"Fiscal Responsibility," "Compassionate Conservatism," and other Republican Oxymorons
At the time, the Republicans claimed that these cuts were designed to help reduce the budget deficit that the United States is currently running- a deficit that was run up by the Republicans under Bush. As you might guess, for someone who was raised in a Republican household when Democrats were taking the blame for budget overruns and Republicans were presenting themselves as the party of fiscal responsibility (i.e. me) the current state of affairs is darkly humorous.
More recent events, however, have given lie to the earlier Republican claims. The U.S. House of Representatives recently passed a set of tax cuts that not only meet, but actually exceed, the amount "saved" by the earlier reductions in social spending. Or, as the Washington Post explains in their article:
The House approved yesterday $56 billion in tax cuts that would keep alive the deep reductions in the tax rates on dividends and capital gains passed in 2003, but the measure is certain to be challenged by senators who have so far balked at the tax cuts for investors.
The bill passed largely along party lines, 234 to 197, after a rancorous partisan debate over whether the tax cuts would chiefly benefit the rich or sustain economic growth. Nine Democrats joined 225 Republicans for passage, while three Republicans -- Reps. Sherwood L. Boehlert (N.Y.), Jim Leach (Iowa) and Fred Upton (Mich.) -- sided with 193 Democrats and independent Bernard Sanders (Vt.) to oppose it.
The tax measure's cost would more than offset the savings in a tough budget approved by the House last month, which would trim federal spending by $50 billion over five years by imposing new fees on Medicaid recipients, squeezing student lenders, cutting federal child-support enforcement and paring the food stamp rolls.
Of course, as you might expect, the Republicans do have a "good" explanation for their recent behavior: it will stimulate the economy and, thus, create a rising tide that will lift all boats.
But the centerpiece of the bill is the extension, through 2010, of the capital gains and dividend tax cuts, which lowered the tax rate on investment income to 15 percent, from as high as 38.5 percent. This extension alone is projected to cost $20.6 billion over five years and $50.8 billion over 10 years.
"Lower tax rates on savings and investment have benefited millions of Americans of all income levels either directly -- through lower taxes on investment returns -- or indirectly through new and better jobs and greater economic security for families," [Treasury Secretary John W.] Snow said.
Sounds pretty good, right? Well, as everyone has probably noticed this is another example of Supply-side Economics, which has thus far proven quite dubious in improving economic outcomes. What is particularly disturbing is the breakdown of benefits by demographic groups:
The Tax Policy Center, run jointly by the Brookings Institution and the Urban Institute, has concluded that the bottom 80 percent of households would receive 15.8 percent of the House tax cuts' benefit. The top 20 percent would receive 84.2 percent of the benefit. Households earning more than $1 million a year would get 40 percent of the tax cuts, or an average reduction of nearly $51,000.
So, the Republicans have basically cut spending for social service programs so that they could subsequently give the most wealthy 20% a tax break- and in so doing managed to actually increase spending. Indeed, well done my brothers and sisters in the GOP. While the concept of "deficit reduction" appears to be eluding you, the alternative concept of "spoils system" is one with which you appear quite familiar. Granted, some of the tax breaks you have enacted or extended are probably fairly useful- like the tax-incentives for employing welfare recipients- but these are small change. For the most part, this is just another episode of voodoo economics.
I'm going to go whack myself in the face with a hammer for a while. If anyone out there with more expertise in these matters (For example... Tom) would like to comment on this, by all means. I do sincerely hope it isn't as bad as I think it is.