"Bush administration claims that his tax cuts pay for themselves with economic prosperity is challenged by the facts. The economic expansion of 2001-2007 was less robust than all other economic expansions since World War II. Wages grew more slowly, investments were slower, and wages for middle income earners actually fell. And poverty increased markedly during these tax-cut years. Even the Treasury Department's economists have found that economic gains resulting from these tax cuts pay for only 10 percent of their costs -- hardly a sound investment. Many other economists say the economy grew despite the tax cuts, not because of them." Journalist Margaret Krome served as a Peace Corps Volunteer in Cameroon.
Margaret Krome writes: Job No. 1 is reversing Bush tax cuts
Margaret Krome: Job No. 1 is reversing Bush tax cuts
Margaret Krome — 10/28/2008 4:13 am
It's satisfying that the presidential campaign is finally igniting discussion on a topic most voters have yawned about for eight years -- the impact of the tax cuts that President Bush promoted and, with the help of Republican congressional majorities for most of his term, passed and signed into law in 2001, 2002, 2003, 2004 and 2006.
It's satisfying that despite misrepresentations from the McCain/Palin campaign, the public seems to grasp the impact of Bush's tax cuts, which were sold far too easily, with little inquiry into who really would benefit and who would lose. The Urban Institute and Brookings Institution Tax Policy Center's analysis shows that in 2007, middle income households received tax cuts averaging $740, compared to the 0.3 percent of the households with incomes above $1 million, who received $120,00 in tax cuts! To call these tax cuts regressive is being generous; to reverse them is hardly "socialist policy," as John McCain and Sarah Palin have charged.
It's satisfying to see air time on whether Bush tax cuts have helped small businesses. According to the Tax Policy Center, only around 1.3 percent of filers with small-business income are subject to the top two income tax rates. This means that a tiny number of small businesses have benefited from the Bush reductions of those taxes. Small businesses would be helped, not hurt, by a return to a more equitable tax policy.
Despite those satisfactions, it's regrettable that with the nation's economy in such shambles, most of the talk has focused just on whether the tax burden is fair and little has addressed the relationship of the Bush tax cuts to our current economic crisis.
First of all, Bush administration claims that his tax cuts pay for themselves with economic prosperity is challenged by the facts. The economic expansion of 2001-2007 was less robust than all other economic expansions since World War II. Wages grew more slowly, investments were slower, and wages for middle income earners actually fell. And poverty increased markedly during these tax-cut years. Even the Treasury Department's economists have found that economic gains resulting from these tax cuts pay for only 10 percent of their costs -- hardly a sound investment. Many other economists say the economy grew despite the tax cuts, not because of them.
Equally important, the Congressional Budget Office's data demonstrate that the tax cuts have been the single biggest contributor to the nation's ballooning budget deficit. Almost half of the deficit (48 percent) can be attributed to these tax cuts, a third (35 percent) was due to increases in defense and security spending, while only a sixth (17 percent) was due to the source that Bush has sought to blame the most -- domestic spending.
Deficits seem like an abstract evil until you reflect that they affect our nation's access to capital. From personal financial advisers to the nation's financial policymakers, all are begging households to maintain their investment in the nation. The enormous borrowing done by the government has drawn down national savings, resulting in fewer funds available for investments, a critical determinant of our nation's ability to recover.
We all remember from our college economics classes the significant impact of opportunity costs. The forgone income from Bush's tax cuts has been used to justify his cuts in domestic spending, even while he has increased defense and security spending. Hurricane Katrina demonstrated the terribly expensive folly of his misguided cuts in protecting against flooding, and the current economic crisis is demonstrating how inadequate our nation's support system has become to help the growing ranks of the needy.
A crucial first step toward reversing the economic mistakes of the Bush years is reversing the impact of his tax cuts, as Barack Obama and Joe Biden have long promised. Doing so is not socialism, as John McCain now suggests it to be, but the prudent and responsible course.
Margaret Krome of Madison writes a semimonthly column for The Capital Times.
