Bush's proposed economic reforms highlight the divide between Republican theory and practice.
Core to Republican ideology is fiscally responsible government. This, realized by less government in general and less regulation in particular, should be accompanied by significant tax cuts. Equal civil rights, without preferences, and more individual freedom are just as crucial.
Even the desired cutting back on big government should be done with serious consideration for national security, economic responsibility, and the population's general welfare. Rather than as short-term political/electoral collateral, tax cuts and government cuts need to be done with an eye toward what is healthy for the country, as well as in its future best interests.
Early on in this administration, Bush made his priorities clear, passing the largest farm supports in U.S. history. The focus was not on the economy or policy, but on the Midwestern vote. Basically corporate welfare, these supports provide a minimal increase in income for small family farms. The billions are provided either for farms not to produce or as crop-price supports, creating very few new jobs. The benefits largely accrue to mega-agribusinesses' profit margins.
The U.S. is urging Third World countries to become less reliant on foreign aid and more economically self-sufficient. American agribusinesses, because of the government billions, can sell food cheaper than it can be grown in many countries. This has had a devastating impact on local farms, and it further reinforces international perception of the U.S. as hypocritical -- supporting Third World economic self-sufficiency while undermining it -- as well as being arrogantly imperial; we don't really care about the rest of the world.
But these supports are chump change in light of Bush's overall tax-cutting, especially the latest proposals.
The economic growth spurt that peaked in 2000 was fueled by irrationally optimistic overinvestment. If, for example, a million square feet of office space were needed, 10 companies, seeing this need, each raised the money and built a million square feet each, and the market was soon ridiculously oversaturated. This basic scenario played out again and again, in industry after industry. The projected economic strength of the new technology sector was even more staggering. Lacking either business/consumer demand or models for generating revenue, ideas were funded with millions of dollars. Much of this went for labor, services, and supplies, fueling the drive of the more traditional economy. As a metaphor, the economy was, say, a vehicle built to go no more than 125 mph, being driven at over 200. Most reasonable economists expected the slowdown, though many probably didn't expect it to be as dramatic as it has been.
The economy is now slowly growing. The pace will accelerate, though not by much, in the near future. The business isn't there, as was so recently demonstrated, and both businesses and consumers are cautious about spending. The government can certainly help encourage economic growth, but there is a limit to how much growth can occur. Extraordinary economic growth, however, can be the only rationale for such enormous tax cuts when revenue is already so much less than either projected or needed.
Almost everyone would agree that government is bloated, although there probably would be aggressive disagreement over what needs cutting. The myth is that, by trimming fat and getting rid of corruption and unnecessary programs, the government can save a huge amount of money. First, the government does many things and many of them well. Government money often impacts our lives in ways of which we are not aware. Second, the Bush administration is dramatically increasing spending in many areas. The Pentagon's budget has increased by billions -- and what will Star Wars end up costing? If the war against Iraq happens, it is going to cost tens of billions. Homeland security is already costing billions. Third, much of the fat will stay? How many tens of millions has Trent Lott brought to Mississippi? The battling take-no-prisoners fiscal conservative ex-Senator Phil Gramm once bragged that he had brought so much pork to Texas he should have trichinosis. Republican legislators' treasured programs will not be cut, though certain Democrats should be nervous for their home districts.
So what is going to be cut to compensate for the lost revenue? Social services, health and mental health services, education, nutritional supports, alternative energy research, and transportation alternatives, as well as mass transit, job training, and so on. Overwhelmingly, social programs that either serve a largely disenfranchised constituency or can be cut where the effects are unnoticed and the impact won't be felt by the larger population anytime soon.
Not enough; essentially we are taking money that our children and grandchildren, and their children and grandchildren, will have to pay back.
Make no mistake about it: These cuts are not likely to have much of an immediate impact on the economy. As the Daily Worker noted: "But what's gotten lost in all the excitement is that a shift toward buying high-yielding stocks by investors and paying out dividends by companies won't quickly solve the market's problems. The move also could have widespread and potentially negative ramifications on everything from mergers and acquisitions to capital spending to state and local government financing. And if rising dividends come at the expense of lower share buybacks, then the growth in per-share earnings will likely slow, potentially keeping a lid on any market gains over the next few years." Of course, those communists just hate capitalism to begin with ... oh, wait, that was from a front-page story in the Wall Street Journal. Sorry for the mix-up.
Well, if it spreads the tax savings among all taxpayers, at least there is a social equity, right? Don't fool yourself; these tax cuts benefit the rich more than anyone. Sure, everybody is getting a little, but any across-the-board tax cut significantly skews toward the wealthy. This one is especially outrageous. Politicians and talk-show hosts disdainfully condemn those who claim the dividend tax abolition is an economically unneeded and budgetarily unwise benefit almost entirely for the very richest Americans. They point out how so many working class families, as well as retired folks on fixed incomes, own stocks. What a blessing! But most small stockholders own between a few dozen and a few thousand shares. Dividends are very small amounts of money. Someone with 2,000 shares is liable to be getting from a few hundred to a couple of thousand dollars (at the very best) in dividends a year. Their savings will be meager. Those who own millions, if not tens of millions, of shares will have substantial savings.
Unemployment insurance mostly goes right back into the economy. Cuts for the working class (lower and middle) usually go to purchase goods and services. Tax cuts for the rich go to safe investments and allow for even larger campaign contributions for Republican candidates and conservative causes.
Bush's policy of increasing certain budgets, some substantially, given the staggering tax revenue shortfalls, seems rash enough. No amount of cutting of government services and supports will bandage the gushing budgetary wounds that already exist without the wounds being deepened. But aggressively pushing for unreasonable and unrealistically fantastic tax cuts, especially given the possibility of war, is almost impossible to comprehend. This is not just extreme fiscal irresponsibility -- it's economically insane governmental policy. Hypocritically, not only are the Republicans not complaining, they're the ones authoring this situation. This would seem ironic if not for the potentially horrendous consequences, for both people and the budget, of this cold-blooded political opportunism.
Next week: Other Republican ideological beliefs we'd like to see respected but probably won't.