Thursday, February 10, 2005

The Violins Are Out

Only $2.6 trillion? Oh the humanity!

Do the oversized partisan newspapers really have to be so utterly, boringly predictable? When the new budget came out, reactions from the usual suspects might as well have been copied and pasted from previous "news" and editorials during any year in which any Republican president dared to feign the slightest degree of frugality (President Clinton was seriously frugal, but the press cuts Democrats a lot of extra slack).

A recent Washington Post editorial instantly decried any and all spending cuts "draconian" or "dramatic," not to mention "unrealistic." What a shock that was. An L.A. Times editorial, accidentally misplaced on the news page, whined that President Bush's proposed haircut for a few budget items "will touch people on food stamps and farmers on price supports, children under Medicare and adults in public housing."

Did Bush somehow forget to brutalize widows and orphans?


One thing that makes the banal media mantra in favor of lavish spending particularly tasteless at this time is that the discussions of this year's budget have somehow managed to totally ignore the wild spending spree during President Bush's first term.

When planned spending for 2006 is compared with actual spending in 2001, it becomes ridiculous to pretend there is anything "draconian" or "breathtaking" about the president's belated tap on the brakes. It is unsurprising and probably understandable that defense spending rose 38.6 percent from 2001 to 2006. What is less well known and harder to rationalize is that the increase in spending over those same five years was 39.8 percent for education, 41 percent for the judicial branch, 48.1 percent for the legislative branch, 56.4 percent for state and international aid and 84.5 percent for commerce.

Even if we measure this spending surge in constant dollars, to adjust for inflation, overall spending is projected to rise more than 23 percent from 2001 to 2006. Since the economy (GDP) did not grow nearly that much, federal spending will have risen from 18.5 percent to 19.9 percent of GDP. Yet this is being called a "draconian" budget?


In case you didn't get it the first time, Andrews went on to say, "Mr. Bush's tax cuts of 2001 and 2003 went largely to the nation's wealthiest taxpayers." No matter how many times I keep reading this, I never quite get over the outright audacity of the Big Lie technique. It isn't just the author's confusion about halving the dividend and capital gains taxes, which typically yield higher revenues from the rich. Even if we focus on just the reductions in personal income tax rates, any notion that they "went largely to the nation's wealthiest taxpayers" makes sense only if one describes everyone who pays any income tax at all as among "the nation's wealthiest" (all actual taxpayers are in the top 60 percent, because 40 percent pay no income tax).

Half the estimated revenue loss from reducing income tax rates was due to reducing from 15 percent to 10 percent rates on the first few thousand dollars of income. Whatever you think of that costly gesture (I think it was wasteful and inefficient), it certainly didn't go "largely to the nation's wealthiest taxpayers." The same is true of social gimmicks like the child tax credit and the marriage penalty fix, unless one imagines that all two-earner families with kids must be rich.

The other rate reductions were spread quite evenly among all tax brackets. The overall package could only be said to largely benefit "the nation's wealthiest taxpayers" only because the top 5 percent (those earning more than $126,000 in 2002) pay 54 percent of all income taxes, so they should get about half of any even-handed tax cut.


As for all the banal commentary about draconian budget cuts and unaffordable tax cuts, I've heard it all too many times before. Please wake me up if somebody at The New York Times, L.A. Times or Washington Post ever has something novel or intelligent to say about taxes and spending. But somebody would have to wake them up first.

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