24,
2004
Jeremy Scahill
John
Kerry: the Warchurian Candidate
Gary Leupp
"We
Want Them to Go Away"
David Domke
God
Willing: an Echoing Press and Political Fundamentalism
William Loren Katz
The Meaning of Hugo Chávez: Black and Indian Power in
Venezuela
Jonah Gindin
With Chavez? Reading the International Private Media
Fran Schor
Denying Atrocities: From Vietnam to Fallujah
Joe Bageant
Driving
on the Bones of God
Website of the Day
The Great America Lockdown: a Primer for the RNC
August 23,
2004
Winslow Wheeler
Don't
Mind If I Do: Porkbarrel and the War on Terror
John Pilger
Bush
May Be the Lesser Evil
Stan Goff
Swift
Boat Dogfight
Bill and Kathleen
Christison
Notes
from the West Bank: Build, Demolish, Rebuild
Mike Whitney
The Unraveling of Afghanistan
William Blum
Brave
New World of Iraqi Sovereignty
Ralph Nader
A Letter to the Washington Post: a Shameful and Unsavory Editorial
August 21 /
22, 2004
Cockburn /
St. Clair
"They
Want Blood:" The Bi-Partisan Origins of the Total War on
Drugs
Landau / Hassen
Failing
the Mission? Form a Commission
Brian Cloughley
The
Bush Team in Iraq: Moral Cowardice, as Practiced by Experts
Josh Frank
Nader as David Duke? The ADL Wants You to Think So
Mike Whitney
Reincarnating Mengele: the Torture Doctors of Abu Ghraib
Ron Jacobs
Day Labor Blues
Mickey Z.
Shooting at Whales: 40 Years After Tonkin
Fred Gardner
Dr. Wolman Comes Out: The Cannabis Consultants
Dave Zirin
Uprising in Athens: Iraqi Soccer Team Gives Bush the Boot
Josh Saxe
Witnessing Police Brutality in LA
Yanar Mohammed
Letter from Baghdad: a Democracy of Killings and Bombings
Helen Williams
Ali's Story: a Taste of Reality from Baghdad
Michael Donnelly
Elemental and NaturalForests, Fire and Recovery
Elizabeth Schulte
The Crisis in Affordable Housing
Poets' Basement
Adler, Albert, Virgil, Ford and Krieger
Hot Stories
Alexander Cockburn
Behold,
the Head of a Neo-Con!
Subcomandante
Marcos
The
Death Train of the WTO
Norman Finkelstein
Hitchens
as Model Apostate
Steve Niva
Israel's
Assassination Policy: the Trigger for Suicide Bombings?
Dardagan,
Slobodo and Williams
CounterPunch Exclusive:
20,000 Wounded Iraqi Civilians
Steve
J.B.
Prison Bitch
Sheldon
Rampton and John Stauber
True Lies: the Use of Propaganda
in the Iraq War
Wendell
Berry
Small Destructions Add Up
CounterPunch
Wire
WMD: Who Said What When
Cindy
Corrie
A Mother's Day Talk: the Daughter
I Can't Hear From
Gore Vidal
The
Erosion of the American Dream
Francis Boyle
Impeach
Bush: A Draft Resolution
Click
Here for More Stories.
|
August
31, 2004
The
Foundation for Greater Prosperity?
Beyond
Bush's Rhetoric on the Economy
By
MATT VIDAL
In one of numerous pronouncements that
economic recover is just around the corner, Bush told campaign
donors in 2003 "This administration has laid the foundation
for greater prosperity and more jobs across America."[1]
Just the other day in a New
York Times op-ed, N. Gregory Mankiw, former Harvard economist
and now chair of Bush's Council of Economic Advisors, mechanically
repeats the mantra: "the economy is strong" and the
president's "policies are making it stronger."[2] Whew!
No need to worry after all.
Mankiw dismisses so many "pessimists"
and implores us to "look at the facts," of which he
presents two. First, lest you think the glass is half empty,
the current unemployment rate is not nearly as bad as it was
at the height of the Great Depression. A truly outstanding accomplishment
for the Administration, indeed.
Second, Mankiw reminds us that
due to current data limitations it is impossible to precisely
say anything about the quality of jobs created in the recent
wave of job growth. But to argue as he does that because different
analysts, using available data on industry and occupations (rather
than individual jobs), "can reach wildly different conclusions,"
means we can therefore say nothing about the quality of job creation
is a non sequitur. To be sure, widely different conclusions
have been reached in this debate. But this is rather standard
for politically-charged social scientific debates.
The data, though imperfect,
do tell us something about the character of recent job creation.
In one methodologically sound analysis, economists from the Economic
Policy Institute used Bureau of Labor Statistics data to show
that the sectors--occupations within industries--that expanded
from June 2003 to June 2004 have weekly earnings 7.2% lower than
sectors that contracted during that period.[3] That is, recent
job growth has been within relatively lower paying sectors.
