The Great Tax Cut Debate...
Democrats split on tax-cut issue
By Thomas Oliphant, 8/26/2003
WASHINGTON
THE LAST TIME I checked, the people who work for a living or who are retired on modest incomes -- the ones who comprise the foundation of the Democratic Party -- are not responsible for the stagnant economy or the absence of new jobs, much less for the government's explosion of debt and deficit. So why is it that two of the more prominent Democratic presidential candidates -- Howard Dean and Richard Gephardt -- would target their paychecks and pensions in seeking to lead the country out of the unprecedented mess President Bush has created? And why is it that three others -- John Edwards, John Kerry, and Joe Lieberman -- would not, focusing instead just on Americans with sky-high incomes?
It is not chic right now to suggest that there are a couple of serious issues in the contest that appears winnable, particularly because of Bush's inability to level with the country about either Iraq or the economy's anemic recovery.
For the moment, in the period before the campaign heats up and Democrats in the early voting states get ready to winnow the field, it is chic instead to wonder at the so-called Dean Phenomenon or marvel at the difficulty all of the other candidates appear to be having in establishing themselves. It is also chic to comment on the alleged desire of Democratic voters to cheer a candidate who will "take on" Bush, an elevation of attitude over substance.
For those of us who are rarely chic, this is more than unusual -- it is dangerous. A disagreement as fundamental as how to close the worst budget gap ever, a gap certain to keep the economy's long-run growth prospects minimal at best and greatly complicate the financing of the baby boom generation's retirement, is worth discussing more vigorously.
That is especially so this week, with the Congressional Budget Office's nonpartisan pronouncement that $500 billion deficits are likely to be with us for the foreseeable future, especially if the Bush administration decides to be honest about the cost and length of the Iraq occupation and of still-pending tax cuts. Already, this ruinous prospect is making even Bush supporters nervous on Wall Street, where smart money is beginning to drop long-term bonds like bad habits, gradually raising interest rates.
Perhaps reflecting their disquiet at the implications of their own ideas, Dean and Gephardt are fond of disguising specifics in a grander formulation -- getting rid of -- or "repealing" -- all of the tax cuts (enacted, in effect and pending) of the ineffectual Bush era.
In Dean's mind, the imperatives both of national health insurance and of balancing the budget are of far greater importance. To Gephardt, it alone is the reason he joins Dean in advocating complete repeal because Gephardt's concept of universal coverage via tax subsidy is much more costly.
The concept, however, disguises the fact that babies are being thrown out with the bath water. Specifically, the "complete repeal" Dean and Gephardt favor includes increases in the child tax credit, the establishment of a new bottom tax rate of 10 percent, and the substantial broadening of the base for the 15 percent income tax rate.
Give or take a detail, that just so happens to be the tax cut for ordinary Americans that Al Gore advocated three years ago.
The amounts involved are huge by ordinary Americans' standards -- more than $1,500 annually for a household with $40,000 in income, and proportionately more and less as one goes down toward the working poor and up toward the upper-middle class. Dean and Gephardt may argue that in the long run everyone is better off if the tax cuts are repealed and health insurance made universal, but John Maynard Keynes famously observed that in the long run we are all dead.
The important question they ignore is why ordinary Americans (working and retired) should have to pay one dime more in income taxes to help solve a mess they're not responsible for.
Edwards, Kerry, and Lieberman have taken different versions of the opposite point of view -- that tax cuts for Americans with incomes as low as minimum wage and as high as $200,000 for a household should be maintained, and that solid progress can still be made on pressing domestic needs (not just health insurance) and on balancing the budget.
Indeed, to stimulate more consumer demand and economic growth, Edwards and Kerry have proposed still more tax cuts for Americans who live off their paychecks -- Edwards via additional family credits, Kerry via a holiday on payroll taxes.
This seems to me like a discussion worth having about differences that are important. The income taxes paid by ordinary Americans are no small issue for ordinary Americans. Whether they should go up or down is the kind of question that Democrats should be discussing more thoroughly; it is the kind of question that defines them more fundamentally than how heatedly they attack Bush.
