Friday, May 16, 2003

Tax cuts are a reckless and ineffective tool for poking the economy. As a recent New Yorker column pointed out, President Bush (a man whose sincerity while presenting platitudes and other simplistic thinking is rarely paralled in American politics) has argued that tax cuts create jobs. Which is an odd equation when you consider that Congress already passed his historically deep tax cuts in 2001, and that hardly kept the job market out of the crapper. Earlier, James Surowiecki also deconstructed the logic of tax cuts:

The righteous disdain for taxation is clearly part of a broader backlash against the government’s “greedy hand.” It is politically expedient, since lower tax revenues can be used to justify sharp cuts in entitlement programs, whose beneficiaries tend to vote Democratic. And it has become a convenient way of patching up the holes in the economic case for tax cuts. Thanks in part to the supply-siders, the U.S. already has the lowest tax burden of any major industrial country, and marginal tax rates are relatively modest. Cutting tax rates that are so low, most economists believe, creates few incentives. The carrot just isn’t big enough. And with the national debt at more than six trillion dollars, and twenty-five trillion dollars in Social Security and Medicare obligations soon coming due, the potential benefits of another big tax cut are simply outweighed by the costs. ... In the past three years, the president has managed to offer tax cuts as the right response to a booming economy, then to a recessionary economy, and now to a slow-growing economy.

From Time magazine:
While President Bush held a rally last week near Arkansas' state capitol to drum up support for his tax cuts, a few blocks away, at nearly the same hour, Republican Governor Mike Huckabee was imploring his balky legislature to support a tax raise. "I envy his position of being able to come to Little Rock and preach tax cuts while I preach a tax increase," Huckabee told TIME. "He has a tool that I do not have, called deficit spending, and can shift—or at least not fix—the Medicaid issue, which is causing most of my heartburn." Medicaid costs in Arkansas have risen from $1.2 billion a decade ago to $2 billion, and Huckabee, like Governors everywhere else, wants Washington to start shouldering more of the burden. ... Governors increasingly blame the Bush Administration for the severity of their situation. "I am a good Republican. I am a good team player," Arkansas' Huckabee said laughingly during an interview. "[But] turn that tape recorder off and I will speak an earful."

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