More generally Professor Mankiw
has apparently dropped the methodological and conceptual rigor
of the academy and now fully embraced his role as cheerleader
for the transfer of wealth currently masquerading as economic
policy under the Bush Regime. Thus, rather than the more sober
analysis that led him to label the Reagan supply-side advisors
as "charlatans and cranks" in the first edition of
his Principles of Economics textbook, Mankiw has now reverted
to substituting the recitation of political codewords--"tax
relief" and "double taxation"--for actual analysis.
One-size-fits-all
policy
Whether during war or peace,
budget surpluses or massive deficits, Bush's economic policy
has been bewilderingly single-minded: tax cuts. Professor Mankiw,
maintaining that unwavering optimism, is sure that "the
economy is heading in the right direction," due in part
to the fact that Bush "acted decisively to jump-start the
economy" through "tax relief reducing the double taxation
of dividends" and other measure of the tax cut packages.
However, at least 450 of Mankiw's
esteemed colleagues disagree. Ten Nobel Laureates and 450 other
prominent economists drafted a letter opposing Bush's tax cuts,
arguing that "there is widespread agreement that the purpose
is a permanent change in the tax structure and not the creation
of jobs and growth in the near-term. The permanent dividend tax
cut, in particular, is not credible as a short-term stimulus."[4]
As these and other economists
have noted, the Bush tax cuts are very poorly designed as a policy
for short-term economic stimulus. Isaac Shapiro and Joel Friedman
of the Center on Budget and Policy Priorities have done an analysis
of effectiveness of the 2003 tax cut, based on when they will
be enacted--the proposal spreads them out over 10 years--and
of the elements of the package that are high "bang-for-the-buck"--those
that "yield more than one dollar of added short-term demand
for each dollar of revenue loss."[5]
Shapiro and Friedman conclude
that only around one-fifth of proposed cuts would have been in
effect by October 2004, and that only 19% are high bang-for-the-buck.
In combination, only four percent of the 2003 tax package would
be an effective short-term stimulus.
Despite the rosy pronouncements
of the Administration, labor markets remain weak. Mankiw noted,
for instance, that the "recovery is broad-based." Yet
the latest numbers available (July 2004) show that 45 states
have higher unemployment, and 32 states have fewer jobs than
when the recession began in March 2001.[6] While there has been
some job creation, there are still 1.2 million fewer jobs now
than when the recession began. In fact--Makiw's protestations
notwithstanding--while we are not in another depression Bush
has presided over the greatest sustained job loss since the Great
Depression.
If the Bush tax cuts were designed
as short-term stimulus, numerous commentators have noted, they
would be temporary. Yet, nearly all of them are intended to be
permanent, as Bush has publicly stated, though the sunset clauses
(where cuts are scheduled to expire unless reauthorized) have
provided a useful accounting gimmick to hide the true costs of
the tax cuts. And despite the rhetoric, the tax cuts are not
free but must be paid for. As Paul Krugman has noted, the Congressional
Budget Office concluded that half of the 2003 budget deficit
of $400 billion is directly due to the tax cuts. That is, $2,000,000,000.
It has been noted by Krugman
and others that this $2 billion could have been directly used
in many other more effective ways to jump-start the economy,
such as through aid to struggling state governments to ease their
fiscal crises. These are not just idle speculations. The tax
cuts are currently being paid for through borrowing, including
substantial foreign borrowing. And there are plenty of available
alternatives for much higher bang-for-the-buck policies. I'll
briefly mention two here.
The US manufacturing sector
has taken must of the brunt of job loss over the last few years,
due in part to competition from low-wage regions (and also to
myopic capitalists in US multinational corporations who are facilitating
the erosion of the domestic manufacturing base by shifting work
overseas through "offshore" outsourcing). Yet, employers
in high wage regions like the US can compete in a global world
if they are technologically and organizationally "modernized,"
distinctive, and high-performance. For many reasons it is hard
for small manufacturers to reach these points on their own, and
it is here that government assistance can play a huge role. The
US does have one program in this vein, the Manufacturing Extension
Partnership (MEP), with state-level technology centers providing
subsidized upgrading.
The MEP was recently selected
as one of 15 finalists out of over 1000 government agencies for
the Harvard Innovations in American Government Award. Yet the
Bush administration targeted the MEP program for elimination
in the FY 2003 and 2004 budgets, though the program survived
due to widespread grassroots support from small and medium sized
manufacturers. This program, with a current budget of just over
$100 million is the primary, indeed one of the only, means of
fighting the outsourcing of US manufacturing jobs, by directly
upgrading small and mid sized manufacturers. Yet rather than
direct some of the $200 billion toward some form of manufacturing
policy such as the MEP might provide a basis for, the Bush administration
sought to eliminate the MEP and gave the money away to millionaires.
