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News :: Miscellaneous |
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WHO SHOULD GET TAX RELIEF? |
Current rating: 0 |
by Mark Weisbrot
(No verified email address) |
12 Feb 2001
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Bush's Tax Cut Would Lose in an Honest Debate |
Sometimes honesty can be the best policy, even in politics. This is a hard sell here in
Washington, where the truth is treated with so little respect, and spin is everything. But perhaps
the Democrats and their allies are learning a lesson as George W. Bush\'s proposal for a tax cut
gathers momentum.
Here is a tax cut that is truly a gift to the rich and the super-rich. One of its biggest components
is to abolish the estate tax. This would give hundreds of billions of dollars to those who need it
the least: people who are born into enormous wealth. Two-thirds of this tax is paid by the
richest two-tenths of one percent of all taxpayers.
There is no ambiguity here. Mr. Bush advocated this cut during his campaign for the
presidency, and the Republican Congress actually passed it last September. The legislation was
vetoed by President Clinton.
You might think that the Democratic leadership, which opposes these tax cuts, would be bold
enough to suggest that maybe Bill Gates\' kids don\'t need another break at the expense of the
U.S. Treasury. Not so. They have chosen instead to argue from an ultra-conservative
standpoint: we can\'t afford the tax cuts because we need to use federal budget surpluses to pay
off the national debt.
From an economic perspective, the idea of paying off the national debt as soon as possible has
never made much sense. Of course anyone who has a mortgage on their house would like to
save on future interest payments by paying it off early. But should they sacrifice their children\'s
health care and education in order to do so? Most people would say no. Economists would go
further, pointing out that it does not make sense to use surplus funds to pay off debt when there
is an alternative that yields a return higher than the interest on the debt.
Our national debt is quite low relative to our economy, and that is all that matters. It currently
stands at about 35 percent of GDP, down from 49 percent just five years ago. It really
shouldn\'t be an issue, and if not for the demagoguery of politicians, it wouldn\'t be.
The Democratic strategy was hit hard last week when Federal Reserve Chairman Alan
Greenspan said that we could indeed afford a tax cut, and that in fact he was concerned that
without one we might pay off the national debt too quickly.
Greenspan\'s remarks were obviously politically motivated. Would he have said the same thing
if we had a president proposing $1.6 trillion in new spending -- rather than a tax cut -- over the
next decade? To ask the question is to answer it.
But here, too, the Democrats have painted themselves into a corner by joining in the deification
of Mr. Greenspan, exaggerating beyond recognition not only his impartiality but his
competence.
This is a man who has repeatedly thrown hundreds of thousands of people out of work -- by
raising interest rates -- in order to keep wages from rising. So anyone who reads the business
press should not be surprised that he supports tax cuts for rich people.
If they want to give Greenspan credit for not pulling the plug on the economy for nine and a half
years, fine. But this praise should be of the kind given to a compulsive gambler gone straight: he
crashed the economy in 1990, sending it into recession by hiking interest rates to ten percent
the previous year. He kept unemployment much higher than necessary for several years, by
adhering to a theory -- now thankfully abandoned -- that six percent was the best that we
could do without accelerating inflation.
And now, as we see layoffs soaring at companies throughout the country, does it really take
that much political courage to question the six interest-rate hikes since June 1999 that helped
bring on the current slowdown? Or does the \"Maestro\" -- as journalist Bob Woodward titled
his fawning portrayal of Mr. Greenspan -- only merit praise for trying to put the toothpaste
back in the tube?
Now that the Democrats have been let down by both the Fed chairman and their own fatally
flawed arguments, here\'s a new, more honest strategy. Propose a tax cut for the majority of
Americans, with an increase in the Earned Income Tax Credit for those at the bottom of the
wage scale.
Then ask the citizens a simple question: who should get tax relief? The richest one percent of
Americans, who have more than doubled their real (inflation-adjusted) after-tax income over
the last twenty-three years? Or the majority of Americans, whose income has stagnated?
They\'ll get the answer they want to hear -- and no one will care whether Mr. Greenspan
agrees.
Mark Weisbrot is the co-director of the Center for Economic and Policy Research in
Washington, D.C. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.
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See also:
http://www.cepr.net/
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National debt vs. personal debt |
by Nancy Dietrich-Rybicki
nancydietrich (nospam) juno.com (unverified) |
Current rating: 0
16 Feb 2001
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I've always found it interesting how politicians always talk about the need to lower the national debt, but never talk about the need to lower personal debt. U.S. citizens are currently holding over $1 TRILLION dollars in debt, not including real estate debt (mortgages, etc.). Apparently, "keeping the economy running" by increasing personal debt to purchase things is more important than each individual's well-being. It's also a shame that many citizens' debts also happen due to medical bills. Anyway, I'm getting off my soapbox now, and thanks for the post!
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