Bush's Class-War Budget
By PAUL KRUGMAN

Published: February 11, 2005


t may sound shrill to describe President Bush as someone who takes food from the mouths of babes and gives the proceeds to his millionaire friends. Yet his latest budget proposal is top-down class warfare in action. And it offers the Democrats an opportunity, if they're willing to take it.

Advertisement


First, the facts: the budget proposal really does take food from the mouths of babes. One of the proposed spending cuts would make it harder for working families with children to receive food stamps, terminating aid for about 300,000 people. Another would deny child care assistance to about 300,000 children, again in low-income working families.

And the budget really does shower largesse on millionaires even as it punishes the needy. For example, the Center on Budget and Policy Priorities informs us that even as the administration demands spending cuts, it will proceed with the phaseout of two little-known tax provisions - originally put in place under the first President George Bush - that limit deductions and exemptions for high-income households.

More than half of the benefits from this backdoor tax cut would go to people with incomes of more than a million dollars; 97 percent would go to people with incomes exceeding $200,000.

It so happens that the number of taxpayers with more than $1 million in annual income is about the same as the number of people who would have their food stamps cut off under the Bush proposal. But it costs a lot more to give a millionaire a break than to put food on a low-income family's table: eliminating limits on deductions and exemptions would give taxpayers with incomes over $1 million an average tax cut of more than $19,000.

It's like that all the way through. On one side, the budget calls for program cuts that are small change compared with the budget deficit, yet will harm hundreds of thousands of the most vulnerable Americans. On the other side, it calls for making tax cuts for the wealthy permanent, and for new tax breaks for the affluent in the form of tax-sheltered accounts and more liberal rules for deductions.

The question is whether the relentless mean-spiritedness of this budget finally awakens the public to the true cost of Mr. Bush's tax policy.

Until now, the administration has been able to get away with the pretense that it can offset the revenue loss from tax cuts with benign spending restraint. That's because until now, "restraint" was an abstract concept, not tied to specific actions, making it seem as if spending cuts would hurt only a few special interest groups.

But here we are with the first demonstration of restraint in action, and look what's on the chopping block, selected for big cuts: the Centers for Disease Control and Prevention, health insurance for children and aid to law enforcement. (Yes, Mr. Bush proposes to cut farm subsidies, which are truly wasteful. Let's see how much political capital he spends on that proposal.)

Until now, the administration has also been able to pretend that the budget deficit isn't an important issue so the role of tax cuts in causing that deficit can be ignored. But Mr. Bush has at last conceded that the deficit is indeed a major problem.

Why shouldn't the affluent, who have done so well from Mr. Bush's policies, pay part of the price of dealing with that problem?

Here's a comparison: the Bush budget proposal would cut domestic discretionary spending, adjusted for inflation, by 16 percent over the next five years. That would mean savage cuts in education, health care, veterans' benefits and environmental protection. Yet these cuts would save only about $66 billion per year, about one-sixth of the budget deficit.

On the other side, a rollback of Mr. Bush's cuts in tax rates for high-income brackets, on capital gains and on dividend income would yield more than $120 billion per year in extra revenue - eliminating almost a third of the budget deficit - yet have hardly any effect on middle-income families. (Estimates from the Tax Policy Center of the Urban Institute and the Brookings Institution show that such a rollback would cost families with incomes between $25,000 and $80,000 an average of $156.)

Why, then, shouldn't a rollback of high-end tax cuts be on the table?

Democrats have surprised the Bush administration, and themselves, by effectively pushing back against Mr. Bush's attempt to dismantle Social Security. It's time for them to broaden their opposition, and push back against Mr. Bush's tax policy.

__________________
AMERICA LAND OF THE FREE HOME OF THE BRAVE--BECAUSE OF OUR CONSTITUTION.

Painting a Rosy Budget Picture
Bush Touts Declining Deficit, but Long-Term Outlook Is Dimmer

http://http://www.washingtonpost.com...siness/economy

By Michael Abramowitz and Peter Baker
Washington Post Staff Writers
Wednesday, October 11, 2006; Page A06

MACON, Ga., Oct. 10 -- The federal budget deficit shrank from $318 billion to less than $260 billion in the fiscal year that concluded in September, officials disclosed yesterday. It marks the second year in a row that the deficit has declined after ballooning in the early years of the Bush administration.

