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• "There is more stupidity than hydrogen in the universe, and it has a longer shelf life." -- Frank Zappa |
9-15-2003
The Gigantic Insurance Company
I'm getting closer to personally defining a great truth, and it's somewhere between the shouts of grubby street protesters -- "Rich Republicans are stealing my country!" -- and Paul Krugman's New York Times Magazine (9-14) story "The Tax Cut Con."
Mr. Krugman, a Times columnist and Princeton professor, presented a lengthy case about a weighty issue. But considering the whole field of government finance reporting is long and boring, and not prone to bumper stickers or sound-bites, I'll just offer a short summary here.
Rich Republicans are stealing your country.
Now the way this is going about is not some grand Hollywood heist, but a decades-long calculated process. This process stems from two groups who back tax cuts for different reasons; folks who believe tax cuts spur the economy, and folks who believe the only way to shrink government is to shrink the amount of money government takes in.
Mr. Krugman's article rakes both sides.
I have long argued that the tax cut, deregulation mantra of the right has not had the economic benefits commonly touted. This article agrees with me, and presents better proof than I've ever been able to assemble. The American electorate is more aware of the mythology of tax cut theory than the actual performance.
The second group, the people who want to shrink government, pose the more serious question for Mr. Krugman. The theory is called "Starve the Beast," and it was coined by Reagan budget director David Stockman. It's common to hear politicians rail against waste, fraud and abuse, but within a decade, the federal deficit (and the bond market) will be so out of hand, drastic cuts will be needed in areas most Americans support -- education, Social Security, Medicaid.
The politicians will say they've been forced to do it. What they won't say is that they created the choice for themselves.
For those unable to find the entire article in NYT archives, copyright law, under the rights of a reviewer, allows me to cite a few of Mr. Krugman's cited facts.
-- Tax cuts are a real priority for GOP politicians, yet Americans typically pay less tax than citizens of other countries.
-- Tax cuts are largely sold as designed to help the poor and middle class, but the poor and middle class are paying, on average, about the same they've always paid. Taxes for the rich, however, are now the lowest in 70 years.
Now here's the wild part. According to one political theory followed by these folks, middle-class taxes shouldn't be cut, they should be raised. It is important for voters to hate taxes; that's what will make it possible, in the end, to radically scale back government.
To understand how people can believe such things, Mr. Krugman goes back to when the tax-cuts-spur-the-economy theory was known as "supply-side economics." The term didn't come from economists; it came from political think tanks. Most economists have always considered the effects of supply-side economics marginal at best. But it sounds good, and it feeds -- and feeds off -- public anger over taxes. It may be terrible policy, but it makes good politics -- getting government out of the way and letting business be business -- and if you win the politics, the policies are yours to make.
Look at it this way. President Bush cut taxes $200 billion allegedly in order to stimulate the economy and create new jobs. If the U.S. had just flat used the money to create average paying jobs, there would be four million new jobs. Have we seen four million new jobs lately? In fact, just the opposite is true -- roughly three million jobs have been lost since Bush took office.
I close, first, with a strong recommendation that people find and read the entire article, and secondly, with the short excerpt which follows. All told, Mr. Krugman's article earns the highest compliment I can give.
It's so good, I wish I had written it.
"As Peter Fisher, under secretary of the treasury for domestic finance puts it, the federal government is 'a gigantic insurance company with a sideline business in defense and homeland security.' And about a decade from now, those policy holders will begin making a lot of claims."
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