Tax cuts: A final act of recklessness.
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| Fri, 09-24-2004 - 8:32am |
Editorial: Tax cuts/A final act of recklessness.
http://www.startribune.com/stories/561/4997481.html
In a democracy, scholars say, citizens get the quality of government they deserve. But no one deserves the reckless and hypocritical tax cut that Congress planned to pass this week in a last-minute burst of electoral pandering. Voters have not asked for it, the government cannot afford it and lawmakers themselves seem clueless about its corrosive long-run impact on the economy and the federal budget.
Although President Bush has been the chief cheerleader for tax cuts these last four years, there's plenty of blame to go around for this week's surprise maneuver, a $145 billion bill that would extend three temporary features of the big 2001 federal tax cut. The Republicans who control Congress hatched the plan in a late-night committee meeting on Wednesday, knowing that Democrats dare not vote against it in an election year. Democratic leaders such as Tom Daschle and John Kerry caved, knowing they are locked in tight races. Bush himself set the stage by supporting a smaller and more responsible tax bill last August and then, in a sudden reversal, killing it so a larger bill could be brought back closer to the election.
Since members of Congress will soon be home campaigning for reelection, voters can expect to hear the usual nonsense that has come to pass for fiscal judgment in the 108th Congress.
Lawmakers will say the bill targets the middle class, mainly with provisions for married couples and families with children. But the Center on Budget and Policy Priorities in Washington, D.C., points out that 68 percent of benefits next year will go to the top fifth of American households, while only 10 percent will go to those in the middle fifth.
Supporters will say the feeble economy needs more stimulus. But that's not the view of Alan Greenspan, chairman of the Federal Reserve and Washington's most respected economist. This week the Fed raised interest rates for the third time this year precisely because Greenspan fears an overheated economy and growing federal deficits.
The administration will say that a growing economy will pay for the tax cut and eventually reduce the deficit. But that's what the White House budget office said in 2001, 2002 and 2003. Instead, the federal deficit has simply gotten bigger and bigger.
Finally, inevitably, members of Congress will say "it's your money" and they're just giving it back. Well, no. Congress already has spent your money on everything else the government does. To pay for these tax cuts Washington will borrow a record $422 billion this year -- much of it from foreign investors. In fact, Congress will borrow $1 of every $5 the government spends this year. A tax cut for today's voters, in other words, is a higher debt load for their children.
If this were pandering on the normal scale, voters might shrug it off as part of the electoral landscape. But former Minnesota Gov. Arne Carlson, an authentic fiscal conservative, points out that American profligacy is now a threat to the world economy. The International Monetary Fund's managing director, Rodrigo de Rato, told the Council on Foreign Relations Monday that massive U.S. borrowing jeopardizes the stability of world currencies and poses "a risk not only for the United States economy, but for the world economy." The lawmakers who pushed this package through Congress this week must have looked long and hard into the future -- and decided that it ends on Nov. 2.


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>"Democrats had made it clear they would vote to extend the tax cuts, but they tried during the conference committee to attach amendments that would have paid for them with either a surcharge on families with incomes above $1 million or by closing some corporate tax shelters.
The Republican majority rejected those amendments, along with amendments that would have extended the child tax credit to families with incomes just above $10,000 a year."<
Quote from..........
Op-ed: If It Ain't Broke, Give It a (Tax) Break.
Sleazy legislation demonstrates Bush's lack of ideological principles.
http://www.latimes.com/news/printedition/opinion/la-oe-chait24sep24,1,7691019.story
One telling episode began last year, when, because of a World Trade Organization ruling, Congress had to eliminate a $5-billion-a-year export subsidy. The obvious thing to do was pocket the $5 billion and make a dent in our quite large budget deficit. Of course, the GOP-controlled Congress decided instead that every dollar saved would be devoted to tax cuts. And because the newfound money would come from corporate America, it would be returned to corporate America.
Now, if it did make sense to provide a tax cut to corporate America, the logical course of action would be to make it a broad-based tax cut. So of course Congress avoided that. Instead, it decided to offer narrow tax breaks to manufacturers, on the grounds that manufacturing has faced hard times. Thus Congress violated a maxim of conservative and liberal economists alike, which holds that the tax code should not favor one kind of income over another.
Why? First, markets are more efficient than lawmakers at deciding whether resources should be allocated to building cars or to writing software. The fact that manufacturing is in trouble sounds like a compelling exception, until you realize that politicians can (and do) make an equally compelling case to favor industries that are doing well. A few years ago, Congress exempted online purchases from sales tax — on the grounds that booming Internet commerce represented the wave of the future. Neither kind of favoritism makes economic sense.
