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Voodoo
Redux
January
10, 2002
by Eric Munoz
Shortly after Tom Daschle pounded his tax cuts, George Bush
shot back his awkward rejoinder: "Not over my dead body will
they raise your taxes." No doubt Bush's clumsy choice of words
was meant to illicit memories of his father's pledge just
a decade or so ago.
Because some attribute Forty-One's loss in 1992 to breaking
his "Read my lips" promise, Forty-Three is hell bent on not
only not making the same mistake his father made but somehow
atoning for it. George the Younger, it can be certain, will
doggedly hold on to his pledge come hell or high water. Bush
will not only resist all attempts to scuttle his $1.35 trillion
tax cut but he will fight to accelerate and increase those
cuts as a tribute to the right wing supply-siders he feels
are crucial to his re-election hopes. The massive tax cut
and the economic security package are bad for the economy
and bad for the country.
First of all, George Bush sold his tax cut on a false premise.
He told us that we had enough money to pay down the debt,
enough money to save Social Security, enough money for prescription
drug coverage for seniors, enough money for education and
enough money to set aside for a rainy day. After all those
priorities, we were told, we could afford a $1.35 trillion
tax cut. The administration, knowing full well that after
all the priorities would be addressed there would be little
room for their sacrosanct tax cut, pushed through the gargantuan
tax cuts before anyone would be the wiser.
However, the real problem with George Bush's $1.35 trillion
tax cut is not that it is a tax cut per se, but that it is
so heavily tilted toward the wealthy and well-off. The Bush
argument is that tax cuts for the well-off and wealthy will
save businesses money and thus create jobs. However, in order
to stimulate the economy we need to increase demand in the
short term, which will reduce inventories, spur production,
increase investment and create jobs.
Bush is assuming that by decreasing taxes for businesses
and the well-off, more income will be available for businesses
to hire workers. The more taxes are cut the more business
will be able to hire workers. The more workers are hired the
more tax revenues are increased. Thus, a reduction in tax
rates triggers a growth in the tax base and tax revenues are
sufficient to pay for federal programs.
There is no doubt that one can still find some economist
somewhere that will vouch for the trickle-down a/k/a supply-side
a/k/a we-have-so-much-money-we-can-meet-all-our-prioritites-have-a-massive-tax-cut
-and-in-recession-it-will-stimulate-the-economy theory of
economics. But we've already tried it and it didn't work.
Instead we ballooned the federal debt, increased interest
rates and mortgaged our future.
Not surprisingly, this administration has recently requested
an increase in the federal debt ceiling and long-term interest
rates are mitigating any savings in taxes realized by middle
and lower income families and companies continue to hemorrhage
employees. It is surprising, however, that a good deal of
the public can still be fooled by the fiscal chicanery of
the Bush administration.
Part of that chicanery is intentionally misrepresenting the
position of the Democratic leadership. Tom Daschle did not
say that a tax hike is needed to fight the recession, what
he did say was that the size of the tax cut and it's distribution
probably made it worse by keeping interest rates high without
stimulating anything. It would also, by implication, be a
bad idea to accelerate or increase the scope of the tax cuts
without providing more to the demand side, to those who would
actually spend the money.
Daschle's position cannot be described as wanting to increase
taxes. In fact, Sen. Daschle replied to Bush's mischaracterization,
"Let me be clear," he said, "I proposed short-term tax cuts
to create jobs and generate investment and long-term fiscal
discipline, not tax increases."
Sen. Daschle's proposal for short-term tax cuts is aimed
at giving the economy a boost by increasing demand. By all
accounts, the current recession is based on the accumulation
of excess inventories, which explains why prices, for the
most part, are falling. Companies are trying to sell off the
products that they have over-produced.
Stimulating the supply side of the economy makes no sense.
Why would companies hire more workers to produce stuff that
they can't sell? Stimulating the demand side of the economy
makes perfect sense. Put money in the hands of the people
who need it and they will spend it. The excess inventories
will be depleted, companies will need to replenish their inventories,
workers will be hired to produce them and voila, recovery.
However, today's Republican Party will not even consider
the possibility let alone enact policy to stimulate the economy
by boosting demand. The party, like it's leader, as become
so arrogant that it cannot admit that massive tax cuts for
the wealthy are not the answer, for then it would be admitting
its own fallibility. Whatever one thinks of George the Elder,
at least he was sensible enough to realize that the economic
policy he described as Voodoo economics was, in fact, just
that.
One can be sure that it was not easy for George I to forsake
his "No new taxes" pledge, but he had the courage to do what
was best for the economy and what was best for the country.
George II on the other hand, will suffer no such attack of
courage but will steadfastly stand by his stubborn pledge
even as debts mount, interest payments eat up revenues, investment
is crowded out and productivity slows. Under no circumstance
will W chance losing the support he receives from the right-wing
of the Republican Party, like many think his father had done.
Democrats now have a chance to capitalize on George Bush's
arrogance and the fiscal irresponsibility of the Republican
Party, on the recurring deficits and the growing national
debt. The democrats must hammer a simple message home, we
are the party that led the nation out of recession and staggering
deficits, and we have the experience and the knowledge to
grow our economy again.
In 1993, Al Gore cast the deciding vote on and President
Clinton signed the Budget Reconciliation Act that led to fiscal
responsibility. America wants and needs for its government
to provide certain services and those services must be paid
for, not by future generations, not by the retirement savings
of our workers and especially not for the benefit of a select
few who may or may not invest in our economy. Voodoo redux
just will not do.
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