Old Tax Policy but New Marketing Strategy

When George W. Bush's campaign leaked his economic plan to the press recently, the lucky recipients were forced to accept a special condition: Any reporter who wanted to see it had to agree not to share the details with other campaigns or, more importantly, outside analysts. "This is between you, me, and your typewriter," a Bush aide told one reporter.

The result of this clever leak strategy was an initial wave of reviews that dovetailed with Bush's efforts to cast himself as compassionate. The plan, according to The Washington Post, would "focus its deepest reductions on the working poor and middle class" and "mark a clear departure from more traditional conservative GOP tax policy." Even the most skeptical story, courtesy of The Wall Street Journal, reported that Bush was "seeking to steer more benefits to working-poor taxpayers."

In truth, Bush's tax cut would do nothing of the sort. More than three- fifths of the cut would accrue to the upper 10 percent of the income spectrum, with barely more than one-tenth for the lowest 60 percent. Bush's proposal, in this respect, resembles the tax cut passed by Congress last summer.

This unflattering little detail did eventually come to light -- once reporters were able to show the plan to economists -- but it was reported in small follow-up stories that ran only after the favorable impression had hardened.

Moreover, the Bush campaign's masterful sales job has shoved aside other questions about the plan. Take, for instance, how the campaign accounts for revenue losses. Bush promised that his tax cut would be paid for entirely out of budget surpluses -- and that it would not use any of the surplus that derives from Social Security. But Bush assumes that future Congresses will adhere to spending caps that, while still on the books, would require a 20 percent cut in domestic spending and, as a result, have been all but abandoned by even the staunchest conservatives.

That is a common fiction that candidates employ by assuming that the economy (and, hence, tax revenues) will grow considerably faster than the budget scorekeeping agencies predict. By presupposing a rosier scenario than everybody else, Bush is giving himself more money to dole out in tax cuts than any other candidate. In other words, Bush's fiscal style is to assume a bright future, commit every cent to tax cuts, and hope that we don't plunge into the red. If this sounds familiar, it should; it was the fiscal policy of Ronald Reagan.

This is still more evidence of the ingenious marketing of Bush's tax cut -- Bush has defined himself to the broader public as a dissident from the conservative wing of his own party while still hewing firmly to the supply- side orthodoxy of the Republican right.

Bush, of course, has no intention of campaigning openly as a supply-sider. In fact, he relegated the only macroeconomic argument for his tax cut to the tail end of his speech, and he framed it in classic Keynesian terms: tax cuts, he claimed, "provide insurance against economic recession." But this is nonsensical.

If you advocate tax cuts during a recession in order to get out of the recession (as Keynesians do), and if you advocate tax cuts during an economic boom in order to prevent a recession, then what you really mean is that you advocate tax cuts all the time. So, while Bush's rationale may seem to resemble mainstream economics, it is really a disguised argument for supply- side economics -- the defining characteristic of which is the belief in tax cuts as the proper response to any conceivable set of conditions.

Finding justification for that belief is another matter. Supply-side economics holds that current tax rates massively discourage work and investment. That's a hard case to make in today's economy.

The essential tenet of supply-side theory holds that tax hikes cannot raise government revenue because tax increases will slow down the economy, leaving the government larger chunks of a smaller pie. The Journal has frequently illustrated the point with a chart purporting to show that federal tax revenues have never risen above 20 percent of GDP and, therefore, never will. According to this logic, the upper-bracket rate hikes of 1990 and 1993 should have so devastated the economy that by now people would be selling off their tooth fillings and clubbing rats for food.

It hasn't quite worked out that way, of course. So the Journal has taken to arguing for rolling back the Clinton tax hike -- not on the traditional grounds that it failed to raise revenue but because it raised too much revenue, thereby fueling big government. It has a new chart showing how tax revenues as a percentage of the economy have grown in recent years. "The bad news," argued a recent editorial, is that, in the absence of tax cuts, federal revenues will "continue to rise as prosperity pushes more and more Americans into higher tax brackets."

Such a scenario -- a rising tide resulting in bulging government coffers -- is precisely the utopia that the right once promised would arise from massive tax cuts. Now it is a nightmarish vision from which only tax cuts can save us.

Having lost the mantle of economic growth, tax cutters have fallen back on non-economic arguments. Over the summer, congressional Republicans sought to put forth the case that the government's black ink represents an "overcharge" that "belongs to the taxpayers." Running a budget surplus, by this formulation, is inherently immoral. Bush has taken this even further, linking his tax cuts to "prosperity with a purpose" and "a country rich not only in goods but in goodness."

Behind these airy generalities lies a very specific intent. Bush's constant invocations of "Latino communities" and "waitresses, store clerks and janitors" are meant to imply that the status quo is immoral because of its impact on the middle and lower classes. But the substantive thrust of his proposal acts upon an altogether different moral indictment: a belief that taxing the rich, whatever its practical effects on the economy, is simply wrong. It's no accident that Bush's tax cut would exactly repeal the upper-bracket tax hike enacted by President Clinton. Repealing that increase has been a goal of supply-siders for years, but Bush makes no mention of the fact that his plan would do so. That's no accident, either.