Second, when the government favors one activity over another, it invariably creates a huge incentive to monkey with the definition of that activity. If manufacturing gets a lower tax rate, then the goal is to be legally defined as a manufacturer. That's exactly what happened. Lobbyists for agriculture, construction, recording and many other industries successfully began lobbying Congress to be reclassified as manufacturers.
In due course, the pretense of only aiding manufacturing was dropped. The bill — which has now passed both the House and the Senate — became a free-for-all for Congress to reward specific constituents. One provision, which employs the legislative habit of pretending that a bill doesn't single out beneficiaries, awarded $189 million to "a motor vehicle manufacturer who announced in December 2000 that it would phase out the motor vehicle brand." (Oldsmobile, if you must know.) Bank directors, foreign-dog-race gamblers and sundry other worthies won targeted tax breaks. As one lobbyist told the Washington Post's Jonathan Weisman, "You wouldn't be a decent tax lobbyist if you didn't have tons of stuff in ."
The comic denouement of this episode is that the giveaways, properly accounted for, will end up costing far more than what was saved in the first place. It's as if a man up to his eyeballs in debt found a $100 bill and decided to blow it right away, and ended up spending $200.
The spectacle has grown so grotesque that even conservatives like Glenn Hubbard, Robert Novak and the Wall Street Journal editorial page writers — who regard upper-class tax cuts the way teenage boys regard sex — have denounced it. Nobody, literally nobody, supports this bill except those who directly profit from it and their toadies and hirelings. And even the latter seem somewhat divided. One lobbyist involved in the bill confessed to Weisman that it "has risen to a new level of sleaze."
You could blame Congress for this debacle, but that would be like blaming mosquitoes for sucking blood. Congress is designed to look out for parochial interests. The White House is supposed to look out for the national interest. But the sleaze has proceeded because Bush signaled his willingness to sign the bill no matter how tawdry it got.
A normal administration would have some smart policy geeks in a position to prevail on the president to veto such a bill. That's what's so uniquely awful about this administration. It would never occur to anybody in power to veto a bill simply because it was indefensible.
I didn't realize myopia was contagious--GWB has the same problem--please God let the farce continue until I'm re-elected. If I could only believe we wouldn't suffer from the fall out it wouldn't bother me so much. Apparently it also bothered the editorial writers at the NYT also.
Congress Slouches Toward Home
Published: September 24, 2004
The Republican-controlled Congress is shambling to the end of one of the lightest workloads in decades without a hint of embarrassment, concentrating on the defense of the flag, tax cuts and marriage while failing at the most demanding obligations of government.
When the lawmakers get back home, voters should ask them how they could quit their posts while leaving a dozen basic spending bills in next year's budget unfinished - hung up once more in back-room feuds about pork and logrolling. The assault weapons ban was allowed to lapse to appease the gun lobby. A simple $5 billion corporate-tax plan to satisfy a violation of tariff laws remains mired in a $150 billion pork fest, while American products suffer retaliatory sanctions in the billions. As for fully financing and enforcing the No Child Left Behind Act, voters have to settle for lawmakers' posing tenderly with schoolchildren.
Equally disturbing is how our elected representatives have been spending their time.
Eager to help the middle class, a goal no one can argue with, they threw moderation to the winds this week on a $145 billion extension of existing tax cuts benefiting families. They hoped voters would not notice that they had not bothered to find budget savings to offset the costs of this program, and that these tax cuts will spawn a borrowing binge by the government from banks around the world. The loans will come due for America's children and grandchildren, whose earnings may just as well be stamped "Payable to the Bank of China." Republican leaders did find the fiscal constraint to brush aside proposals to extend minimal credits for millions of children in working-poor families, only to add a $13 billion dollop of tax boons to corporations.
The House began its work on the decades-delayed reform of the American intelligence agencies by announcing that its kudzu patch of competing committees, one of the central points of criticism by the 9/11 commission, was too sacred to touch. Beyond that, House Republican leaders' most enthusiastic response to the call for reform seemed to be in trying to tack on a Patriot Act postscript that would grant law enforcement even more powers that could curtail civil liberties.