Democrats split on tax-cut issue
By Thomas Oliphant, 8/26/2003
WASHINGTON
THE LAST TIME I checked, the people who work for a living or who are retired on modest incomes -- the ones who comprise the foundation of the Democratic Party -- are not responsible for the stagnant economy or the absence of new jobs, much less for the government's explosion of debt and deficit. So why is it that two of the more prominent Democratic presidential candidates -- Howard Dean and Richard Gephardt -- would target their paychecks and pensions in seeking to lead the country out of the unprecedented mess President Bush has created? And why is it that three others -- John Edwards, John Kerry, and Joe Lieberman -- would not, focusing instead just on Americans with sky-high incomes?
It is not chic right now to suggest that there are a couple of serious issues in the contest that appears winnable, particularly because of Bush's inability to level with the country about either Iraq or the economy's anemic recovery.
For the moment, in the period before the campaign heats up and Democrats in the early voting states get ready to winnow the field, it is chic instead to wonder at the so-called Dean Phenomenon or marvel at the difficulty all of the other candidates appear to be having in establishing themselves. It is also chic to comment on the alleged desire of Democratic voters to cheer a candidate who will "take on" Bush, an elevation of attitude over substance.
For those of us who are rarely chic, this is more than unusual -- it is dangerous. A disagreement as fundamental as how to close the worst budget gap ever, a gap certain to keep the economy's long-run growth prospects minimal at best and greatly complicate the financing of the baby boom generation's retirement, is worth discussing more vigorously.
That is especially so this week, with the Congressional Budget Office's nonpartisan pronouncement that $500 billion deficits are likely to be with us for the foreseeable future, especially if the Bush administration decides to be honest about the cost and length of the Iraq occupation and of still-pending tax cuts. Already, this ruinous prospect is making even Bush supporters nervous on Wall Street, where smart money is beginning to drop long-term bonds like bad habits, gradually raising interest rates.
Perhaps reflecting their disquiet at the implications of their own ideas, Dean and Gephardt are fond of disguising specifics in a grander formulation -- getting rid of -- or "repealing" -- all of the tax cuts (enacted, in effect and pending) of the ineffectual Bush era.
In Dean's mind, the imperatives both of national health insurance and of balancing the budget are of far greater importance. To Gephardt, it alone is the reason he joins Dean in advocating complete repeal because Gephardt's concept of universal coverage via tax subsidy is much more costly.
The concept, however, disguises the fact that babies are being thrown out with the bath water. Specifically, the "complete repeal" Dean and Gephardt favor includes increases in the child tax credit, the establishment of a new bottom tax rate of 10 percent, and the substantial broadening of the base for the 15 percent income tax rate.
Give or take a detail, that just so happens to be the tax cut for ordinary Americans that Al Gore advocated three years ago.
The amounts involved are huge by ordinary Americans' standards -- more than $1,500 annually for a household with $40,000 in income, and proportionately more and less as one goes down toward the working poor and up toward the upper-middle class. Dean and Gephardt may argue that in the long run everyone is better off if the tax cuts are repealed and health insurance made universal, but John Maynard Keynes famously observed that in the long run we are all dead.
The important question they ignore is why ordinary Americans (working and retired) should have to pay one dime more in income taxes to help solve a mess they're not responsible for.
Edwards, Kerry, and Lieberman have taken different versions of the opposite point of view -- that tax cuts for Americans with incomes as low as minimum wage and as high as $200,000 for a household should be maintained, and that solid progress can still be made on pressing domestic needs (not just health insurance) and on balancing the budget.
Indeed, to stimulate more consumer demand and economic growth, Edwards and Kerry have proposed still more tax cuts for Americans who live off their paychecks -- Edwards via additional family credits, Kerry via a holiday on payroll taxes.
This seems to me like a discussion worth having about differences that are important. The income taxes paid by ordinary Americans are no small issue for ordinary Americans. Whether they should go up or down is the kind of question that Democrats should be discussing more thoroughly; it is the kind of question that defines them more fundamentally than how heatedly they attack Bush.
posted by Pamela J. Leavey at 11:51 PM
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