Democratic Underground

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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