Republican leaders have also been chipping away at the Constitution by proposing to deny judges jurisdiction to review selected acts of Congress. The House passed a measure yesterday retaining the Pledge of Allegiance's "under God" phrase and prohibiting any federal court - including, outrageously, the Supreme Court - from judging the law's constitutionality.
In essence, the House proposed to protect a patriotic ritual by trashing the constitutional system it celebrates. This measure was spurred by discontent over a 2002 federal appeals court ruling that invalidated the recitation at public schools of the pledge with the "under God" phrase in it, and the Supreme Court's recent choice to dismiss the case on technical grounds rather than addressing the merits. It echoed the mean-spirited and unconstitutional Marriage Protection Act, which the House approved in July to bar federal courts from reviewing the legal definition of marriage.
The other day, Congressional Republicans celebrated the 10th anniversary of their ascendancy to power with the Contract With America, somehow failing to mention that their fervid conversion to unchecked deficits was not exactly part of that contract. Once upon a time, gridlock was considered the ultimate problem with Congress. That looks better than what we're getting right now.
http://www.nytimes.com/2004/09/24/opinion/24fri1.html
>"Equally disturbing is how our elected representatives have been spending their time."<
They must be brain washed or drugged. Common sense has gone down the drain.
>""Payable to the Bank of China.""<
I predict the next super power will be China.
Sure, they can just take over the US. More outrage over taxes.
Rejuvenated and buoyant on the stump, George W. Bush has been hammering John Kerry on spending and taxes. Assailing the "hidden Kerry tax plan," Bush accuses Kerry of proposing $2 trillion dollars in new spending while raising taxes on the rich, which will somehow be foisted onto the middle class. "You can't tax the rich enough to pay for his spending," Bush tells crowds. "The rich hire lawyers and accountants for a reason -- to stick you with the bill."
There's nothing like concealing tax dodgers. But campaign rhetoric can't hide the reality that Bush's tax cuts actually increase taxes on the poor and middle class, starve social services, severely strain already overburdened state budgets and contribute to a skyrocketing national deficit. This week Congress agreed to extend key provisions of Bush's tax cuts, even though they lack the money to pay for them.
Under Bush,
** Eighteen states passed major tax increases totaling $6.2 billion to pay for unfunded Bush mandates like No Child Left Behind. That's on top of the $6 billion in tax hikes fifteen states were forced to enact two years ago. And despite the increased revenue, budget cuts nonetheless caused half a million children to lose their health insurance.
** Property taxes jumped ten percent nationwide between 2001 and 2003. Major cities saw a 23 percent rise in the last four years.
** The debt burden grows by $87 billion every fifty-one days. The average family of four took on $52,000 more in its share of the national debt over six years, starting in 2001.
** Multinational corporations were sixty-eight percent more likely to invest in tax havens between 1999 and 2002, shortchanging the Treasury Department roughly $70 billion a year.
** The 275 largest corporations paid fewer taxes over the last three years even as profits increased. Twenty-eight corporations paid no taxes from 2001 to 2003, despite raking in $45 billion in profits.
** Congressional Republicans reduced or eliminated tax credits for four million poor families while providing $13 billion in corporate tax breaks as part of a new "middle-class" tax cut this week.
** Audits of corporations decreased sixty percent from the Clinton years.
The list goes on and on. If elected to a second-term, Bush promises to push for a major tax overhaul that would far eclipse the damage he's done so far. Meanwhile, despite a record $422 billion deficit, Bush proposed more than $3 trillion in new spending programs at the Republican convention, far outpacing his "tax and spend," Massachusetts rival. Bush was never a good student, and his numbers don't add up.
http://www.thenation.com/blogs/outrage?bid=13
Where's the outrage, why aren't American's angry? Surely, we've been hypnotized!!!
Excellent piece. Have emailed myself a copy.
Then they vote themselves a raise.
I caught the Bill Moyers show on PBS last night. Interviewed was Pete Peterson, he was discussing his new book "Running on Empty". If you can catch this show please watch it.
One thing he suggested was a panel, something along the lines of the 9/11 commision, to brainstorm
I only saw a few minutes of this program. I remember when the Rudman commission tried to reason our way out of a growing debt in the early 90s. It took forever for people to pay attention. People aren't even attempting to address the problem, they don't want to wake up to the difficult reality of what this generation is doing to their children. I consider the entire political system corrupt, and until the public is willing to hold the legislatures accountable, the current 'I'll pad your pocket if you pad mine" mentality will continue. Political courage, like doing what's right for the majority of the people, is a thing of the past. Long shall we mourn.
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