When it comes to the costs of war and tax cuts, Bush is living in a dream world.
Published in The American Prospect On-Line.
By now most Americans have been hit hard by the reality of recession. The economic news from early April—indicating that payroll employment has fallen sharply in past months and that unemployment insurance claims are up—dampened hope for an economic upturn in the near future. Yet President Bush holds to his State of the Union pronouncement that we are in a recovery and conducts his affairs as if he has no financial care in the world.
So what gives?
No doubt the Bush administration’s attitude is in part public relations—a bet that calculated statements from on high will shore up consumer confidence and become self-fulfilling prophesies. But a closer look shows that the president’s “What, Me Worry?” attitude masks a refusal to take responsibility for the costs of his policies.
The war in Iraq and tax cuts provide two key examples.
In December 2002, the administration assured legislators and taxpayers that a potential war in Iraq would cost $50 billion to $60 billion. These lowball estimates were meant to temper other projections, including those made by Lawrence Lindsey when he was the president’s chief economic adviser, that saw costs running as high as $200 billion.
Announcements by officials such as Office of Management and Budget Director Mitch Daniels suggested that the lower numbers were in line with the costs of the Gulf War. Of course the functionaries failed to mention that our allies paid for around 80 percent of the costs of that previous engagement, leaving the United States with a relatively small tab of $9 billion.
Soon after the start of the Iraq War last month, the low price tag was revealed to be a political fiction. As soon as public opinion shifted in support of the troops in the Persian Gulf, the administration fudged its budget and requested $75 billion for the military engagement. Distressingly, the $75 billion allocation currently passing through Congress covers only six months. It does not pay for the multiyear occupation of Iraq that will undoubtedly be necessary—and that could cost $3.8 billion per month, according to a September 2002 estimate by the Congressional Budget Office.
That’s a lot of money for conservatives who want tight government spending and are currently resurrecting the Reagan-era strategy of “starving the states” to force cuts in social services at the local level.
Even these billions pale next to the revenues that will be squandered should the White House succeed in securing another massive tax cut. Some people might consider a time of war, recession and national emergency an appropriate occasion to suspend ideology and scale back expensive favors for the rich. But George W. Bush sees these three conditions as excuses to free himself from promises of fiscal responsibility. “Lucky me,” he said in famously poor taste last September, referring to the three crises of his administration. “I hit the trifecta.”
If the president employed a delicate balance of optimism and self-delusion to argue that the Iraq war could be paid for painlessly, his fantasies about tax cuts are outrageous, indeed. As a recent editorial in the Financial Times put it, “Wars usually involve sacrifices. In Mr. Bush’s dream-world, you can fight an enemy and hand out tax relief at the same time.”
The justification for this remarkable feat relies on a creative accounting strategy known as “dynamic scoring,” where the presumed benefits of tax “relief” are factored into calculations about the economic impact of the cuts. “Magically, the deficits will melt as the economy reaches the sunlit uplands of ever-deeper tax cuts,” the Times explained. However, “back in the real world, the long-term budget outlook worsens fast.”
While many contend that budget deficits are not necessarily bad, economists widely agree that the Bush tax cuts—most of which won’t phase in for years—will do little or nothing to stimulate recovery now. A key argument against the first round of cuts—that they favor the rich too heavily to ensure quick consumer spending—still holds true. And new cuts would lack even the economic benefits of the $300-per-worker tax rebate that members of the Congressional Progressive Caucus promoted as an alternative to Bush’s plan.
In the White House, war is cheap, tax cuts pay for themselves and recovery has already arrived. Late March’s surprise 51-to-48 vote in the Senate to more than halve the size of the new tax cuts from $725 billion to $350 billion shows that not everyone shares the president’s economic fantasies. That stance was strengthened this past weekend, when Sen. Charles Grassley (R-Iowa) joined Republican moderates in the Senate who vowed to prevent a larger cut. Unfortunately, House leaders will fight for a compromise in committee that would leave intact a package benefiting wealthy investors—and carry a price tag of more than $500 billion.
The question now is whether the president is actually deluded enough to believe the White House’s rosy predictions about the economic costs of war and tax cuts. Or is this administration of class warriors too isolated from the American people to even care?
Research assistance for this article provided by Katie Griffiths. Photo credit: Public Domain Textures / Wikipedia Commons.