Thursday, September 02, 2004
A quick quiz: if you do decide to gird your loins, empty the liquor cabinet and listen to his acceptance speech a couple of hours from now, will you hear the president describe:
- the selfless and valiant efforts of our international allies, without whose heroic assistance we would never have captured the perpetrator of the 9/11 massacres, Osama bin Laden?
- the profound and lasting gratitude of the Iraqi people for our humanitarian actions in liberating them from the yoke of tyranny, and turning their once-barren homeland into a virtual paradise of democracy, prosperity, and peace?
- the latest iteration of his harebrained scheme to privatize (and thereby gut) Social Security, previously floated and abandoned in 2001 when even the Cato Institute couldn't smear enough grease on the numbers to make them work?
Bill Clinton proposed putting his big surpluses into a Social Security "lock-box" for that predictable rainy day. But tonight, Bush instead proposes to give the stock-options class a boost by lopping off a chunk of Social Security insurance revenue for gambling in the stock market. He had this same idea in 2000. If he'd had his way on his inauguration day, the average "owner" in America, investing in the stock market, would be 7% poorer, many flat busted. Some "security." Happy elderly "owners" would be hunting for lunch in the garbage cans under Madison Square Garden.The coded appeal of Mr. Bush's proposed "ownership society" is explicated by John Cassidy in the current New Yorker:
Here's the latest report from the front lines of the class war: The World Bank reports the USA has more millionaires than ever -- we'll see them at the Garden tonight. Median household income's down -- most of us are median -- while the bottom has fallen out for those at the bottom. Our poorest 20% have seen incomes drop by a fifth. America's upper one percent now own 53% of all the shares in the market.
And now the uppers want to crack open your retirement piggy bank, cut some of your retirement benefits, then "allow" you to give them the remainder of your money to fund their latest stock float schemes.
If betting trillions on stock market ponies doesn't produce a big win, what does Mr. Bush propose to do with all the hungry old folk? I think I heard George say, "Let them eat Enron certificates."
And the future market fall, Mr. President, is a slam-dunk certainty. Let's do the math. OK, class, we all buy stock this afternoon to fund our retirement. In fifteen years, baby-boomers are ready to kick back, take it easy and retire on the stock they're about to sell. Did I say, "SELL"? And HOW. Around 2020, tens of millions of "owners" will be selling their shares … to whom?
The President’s ownership initiative hasn’t featured prominently in the media coverage of the campaign, which, strictly from a news perspective, is understandable: he hasn’t announced many specific proposals to back up his talk. But in downplaying the Bush Administration’s economic agenda the media is missing one of the biggest domestic stories of the 2004 campaign. When the President pledges to create an “era of ownership,” he is not talking merely about encouraging people to buy their own homes and start small businesses. To conservative Republicans who understand his coded language, he is also talking about extending and expanding the tax cuts he introduced in his first term; he is talking about allowing wealthy Americans to shelter much of their income from the I.R.S.; about using the tax code to curtail the government’s role in health care and retirement saving; and, ultimately, about a vision that has entranced but eluded conservatives for decades: the abolition of the graduated income tax and its replacement with a levy that is simpler, flatter, and more favorable to rich people.
Work on achieving this ambitious program began with the tax cuts that Congress passed in 2001, 2002, and 2003, but the conservative economists who advise Bush and the right-wing institutes that support him have more in mind than consolidating their gains. Despite a gaping budget deficit, they are pressing the President to continue down a route that will reverse almost a century of American history. Since the personal income tax was introduced, in 1913, it has been based on two principles: the burden of taxation is distributed according to the ability to pay; and capital and labor carry their fair share. The Bush Administration appears set on undermining both of these principles . . . .
Moreover, the White House’s forecast extends only to 2009, when the baby boomers are due to start retiring, putting enormous demands on Medicare and Social Security. “Perhaps the biggest difference between Reagan and George W. Bush tax cuts is that, with Reagan, history gave us time to clean up the mess,” Peter G. Peterson, who was Secretary of Commerce in the Nixon Administration, writes in his new book, “Running on Empty.” “With George W., history may not be so indulgent.”
Instead of trying to build up a surplus to help pay for the retirement of the boomers, the President would cut into future tax revenues by making his tax cuts permanent. According to William G. Gale and Peter R. Orszag, two economists at the Brookings Institution, this would cost about $1.8 trillion between now and 2014. “It is the height of deception to say we can only budget till 2009 but we are going to have massive tax cuts from 2010 onward,” Gale said. “That is what the Administration has done.”
Most people already know that Bush’s tax cuts favored the rich, but the size of the giveaway was startling. Based on figures contained in a recent study from the Congressional Budget Office, it now appears that about two-thirds of the benefits went to households in the top fifth of the income distribution, and about one third went to households in the top one-hundredth of the distribution. To put it another way, families earning $1.2 million a year—that is, the richest one per cent in the country—received a tax break of roughly $78,500. Families earning $57,000 a year—middle-income families—got a tax cut of about $1,100.
Even these numbers, though, do not convey the full ambition of the Republicans’ agenda, which potentially involves a historic restructuring of the American system of government. Roughly two-thirds of taxable income is paid to workers in the form of wages and benefits. The other third goes to reward capital, or accumulated savings, in the form of corporate profits, dividends, and interest payments. If Bush’s economic agenda was fully enacted, the vast bulk of these payments wouldn’t be taxed at all, and labor would end up shouldering practically the entire burden of financing the federal government. In a new book, “Neoconomy: George Bush’s Revolutionary Gamble with America’s Future,” Daniel Altman, a former economics reporter for the Times and The Economist, describes what such a system might look like. “The fortunate and growing minority who managed to receive all their income from stocks, bonds and other securities would pay nothing—not a dime—for America’s cancer research, its international diplomacy, its military deterrent, the maintenance of the interstate highway system, the space program or almost anything else the federal government did. . . . Broadly speaking, that fortunate minority would be free-riders.”