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Call The Cops, We’re Being Robbed

Baaaaad public policy. Dumb, wrong, guaranteed to make things worse.

The Republicans are marching militantly in the wrong direction with economic plans that will aggravate existing problems and do nothing to improve the overall situation. They seem impervious to evidence and common sense. This is painful to watch.

The scariest trend in America today is the growing gap between the rich and the rest of the country. That gap is already the size of the Grand Canyon and getting worse fast.

It is not just that the rich are getting much richer but that the poor and the middle class are getting poorer as well. If, as in the old Reagan bromide, the rising tide were lifting all boats, we would all be merry as grigs. But it turns out that most of us are in the drink without so much as life jackets. Conservatives are struggling mightily to deny the reality of the growing gap; watching them twist the numbers and stretch the explanations is becoming a minor spectator sport these days. In the current issue of The Washington Monthly, Paul Krugman does a masterly job of exposing some of the pathetic shifts they are using, several of them in House Majority Leader Dick Armey’s misleading book “The Freedom Revolution.”

Alice Rivlin, the White House budget director, has earned a reputation as one of the straightest shooters in Washington on economic figures. When she headed the Congressional Budget Office, her numbers were so widely respected that Republicans accepted and used them as readily as Democrats. She’s a deficit hawk as well and has been preaching a balanced budget for longer than House Speaker Newt Gingrich has been in Congress. So when Rivlin came out with the figures last week on what the Republican budget-plus-tax-cuts would do to redistribute wealth in this country, all the smart folks listened up. It’s grim.

The richest 1 percent of families will each receive almost $19,000 a year in tax breaks. The $21 billion that they would receive is 42 percent more than the total tax relief for all families that earn less than $50,000 a year - more than 61 percent of American families.

The poorest 20 percent of families with children will each lose an average of more than $1,500 in income and nearly $1,700 in health coverage. These cuts are so large that a $500 child tax credit - that many of these families will not even get - cannot come close to undoing the damage.

Tax breaks for the richest 5 percent are $37 billion - almost as large as the total of income and health coverage cuts hitting all families with children.

The only way to read this sucker is that tax cuts for the wealthy are to be financed by benefit cuts to middle- and low-income families - a massive redistribution of wealth. It is profoundly dumb.

As Rivlin pointed out during a news conference, her numbers are actually conservative concerning the extent to which the Republican plan redistributes wealth from the poor to the rich, since she did not include all the benefit cuts that the Republicans are planning.

Nancy Folbre, an economist for the Center for Popular Economics, points out in a Chicago Tribune piece that the average U.S. household with income under $10,000 received an estimated $5,700 from the government in 1991; the average household with an average income above $100,000 collected $9,300.

We don’t usually think of rich folks getting government money, so this is worth looking at. One tax break for the rich is the home mortgage interest deduction - the more you spend, the bigger the tax break you get. People who buy million-dollar-plus homes get the biggest breaks. Farm subsidies, sugar and tobacco price supports, corporate subsidies and the savings and loan bailouts are other examples of government spending that go to the rich.

The Republicans are once again touting their old shibboleth, the capital gains tax cut. How proudly they claim John Kennedy as a capital gains tax cutter. How happily they boast that when the rich are given this gigantic boon, they will promptly invest it in job-creating schemes to the general benefit of us all.

This is another example of ignoring the evidence. You don’t even have to read all the economic studies showing that a cut in the capital gains tax doesn’t improve investment. Just remember back to the 1980s. What did all the newly rich do with their gelt? They paid for gold-plated bathroom fixtures and then used the rest to buy other companies that then bought other companies that then bought other companies, leaving the whole corporate structure riddled with debt. Billions of dollars were spent, but not one additional widget was produced by anybody.

The trouble with Republicans and economics is that they don’t think - they believe. Faith is a wonderful thing, but not when it is so glaringly misplaced.