On the Backs of the Poor

During the budget controversy in late 1999, then-Gov. George W. Bush spoke out against Republican leaders in Congress, arguing that it would be wrong for the legislators to "balance their budget on the backs of the poor." Unfortunately, the recent budget released by the Bush administration seems to be doing just that--paying for a bloated, unfair tax cut by cutting valuable services to those most in need. As the tax bill moves through Congress, members of the House--and especially the Senate--should steadfastly resist all efforts to undermine the nation's fiscal stability.

Though Bush only discussed his tax cut 40 minutes into his recent address to Congress, the tax cut sits corpulently at the center of his proposals, influencing every budget decision Bush has made. The cut is now estimated to cost at least $2 trillion once interest losses are factored in, and the costs may soar if, as Bush has proposed, the cuts are made retroactive. The nation simply cannot afford a tax cut of this size; it would repeat the worst fiscal mistakes of the Reagan years, mistakes which led to two decades of deficits. The tax cut is also unnecessary, as it would be near-useless in fighting a short-term recession. And judging from the experience of this past decade, the longest period of peacetime prosperity in the nation's history, high marginal tax rates for the wealthy have not significantly harmed long-term growth.

Moreover, the Bush cut is specifically targeted to aid the wealthy at the rest of country's expense. It ignores the 15-percent payroll tax that is a heavier burden for most American families than the income tax, and its repeal of the estate tax would affect only the top 2 percent of estates. In other words, Bush's plan would cut those taxes primarily paid by the rich and do nothing about the those that fall most heavily on average Americans. Real tax relief would include a refundable tax credit for those who pay payroll taxes, addressing the tax burden as a whole instead of merely those portions that cause the wealthy discomfort.

Because these tilted tax cuts would make it impossible to pay off the national debt, Bush has conveniently redefined the debt so as to avoid the need to repay it. The administration claims that $1.2 trillion of debt is locked up in bonds that cannot be paid off for at least a decade without incurring heavy penalties. However, both the Congressional Budget Office (CBO) and Federal Reserve Chair Alan Greenspan have estimated that this figure is too high by more than $400 billion. It is inexcusable for the Bush administration to declare victory and go home when billions in redeemable debt lie unpaid.

The tax cut would also disrupt efforts to safeguard the future of Medicare and Social Security. The majority of Bush's "contingency reserve" represents money from the Medicare surplus, which both parties have agreed should be saved to help fulfill future obligations. This money would be useless in responding to any "contingencies," since spending it would be equivalent to raiding the Medicare fund. The Medicare system is already in danger, and there is no reason to impoverish it further.

Medicare's situation is further complicated by Bush's pledge to create a prescription drug benefit. New numbers released by the CBO have convinced members of both parties that Bush's program would fall short by tens of billions of dollars; using the Medicare surplus to cover this shortfall, as the administration has proposed, would be akin to stealing from future generations of retirees to fund today's coverage. Bush is just as shortsighted in his Social Security budget, which would take money out of the trust fund to pay for private accounts without covering future expenses.

Finally, the Bush budget would require steep cuts in existing social services. Bush has planned to increase federal spending by 4 percent per year, but this increase would be devoted to specific programs in defense, education, health research and other areas. Most government services would in fact be cut to pay for the tax giveaway. According to the Center for Budget and Policy Priorities, the departments of Agriculture, Commerce, Energy, Interior, Justice and Labor, as well as the Environmental Protection Agency, would experience cuts totaling $230 billion--and steeper reductions might be needed to fund other expensive programs such as a national missile defense. The Republican leadership seems intent on passing the tax bills before the budget process is finalized, meaning that Congress will have voted for billions in budget cuts without considering where they might fall.

We cannot endorse the gutting of vital government services that benefit all Americans to fund an unneeded tax cut that almost exclusively helps the rich. Not since the days of the Smoot-Hawley tariff has such a bad idea gained such wide currency. Democrats and responsible Republicans should rally behind their smaller, fairer alternative. They should campaign to delay the passage of tax bills until the final budget is agreed upon, and they should take Greenspan's advice and tie any tax cuts to successful reduction of the national debt.

Otherwise, they will be complicit in a budget that sacrifices the national welfare to the interests of the wealthy.