Bush plan too rich?

Posted: Jun 13, 2003 12:00 AM

The agony and fury of well-situated critics of the Bush tax program is worth pondering politically and psychologically. Is Paul Krugman of the New York Times a Cassandra, who prophesied what was to come but, revelation after revelation, was scorned and ignored, leaving to posterity not a Troy saved from demolition, but only the eponym? How about Hendrik Hertzberg of The New Yorker? He sees terrible things going on and pretty much for the same reasons given by Krugman. It is all coming in from "narrow greed" and "public neglect." By neglect Hertzberg means the refusal of the American people to make the investment required for the U.S. in 2003. Why this public neglect? In part to indulge the narrow greed? But the two points aren't readily connected. Why should the public at large be determined to appease the inordinate appetites of the few?

But the term greed is of course invidious, and we are driven yet again to look at the charts. In the year 2000, U.S. earners in the top 1 percent contributed (rounding the figures) 37 percent of federal income taxes, up from 30 percent in l995. Earners in the top 10 percent paid 67 percent, up from 61 percent in l995. And the top 50 percent practically didn't move, but then there wasn't much room to move. In 2000, they paid 96.1 percent of the tax, up from 95.39 percent in 1995.

"The Bush Administration no longer flaunts its contempt for nation-building abroad," summarized Mr. Hertzberg in The New Yorker, "but it remains resolutely hostile to nation-building at home. Its domestic policy consists almost solely of a never ending campaign to reduce the taxes of the very rich." Now that censure is correctly ignored, as the language of Democratic national presidential conventions, sheer political noise. But President Bush has some responsibility for the rhetorical excess precisely because he has mostly given only utilitarian reasons for cutting the tax even on the very rich. He'd have been better off, and so would the critical public, co-stressing the wrongness of taxes that rise in the direction of punishment for success. A tax at 38.6 percent is an improvement over the 91 percent tax level under Eisenhower, and criticized by Kennedy and Johnson, who brought it down; but it began to rise again under Clinton. What also had been rising during the period was state taxes. Connecticut, for example, went from 0.0 percent income tax to 4.5 percent in l991.

We come to a critical and unexamined matter, the problem of the states. There was, at the end of the Clinton decade, some relief at the federal level. Federal government outlays as a share of GDP are just over l9 percent, down from 20 percent in l995. Mr. Hertzberg glides over the question as if taxes were a zero-sum game, an increase in the federal figure giving us a decrease in the state figure and vice versa. But it is not so. Spending by the states has risen independently and steadily in the past ten years, and what Mr. Bush's critics are saying is, in effect, that the federal government should simply turn over more money to the states to compensate for their present distress. "The pain is especially acute at the state level, where net federal help is in decline." We get then the painful particularizations: "States are canceling school construction, truncating the academic year, increasing class sizes, and eliminating preschool and after-school programs . . .even cops are getting laid off."

A diminished economy has to mean diminished services at the state level, because states are not permitted to borrow money. What is required is leaner practices, and it is a democratic exercise what exactly that will entail. When Newt Gingrich closed down the government in l995, Mr. Clinton outwitted him by closing down elevator service in the Washington Monument. Targeting such services arouses the yelps the president sought, and Gingrich retreated. But straitened budgets should bring on thought directed at getting along with what we have got. Public-sector spending is over 40 percent of GDP, and it is reasonable for the taxpayer to ask for husbandry in place of higher taxes.

And of course, Mr. Krugman et al. fail to acknowledge, let alone emphasize, that aid by Washington to the states has got to originate in aid from the states to Washington. If Californians want more public money, they can raise it directly, by increasing the taxes on Californians, or indirectly, by getting it from Washington, which will get it from Californians.

There are considerable problems facing Mr. Bush, but they aren't usefully addressed by voodoo socialism.