A second available policy is
being proposed by a group called the Apollo Alliance.[7] The
Apollo Project is a good, old-fashioned Keynesian program to
invest in public and private infrastructure, focusing on developing,
building and retrofitting renewable energy sources across a variety
of economic sectors. The plan, aimed at achieving energy independence,
calls for a ten-year investment of $300 billion, directly creating
millions of jobs and pumping billions of dollars into the economy.
Of course, this is nothing but a daydream under the current Administration
with its deeply vested interests in the oil economy. But the
point is that many policy alternatives are practically, if not
politically feasible.
A transfer
of wealth
Alas, as Krugman notes, the
core measures of the tax cuts are designed to benefit the very
wealthy, not to stimulate the economy. In a penetrating article
on "The Tax-Cut Con," Krugman writes that "The
centerpieces of the 2001 act were a reduction in the top income-tax
rate and elimination of the estate tax--the first, by definition,
only benefiting people with high incomes; the second benefiting
only heirs to large estates. The core of the 2003 tax cut was
a reduction in the tax rate on dividend income."[8]
The latter has been given the
political code name "double taxation," which we've
seen Mankiw has now adopted. The double taxation argument holds
no water, as dividends are just one of many ways in which monetary
exchanges are taxed multiple times. For instance, individual
income is taxed through payroll taxes, income taxes and sales
taxes. And, furthermore, while corporate profits are increasingly
untaxed due to various loopholes and tax breaks, only half of
all Americans own any stock at all and those who do are largely
invested in 401(k) plans that will not be affected by the dividend
tax cut.
Reduction of taxes on dividends,
like the elimination of the estate tax is part of a larger movement
to shift the tax burden from the wealthy to the less well off--in
this case it is a shift from taxes on wealth to taxes on work,
as noted in a recent report by United for a Fair Economy.[9]
This report also notes the shift of the burden on to future generations,
citing a report by Citizens for Tax Justice that shows how the
fiscal policies of the Bush Administration will impose an average
debt of $13,000 per US citizen between 2002 and 2007.[10]
The Bush tax cuts also affect
the income distribution more directly. According to an analysis
by the Brookings Institution, 36.7% of the 2001 tax cuts will
go to the top 1% of income earners. Only 1.1% will go to the
bottom 20% of income earners; 5.9% to the next 20%; and 9.2%
to the middle 20% of income earners.[11] Looked at another way,
the after-tax income of the bottom 20% will be a mere 0.8% greater
(roughly, $100 at the top of the bracket) while for the top 1%
it will be 6.3% greater (roughly, $25,000 at the bottom of the
bracket). In short, the tax cuts make an already unequal income
distribution less equal.
Starting from the premise that
tax cuts must be paid for somehow, either through tax increases
elsewhere or through reductions in government programs, William
Gale, Peter Orszag and Isaac Shapiro have conducted an innovative
analysis of the "net effects" of the 2001 and 2003
tax cuts. They simulate two scenarios in which individuals receive
the tax cuts but then pay for them either through increased taxes
elsewhere or through spending cuts. Under either scenario--equal-dollar
per person financing or progressive financing--they conclude
that "Once the financing is included, the 2001 and 2003
'tax cuts' are best seen as net tax cuts for about 20-25 percent
of households, financed by next tax increases or benefit reductions
for 75-80 percent of households."[12]
"It's
your money"
The tax cuts are sold as populist
measures to give people back their hard earned money. But as
the foregoing demonstrates, the Bush tax cuts are greatly skewed
toward the very wealthy and, are financed largely through borrowing,
and may even end up costing the average tax pay more in the long
run. Indeed, the William Gale and Samara Potter report in a Brookings
brief that "Treasury data show that a surprisingly large
share of households receive no reduction in marginal tax rates
[under the 2001 tax act], including 72 percent of those who file
tax returns and 64 percent of all filers who actually pay positive
amounts of income tax."[13]
Not only have the majority
of the tax cuts gone to the very few, very rich, but these tax
cuts come after income inequality has dramatically increased
over the past two decades, with wage stagnation for most workers.
The ratio of CEO pay to average worker pay exploded from 41-to-1
in 1982 to a whopping 301-to-1 in 2003.[14] According to the
Congressional Budget Office, the gap between the bottom 20% and
the top 1% in 2000 was the largest it's been since-- you guessed
it-- the Hoover years.
