You know when the two men many conservatives have most admired on economic issues during the past 30 years say extending the Bush tax cuts would be harmful, it truly must be a dreadful idea.
But that’s exactly what Alan Greenspan and David Stockman believe.
Greenspan is the former chairman of the Federal Reserve Board from 1987-2006, the libertarian darling who lowered interest rates repeaedly to sustain the economic boom of the 1990s and opposed strict oversight of financial markets.
Stockman was director of the Office of Management and Budget under President Ronald Reagan and helped create the discredited theory of “trickle-down economics,” in which tax cuts for the wealthy are justified because they supposedly will benefit others as the affluent will have more cash to invest.
In a stark repudiation of current Republican policy, both men recently went on record as stating that tax cuts don’t pay for themselves, and that extending the tax cuts for the wealthy approved by President George W. Bush would harm — not help — the U.S. economy.
In an interview Aug. 1, Greenspan flatly dismissed the GOP’s stance that tax cuts pay for themselves by generating private-sector revenue and productivity. “They do not,” he told NBC’s Meet the Press.
“I’m very much in favor of tax cuts but not with borrowed money and the problem that we have gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money,” Greenspan said. “And at the end of the day, that proves disastrous.”
A day earlier, in The New York Times, Stockman wrote an Op/Ed piece stating the Republican Party has become “bankrupt” of ideas. Although the GOP always pushes tax cuts, it’s never been serious about making offsetting cuts — particularly defense cuts, he said.
Referring to “the extraordinary growth of our public debt,” Stockman wrote, “In 1970 it was just 40 percent of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970. This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party’s embrace, about three decades ago, of the insidious doctrine that deficits don’t matter if they result from tax cuts.
“In 1981, traditional Republicans supported tax cuts, matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment,” he added.
“The Reagan administration’s hastily prepared fiscal blueprint, however, was no match for the primordial forces — the welfare state and the warfare state — that drive the federal spending machine.”
And the Bush tax cuts only made matters worse.
Passed in 2001 and 2003, the Bush cuts significantly changed the tax code. The cuts lowered the top tax rate from 39.6 percent to 35 percent, along with more modest cuts for people earning less, and reduced the capital gains tax on profits from property and stock from 10 percent to 8 percent.
That top tax rate, by the way, is for individuals and couples who make more than $311,950 annually. In other words, it wasn’t exactly a boon for the working class.
Because Dubya couldn’t get the 60 votes needed in the Senate to pass the tax cuts, he used the reconciliation process (requiring a simple majority of 51 votes) to enact them. By using that tactic, the cuts will expire at year’s end unless they’re extended.
No, gentle readers, you’re not imagining things. That’s the same tactic used by President Obama and Democrats earlier this year to pass health-care reforms and caused GOP hacks like John Boehner to scream bloody murder.
The tax cuts cost $1.35 trillion over 10 years.
At the same time Dubya was cutting taxes for the country club set, the Bush administration began borrowing heavily — primarily from communist China — to pay for the wars in Iraq and Afghanistan. Before he left office, Bush had borrowed about $489 billion.
(For the record, the U.S. government now owes about $868 billion to China, and pays roughly $50 billion each year in interest alone.)
The reality is Bush’s tax cuts didn’t trigger substantial economic growth; Bush had the lowest job-creation rate of any president since his father. Among modern presidents, only Gerald Ford fared worse.
As The Wall Street Journal put it, “The Bush administration created about three million jobs (net) over its eight years, a fraction of the 23 million jobs created under President Bill Clinton’s administration and only slightly better than President George H.W. Bush did in his four years in office.” (Even Jimmy Carter created 10.5 million jobs during his single term.)
What Dubya’s cuts did accomplish, though, was to create the widest disparity between wealthy Americans and their middle- and working-class counterparts in three decades. And the top 1 percent of Americans, people who earn more than $348,000 each year, ended up with its largest share of income since 1928.
The bottom line: Bush’s cuts shifted the overall tax burden from the rich to the middle class.
Here’s how The New York Times described the gap: “Per person, the top (300,000 Americans) received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.”
Hey, family values crowd: Do you think Jesus would approve of this radical inequity?
Despite the dire outcome, politicians like Boehner and U.S. Sen. Mitch McConnell want Bush’s cuts extended. Obama wants to continue the cuts for individuals earning under $200,000 and families earning under $250,000, but allow them to return to the previous rates for the wealthiest Americans.
Obama is trying to reverse the shift in the tax burden to its more traditional makeup. Already the majority of Americans are paying less in taxes under Obama than they have in decades, thanks to the $222 billion in tax relief included in his economic stimulus plan.
Given the excessive income disparity created during the past decade, there’s no rational basis to extend tax cuts for the wealthy other than simple greed. That’s a point that needs to be hammered home as often as possible between now and November’s elections.
Since at least 1980, the sum total of the GOP platform has been “cut taxes and be aggressive in foreign policy.” That’s exactly the same platform carried out by George W. Bush for eight long years, and look where it’s left us.
Let’s not return to the failed policies of the past.
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