President Bush won a victory in the Senate last week when it agreed to support a $350 billion tax cut that includes temporary elimination of the double taxation of corporate income. But it is not at all clear what this victory accomplishes except to allow some White Houses staffers to keep their jobs.
The Senate legislation will do little for the economy and is incompatible with the House bill. Rather than attempting to narrow differences with the House in the Senate, the White House insisted on making them as sharp as possible. As a consequence, the conference between House and Senate negotiators will be unnecessarily contentious, with a distinct possibility than no bill will ever emerge. This will make President Bush’s “victory” a hollow one indeed.
How did we get to this point? A lot of the problem dates back to the earliest days of the Bush Administration, when a conscious decision was made to blur the administration’s economic philosophy. On different days, it used supply-side arguments for its economic program, on other days Keynesian ones. While all administrations use contradictory arguments for their policies at times, they usually know themselves which ones they really believe in.
As time has gone by, I have become less and less certain whether this White House really knows what its economic philosophy is. One day it is adamant about the need for free trade; the next it is imposing tariffs on steel and supporting huge subsidies for agriculture that directly undermine its own trade agenda. In terms of tax policy, it talks about the importance of incentives and investment one day, and on the next it is promoting Keynesian-style “stimulus”.
If this were just a matter of marketing confusion, I would be less concerned. But the contradictions are inherent in the policies themselves. Good long-term reforms like eliminating double taxation on corporations were combined with give-away kiddy credits and other provisions that have no place in a properly designed tax system. Some provisions will increase growth, while others just lose revenue and will have no stimulative effect.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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