Bang for the buck
Welcome to the Church of Tax Cuts, where the miracle elixir is the proper prescription for any and all symptoms. And – get this! – there are never any nasty side effects. If you doubt that, you’ve obviously never spoken to a true believer.
In 2001, President Bush said the budget surplus was a sign the government had taken too much money from hard-working Americans. Cure? Time-released tax cuts spread out over 10 years. When the economy tanked after the 9/11 terrorist attacks, the answer was more tax cuts. But wasn’t the growing deficit a sign the government wasn’t raising enough revenue? Not if you pray in the right pews. Tax cuts, they say, pay for themselves. Plus, they can provide for a war on terror, the wars in Afghanistan and Iraq, the new prescription drug program and a robust economy!
Now, with the deficit soaring into the trillions and the economy contracting, desperate pleas have rung out for government intervention to forestall an even steeper decline. The answer from the true believers to a stimulus package is, “No way!” Why? Need more tax cuts.
Thirty-three percent of the cost of the current package, which passed the House with nary a Republican vote, is related to tax cuts. The bill is now in the Senate, where Senate Minority Leader Mitch McConnell, R-Ky., says “make it 40 percent” and perhaps some of his folks will convert.
Fortunately, the Church of Tax Cuts is in disrepute, and secular economists armed with empirical evidence have brought sanity to the discussion. One of these “heretics” is Mark Zandi, chief economist of Moody’s and formerly an adviser to the McCain campaign. On July 24, in front of the U.S. House Committee on Small Business, he helpfully explained which government actions would best stimulate the economy. Call it the bang-for-the-buck quotient.
For every dollar in tax cuts, refundable lump-sum rebates would yield $1.26. A nonrefundable version (available only to income-tax payers) would yield $1.02. True believers prefer the latter. A temporary payroll tax holiday would yield $1.29; an across the board tax, $1.03; accelerated depreciation for businesses, 27 cents. True believers embrace these in inverse order to their effectiveness. It’s no better for permanent tax cuts. Make the Bush income tax cuts permanent, 29 cents; make dividend and capital gains tax cuts permanent, 37 cents; cut the corporate tax rate, 30 cents.
Conversely, Zandi noted the following figures for every dollar of spending:
Temporary increase in food stamps, $1.73; extend unemployment insurance benefits, $1.64; increased infrastructure spending, $1.59; general aid to state governments, $1.36. Naturally, it’s the top two that are singled out for mocking by the tax-cut faithful.
Yes, the package produced by Congress contains wasteful items that are dubious stimulators. It could easily be leaner and keener. On that score, the true believers are right, but they’re wrong to shield tax cuts from the complaint. They’re just not that stimulating.
Parenting tip. On his bizarre public relations tour of TV news shows, Rod Blagojevich kept saying he couldn’t resign his post as Illinois governor, because “what would that say to my daughters?”
How about: Better late than never on telling the truth and taking responsibility.
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