Somebody—I heard somebody say, well, what we need to do is have a tax increase to pay for this. That's an absurd notion. You don't raise taxes when an economy is recovering. Matter of fact, lower taxes will help enhance economic recovery.
— President Bush, Sept. 10.
So much for Chatterbox's distant hope, expressed in this column two days ago, that Bush would come "to his fiscal senses" and scale back the three tax cuts he's enacted since assuming office. Since then, Chatterbox has been looking at the numbers. Scaling back the tax cuts, it turns out, won't do the job. They have to be eliminated entirely.
When you add Bush's $87 billion request, which will almost certainly be approved, to a budget deficit that the Congressional Budget Office had already estimated at $480 billion for fiscal year 2004 (which will begin Oct. 1), that pushes the deficit up to $567 billion. This $567 billion estimate assumes that the economic recovery will accelerate. It does not take into account additional spending for the likely introduction of a prescription drug benefit for Medicare recipients. Still, for simplicity's sake, let's say next year's budget deficit will be $567 billion.
According to Robert McIntyre, director of Citizens for Tax Justice, a labor-backed nonprofit whose data on tax policy have proven extremely reliable over the years, the combined revenue loss from Bush's three tax bills for fiscal year 2004 will be $266 billion.
Even if the Bush tax cuts are fully repealed, then, the budget deficit for fiscal year 2004 will still be a not-inconsiderable $301 billion. Given the enormous size of the Bush deficit, there seems little point in presidential candidates John Kerry and John Edwards proposing that we cancel some of but not all the Bush tax cuts.
What would middle- and lower-income people lose if the pre-Bush tax code were restored? Not much. According to a June 4 study by Citizens for Tax Justice, by the end of this decade the average combined Bush tax reduction for everyone except the richest one percent of the population would be only 5 percent. (That's less than a third of the average combined Bush tax reduction for the richest one percent of the population.) The fact that Bush's tax cuts were heavily tilted toward the rich makes it relatively easy for most of us to ponder giving them up. As for President Bush's worry that a tax hike right now would spoil the current fragile economic recovery, a $301 billion budget deficit ought to provide sufficient stimulus. Besides, aren't we supposed to make sacrifices during wartime?
Think of it this way: A $567 billion deficit represents a fiscal emergency no less urgent than the military emergency in Iraq. Just as it won't do for Congress to dither about the money the president needs to bring stability to Iraq and Afghanistan, neither will it do for Congress to dither over how much of Bush's tax policy to repeal. It should chuck the whole thing as of the next calendar year. (It's too late to yank back the tax cuts people are counting on this April 15.)
Do you think Chatterbox is being alarmist? Let's match CBO's (fairly optimistic) deficit projections through the end of this decade with McIntyre's estimates of revenue loss due to the Bush tax cuts. The following chart doesn't include McIntyre's calculation that the Bush tax cuts will further cost Uncle Sam $247 billion in interest through 2010. * Here, then, is a Rebecca of Sunnybrook Farm version of America's projected fiscal health:
2004* 2005 2006 2007 2008 2009 2010 Deficit
$567 billion $341 billion $225 billion $203 billion $197 billion $170 billion $145
Revenue loss due to Bush tax cuts
$266 billion $172 billion $180 billion $186 billion $201 billion $188 billion $234 billion Deficit (or surplus) if Bush tax cuts were revoked $301 billion
$18 billion surplus $89 billion surplus
*Bush's $87 billion request has been added to the CBO estimate.
What does this chart say? It says that if we cancel all Bush's tax cuts, we can maybe, using the rosiest possible assumptions, balance the budget within five years. If we don't cancel Bush's tax cuts, the budget deficit will remain in three digits through the end of this decade. (For Citizens for Tax Justice's more pessimistic—and probably more accurate—picture of what Bush's tax cuts will cost, click here.)
What are we waiting for?
Prominent Democrats in Congress are making empty threats either to withhold the $87 billion Bush requested or to match it with new domestic spending. Well, sure, they're politicians. What about the editorial pages of the liberal New York Times and the less-liberal but fiscally responsible Washington Post? Both this week scolded Bush about the tax cuts' irresponsibility in light of his latest budget request (click here for the Times and here for the Post). But neither editorial page has spelled out precisely how much of those tax cuts we ought to repeal. For that you have to look, oddly enough, at the public statements of presidential candidates Dick Gephardt and Howard Dean, both of whom forthrightly state the Bush tax cuts should be revoked in their entirety. Dean had the best line on this at the Sept. 8 Democratic presidential debate:
I'm not going to raise taxes. We're just going to go back to the same taxes that Bill Clinton had, because I think most people in America would be glad to pay the taxes they paid when Bill Clinton was the president of the United States, if they could only have the economy they had when Bill Clinton was president of the United States.
Correction, Sept. 16, 2003: An earlier version of this story stated, incorrectly, that the chart "makes the improbable assumption that Iraq will be entirely self-governing by this time next year." In fact, the CBO calculations used in the chart project that Iraq reconstruction costs will increase by 7.7 percent a year. Because the CBO baseline doesn't include President Bush's recent request for an additional $87 billion, it's still fair to assume the chart lowballs Iraq-related spending for 2005 and possibly for several years after that. (Return to the corrected sentence.)