White House officials hailed the improving short-term budget picture as a vindication of President Bush's tax-cutting agenda, though the long-term prospects are considerably bleaker, given the escalating costs of health-care and retirement programs and, in the view of many economists, the red ink produced by tax cuts.


Who's Blogging?
Read what bloggers are saying about this article.
mothanskin.blog-city.com
EW513QW
Capitol Letters ?? Your Source For Political Discourse


Full List of Blogs (23 links) »


Most Blogged About Articles
On washingtonpost.com | On the web


Save & Share Article What's This?

DiggGoogle
del.icio.usYahoo!
Reddit
Bush pointed to the declining budget deficit in remarks Tuesday evening at a fundraiser in Georgia, where he once again sought to frame next month's midterm elections in part as a referendum on tax cuts that he says have stimulated revenue. The nation "has got this choice to make," Bush told donors here. "Do we keep taxes low so we can keep this economy growing, or do we let the Democrats in Washington raise taxes and hurt the economic vitality of this country?"

The president will step up his efforts to tout the economy at a White House event Wednesday, when officials said he will announce that he has met his target of cutting the deficit in half over five years -- three years ahead of schedule.

That promise was based on what officials once projected would be a $521 billion deficit in 2004. One senior White House official, who spoke on the condition of anonymity because the president has not officially announced the numbers, said the deficit for 2006 will be less than $260 billion, "with a significant margin." The Congressional Budget Office estimated last week the deficit would be $250 billion.

One reason the goal was achieved is that the bar was set low. As the economy improved, the $521 billion deficit never materialized, and the government ended 2004 with a $412 billion deficit. Moreover, Bush's policies, including the tax cuts and war spending, helped wipe out the surplus that his administration inherited from the Clinton administration in 2001; Democrats point out that the government was supposed to be running a $300 billion surplus this past year, so in effect, they say, there has been a downward swing of more than half a trillion dollars.

Sen. Kent Conrad (N.D.), the ranking Democrat on the Senate Budget Committee, said the deficit numbers mask the broader problem, which is that the government is using so much in surplus Social Security taxes that it eventually must repay. When that is added to the official deficit numbers, Conrad said, the country had an additional $550 billion in debt last year. "It's amazing how word games have been used to hide from the American people how serious our fiscal situation really is," Conrad said in an interview. "All of the happy talk is just that."

Still, the budget deficit is declining, in large measure because corporate and individual tax receipts have surged at a much faster rate than the government originally projected. The Congressional Budget Office estimated last week that government receipts were up 11.8 percent in 2006, to $2.4 trillion, the second-highest increase since 1981, surpassed only by the 14.5 percent increase last year.

Meeting with reporters last week, White House budget director Rob Portman said: "This economy is strong and growing. The president's pro-growth policies, including the tax relief, are working."

But Robert D. Reischauer, former director of the Congressional Budget Office and now president of the Urban Institute, gave the tax cuts little credit because the economic effect of putting that money back into the economy was offset by the debt incurred from extra spending on the wars in Iraq and Afghanistan and relief from Hurricane Katrina. "The consensus among economists is that the tax cuts of 2001 and 2003 and the extensions have done little to boost economic growth, having been offset by increased spending," he said.

Reischauer agreed that revenue is stronger than most observers expected. "But what we're seeing is the calm before the storm," he said. "Everyone knows that the current revenue and spending structures taken together will be unsustainable as the baby-boom generation begins to enter its retirement years."

Administration officials said the president will continue to talk up the economy as he tours the country in the weeks before the Nov. 7 elections, hoping to overcome voter anger about the war in Iraq and congressional scandals. "In some of the key states and some of the key districts, even within these states, the economy remains the number one issue," said Portman, a former Ohio congressman who remains close to his House colleagues.

Bush was campaigning Tuesday for Mac Collins, a former congressman who is trying to unseat Rep. Jim Marshall in one of the few House races in which the GOP has hope of defeating a Democratic incumbent. Collins aides said they expected the campaign to take in more than $400,000 from Bush's appearance.

__________________
AMERICA LAND OF THE FREE HOME OF THE BRAVE--BECAUSE OF OUR CONSTITUTION.