Roughly speaking, the money
of average workers is not being taken by the taxman but by the
boss man. Family income grew at a roughly even pace in all income
categories from 1947 to 1979 (116% for the bottom 20% and 99%
for the top 20%). From 1979 to 2001, in sharp contrast, family
income growth was heavily tilted toward the upper percentiles:
3% growth in the bottom 20%; 11% growth in the next 20%; and
81% growth in the top 5%.[15]
But enough with all the statistics. There is a more general qualitative
point to be made. American mythology notwithstanding, wealth
is not created by individuals. Complex industrial societies create
wealth collectively over many generations. Effectively functioning
markets and societies require many "public goods" that
markets cannot create: legal systems, security and safety, highways
and other public infrastructure, sanitation systems, education
systems, basic research, a social safety net and numerous other
things we take for granted in our modern society.
At the same time, untamed markets
create many intractable problems, including inequality, poverty
and environmental degradation. For all of these reasons, strong,
effective and well-funded government is needed. The FY 2004 is
$2.3 trillion, and this does not include all the state budgets.
Like it or not, the US is a global political economic powerhouse
because of, not in spite of its massive governmental apparatuses.
What the tax cut zealots really want is not a reduction in government
per se, but to further shift costs and burdens on to the poor
and working classes. Otherwise, as the wealthy understand well,
public finance (taxes and spending) can be used to help average
people by redistributing wealth downward, reducing inequality
and increasing quality of life.
Matt Vidal is pursuing his doctorate at the University
of Wisconsin in Madison.
He can be reached at: mvidal@ssc.wisc.edu
[1]. Brian Knowlton, "In
Heart of Steel Country, Bush Talks of Economy, Not Tariffs,"
The New York Times December 2, 2003.
[2]. N. Gregory Mankiw, "Not
a Hooverville in Sight," The New York Times August
22, 2004.
[3]. Elise Gould, Lawrence
Mishel, Jared Bernstein, and Lee Price, "Assessing Job Quality,"
Economic Policy Institute, Issue Brief #200.
[4]. "Economists' Statement
Opposing the Bush Tax Cuts."
[5]. Isaac Shapiro and Joel
Friedman, "Tax Returns: A Comprehensive Assessment of the
Bush Administration's Record on Cutting Taxes," Center on
Budget and Policy Priorities April 23, 2004.
[6]. Economic Policy Institute,
Job Watch website.
[7]. See the Apollo Alliance
website, and specifically the Apollo Jobs Report.
[8]. Paul Krugman, "The
Tax-Cut Con," The New York Times September 14, 2003.
[9]. Chuck Collins, Chris Hartman,
Karen Kraut, and Gloribell Mota, "Shifty Tax Cuts,"
United for a Fair Economy, April 20, 2004.
[10]. Citizens for Tax Justice,
"We're Paying Dearly for Bush's Tax Cuts," September
23, 2003.
[11]. William Gale and Samara
Potter, "The Bush Tax Cut: One Year Later," The Brookings
Institution, Policy Brief No. 101.
[12]. William G. Gale, Peter
R. Orszag, and Isaac Shapiro, "Distribution of the 2001
and 2003 Tax Cuts and Their Financing," Tax Notes
June 21, 2004.
[13]. Gale and Potter, Ibid.
[14]. United for a Fair Economy,
"Ratio of CEO Pay to Worker Pay Reaches 301 in 2003,"
Press Release, April 14, 2004.
[15]. United for a Fair Economy,
Income Inequality Charts website.
Weekend
Edition Features for August 7 / 8, 2004
James Petras
The
Anatomy of "Terror Experts": Meet the Mandarins of
Abu Ghraib
Fred Gardner
Run
Ricky Run: Football, Pot and Pain
Justin Delacour
Anti-Chavez Pollsters Panic: Fix Numbers; Reinvent Venezuela
Brian Cloughley
Persecuted by All; Supported by None: Who Would Be A Kurd?
Joshua Frank
The
Outsider: a Talk with Ralph Nader
Iain A. Boal
On "Shame": Warmed-Over Orientalism and Racist Projection
Chris Floyd
All About Eve: Open Season on Women in DC and Rome
Andrew Fenton
Fighting for Democracy and Justice in Haiti
Aseem Shrivastava
Saga of an Anguished Afghan
Neil Corbett
See Cuba: Sometimes a Cigar is Just a Cigar, Mr. Bush
Carol Miller
/ Forrest Hill
Rigged Convention; Divided Party: How David Cobb Won with Only
12% of the Vote
Tarek Milleron
Breaking the Principled Voter
Donald Macintyre
The
Battle of Najaf
Ron Jacobs
Spirits of The Dead: Why I Love My Petty Bourgeois Tendencies
Mickey Z.
Kid
Gavilan's Grave: Propaganda Scores a TKO
Poets' Basement
Adler, Ford and Albert
Keep
CounterPunch Alive:
Make
a Tax-Deductible Donation Today Online!
home
/ subscribe
/ about us / books
/ archives / search
/ links /
|