- The Washington Times - Friday, February 21, 2003

President Bush has unveiled a bold package of fundamental tax reforms and immediate tax-rate reductions to boost the sluggish economy onto a higher long-run growth path, which will create more jobs, generate greater economic opportunity and raise the nation's overall standard of living. Right on cue, liberal senators from both political parties, who together comprise a voting majority in that august body, lambasted the president's initiative for being skewed toward "the rich" (wrong); for failing to "stimulate" aggregate demand (right, thankfully); and for exploding the deficit (wrong).
To paraphrase Mark Twain, "Sometimes we wonder whether the World's Greatest Debating Society is being run by smart people who are putting us on or by imbeciles who really mean it."
You may remember when President Bush announced his 2001 tax-cut package the same band of liberal senators criticized it for showering a disproportionate share of the benefits on the wealthiest 1 percent of all taxpayers. Senate Minority Leader Tom "I'm Not Going To Pay A Lot for This Muffler" Daschle, South Dakota Democrat, and House Minority Leader Richard Gephardt, Missouri Democrat, marched outside of the Capitol exclaiming, "If you make over $300,000 a year, this tax cut means you get to buy a new Lexus. … If you make $50,000 a year you get to buy a muffler on your used car."
Instead of explaining the benefits of incentive-based tax relief, the administration caved into the demagoguery and made the liberals' initiative rebate checks the centerpiece ($38 billion out of $41 billion) of first-year tax relief under the 2001 tax cuts rebate checks meant to put money in peoples' pockets and to stimulate aggregate demand. Most people forget this important factoid because no sooner had the president signed the tax cuts into law than the liberals abandoned their rebate brainchild, only to retreat into the comfortable confines of contrarianism and obstructionism. … well, that and the fact that all those rebate checks failed to stimulate much of anything.
Now, as the economy remains mired in a jobless recovery, President Bush has stepped up to the plate with a plan to remove impediments in the tax code that obstruct economic growth and that create disincentives to work, save, invest and take entrepreneurial risks.
Liberals immediately pounced on the plan utilizing class-warfare rhetoric. Never mind that the top 1 percent of taxpayers, 77 percent of whom are small businesses and entrepreneurs, currently pay 37.4 percent of all income taxes. Never mind that families earning more than $100,000 would end up paying 73 percent of all federal income taxes if the president's plan were implemented. And, never mind that 3.8 million more lower-income taxpayers will be removed from the tax rolls altogether.
Nonetheless, liberal Johnny One Notes are pushing again for an economic "stimulus package" to "put money into peoples' pockets" with yet another round of rebate checks. Anyone want a muffler for his used car?
The economy does not need, nor has it ever needed government-induced economic "stimulus," nor in fact is it even possible for the government to "stimulate" economic growth in the short run without causing long-run damage to the economy. All the economy requires to grow is stable monetary policy and for Congress to refrain from enacting harmful tax and regulatory policies that distort the incentives that markets naturally create by rewarding people for their work, saving, investing and entrepreneurial risk-taking.
It is a truism that people and businesses must first produce before they can consume. That is why the most important proposals in the president's tax plan are the acceleration of the tax-rate reductions, the elimination of the double taxation on corporate profits and the increase in the amount of investment in plant and equipment that small businesses can write off in the first year (so-called "expensing") proposals that all remove disincentives to produce. Indeed, the president's plan would be even stronger had he also eliminated the stealth tax on individuals by immediately ending the phase-outs of itemized deductions and personal exemptions that surreptitiously increase marginal tax rates and had he allowed all businesses to expense investments, even if temporarily for three years.
Today, liberals are, once again, worshiping at the alter of high tax rates in the name of "fiscal responsibility." However, it is important to remember that they only "got religion" on the issue as a means of preventing Republicans from passing incentive-based tax relief. For example, in 2001 the Senate Budget Resolution sought to decrease the Bush tax cut by $432 billion, but then increased spending by $429 billion. The truth is fiscal responsibility is nothing more than a euphemism for 'tax and spend' liberalism.
Similarly, Republican "deficit hawks" also seem more concerned with redistributing wealth and eliminating deficits than growing the economy. Sen. John McCain, Arizona Republican, makes the class-warfare argument saying, "You will find that the bulk of it, again, goes to the wealthiest Americans," while George V. Voinovich, Ohio Republican, said lawmakers need to focus more on eliminating the federal deficit saying "as far as the eye can see, I see red."
Meanwhile, Joseph Stiglitz, formerly chairman of the Council of Economic Advisers under President Clinton, wrote the problem with "Rubinomics" the deficit reduction-interest rate-economic growth maxim is that "it is inconsistent with what is taught in virtually every economics course in the country namely, that deficits are good for employment, and that reducing the deficit during a downturn is a particularly bad idea." An idea Robert Reich echoed in a recent Wall Street Journal opinion editorial.
Could it be they are praying for a poor economy for the 2004 elections, or, less cynically but perhaps more troublesomely, are they merely "tax and spend" liberals content knowing we all share equally in economic misery rather than sharing, perhaps disproportionately, the blessings of economic prosperity?

Lawrence Hunter is the chief economist and Shaun Small is the senior policy snalyst at Empower America.


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