- The Washington Times - Wednesday, September 18, 2002

Recently liberals have been intensifying their effort to turn the coincidental connection between last year's bipartisan tax cut and this year's budget deficit into a circumstantial one in time for the fall elections.

Yet liberals' wishing it were so, will not make it so. It is important to see through their obfuscation to what really lies beneath: that liberal opposition to the tax cut arises from their desire to spend the money taxpayers and businesses now are using to support the economy.

To hide their motive, liberals don the unaccustomed and ill-fitting cloak of fiscal conservatism by saying they merely want to "freeze" the tax cut to reverse the deficit and help the economy. Sounding deceptively simple, it shouldn't surprise that's exactly what it is: simplistic deception that holds together neither in sum nor in parts.

First, what they seek is a tax increase. If "freezing" the tax cut isn't a tax increase, why would Congress' own estimators score it as one? Yet they and all official estimators assuredly would because it is a change to current tax law. The best proof of this is to turn liberals' own logic back on them. When the issue comes to making permanent last year's tax cuts (that will otherwise expire after 2010), liberals claim this to be an additional tax cut. Why? Because it is a change in the law. Either freezing the law now is a tax increase now, or extending the law later isn't a tax cut liberals can't have it both ways.

Next we must examine their non-facts. The truth is the tax cut didn't cause the surplus to disappear. According to the federal Office of Management and Budget, the tax cut caused just 10 percent of this year's surplus reduction ($41 billion of the $433 billion swing from February 2001). The tax cut actually ranks third in contributing to this year's and next year's surplus decline. New spending outranks the tax cut accounting for 26 percent this year and 27 percent next year. Interestingly, despite spending's bigger contribution to surplus shrinkage, liberals never mention it as a contributor at all.

What ranks first? The economy, of course. An economy that had begun receding in the summer of 2000 and was then hit by the unprecedented September 11 terrorist attack accounts for 64 percent of this year's surplus reduction and 49 percent of next year's.

Somehow liberals think this economy that is still just emerging from a terrorist-targeted recession would benefit from a tax increase. If so, it would be the first. To understand why, imagine where the economy would be now without last year's desperately needed tax cut. Due to the tax cut, the recession (which began in March of 2001 well before the tax cut was even signed) shrank gross domestic product by just a quarter (0.6 percent vs. 2.2 percent) of the average recession's decrease and unemployment rose just 2.1 percent the lowest of America's post-World War II recessions.

In short, the tax cut buffered and bolstered the economy from falling into a recession not just an average one, but the potentially devastating one the terrorist attack and war predicted.

Conversely, imagine where the economic recovery will be tomorrow if liberals are allowed to hike taxes today. Liberals claim raising taxes now will reduce the deficit and this in turn will reduce interest rates. This can't be taken seriously. Even accepting the false assumption that a tax increase could aid growth and add receipts, a tax rise next year would have no effect on the surplus until 2004 at the earliest because taxes are paid a year after the money is earned (ironically, cutting spending next year would have an immediate effect, but this is not a liberal option).

Furthermore, interest rates are already at their lowest in 40 years now despite the temporary deficit. Finally, liberals need to explain how taking money out of the private sector would encourage business to invest or consumers to spend the elements most crucial to full recovery.

The underlying problem in this liberal campaign of canards is that they have so marginalized themselves as to no longer be held accountable for producing a real plan. They are allowed to put together a series of insupportable assertions and call it policy. Specifically, where is their budget? Does anyone believe they want to cut spending or even restrain it? By not having to produce their own plan, they don't have to face up to the tax increase that is the only means of changing the fiscal situation they claim to oppose.

Despite liberals' complaints about the tax cut, the only real question is whether they oppose it more for denying them the money they want to spend or for allowing people to keep their money without Washington's involvement.


J.T. Young is a deputy assistant secretary at the Treasury Department.

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