Bush's Class-War Budget

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Wed, 16 Feb 2005 12:00:35 -0800 (PST)

Bush's Class-War Budget

February 11, 2005

 

 

 

OP-ED COLUMNIST

Bush's Class-War Budget

 

By PAUL KRUGMAN

 

It may sound shrill to describe President Bush as someone who takes

food from the mouths of babes and gives the proceeds to his

millionaire friends. Yet his latest budget proposal is top-down class

warfare in action. And it offers the Democrats an opportunity, if

they're willing to take it.

 

First, the facts: the budget proposal really does take food from the

mouths of babes. One of the proposed spending cuts would make it

harder for working families with children to receive food stamps,

terminating aid for about 300,000 people. Another would deny child

care assistance to about 300,000 children, again in low-income working

families.

 

And the budget really does shower largesse on millionaires even as it

punishes the needy. For example, the Center on Budget and Policy

Priorities informs us that even as the administration demands spending

cuts, it will proceed with the phaseout of two little-known tax

provisions - originally put in place under the first President George

Bush - that limit deductions and exemptions for high-income households.

 

More than half of the benefits from this backdoor tax cut would go to

people with incomes of more than a million dollars; 97 percent would

go to people with incomes exceeding $200,000.

 

It so happens that the number of taxpayers with more than $1 million

in annual income is about the same as the number of people who would

have their food stamps cut off under the Bush proposal. But it costs a

lot more to give a millionaire a break than to put food on a

low-income family's table: eliminating limits on deductions and

exemptions would give taxpayers with incomes over $1 million an

average tax cut of more than $19,000.

 

It's like that all the way through. On one side, the budget calls for

program cuts that are small change compared with the budget deficit,

yet will harm hundreds of thousands of the most vulnerable Americans.

On the other side, it calls for making tax cuts for the wealthy

permanent, and for new tax breaks for the affluent in the form of

tax-sheltered accounts and more liberal rules for deductions.

 

The question is whether the relentless mean-spiritedness of this

budget finally awakens the public to the true cost of Mr. Bush's tax

policy.

 

Until now, the administration has been able to get away with the

pretense that it can offset the revenue loss from tax cuts with benign

spending restraint. That's because until now, " restraint " was an

abstract concept, not tied to specific actions, making it seem as if

spending cuts would hurt only a few special interest groups.

 

But here we are with the first demonstration of restraint in action,

and look what's on the chopping block, selected for big cuts: the

Centers for Disease Control and Prevention, health insurance for

children and aid to law enforcement. (Yes, Mr. Bush proposes to cut

farm subsidies, which are truly wasteful. Let's see how much political

capital he spends on that proposal.)

 

Until now, the administration has also been able to pretend that the

budget deficit isn't an important issue so the role of tax cuts in

causing that deficit can be ignored. But Mr. Bush has at last conceded

that the deficit is indeed a major problem.

 

Why shouldn't the affluent, who have done so well from Mr. Bush's

policies, pay part of the price of dealing with that problem?

 

Here's a comparison: the Bush budget proposal would cut domestic

discretionary spending, adjusted for inflation, by 16 percent over the

next five years. That would mean savage cuts in education, health

care, veterans' benefits and environmental protection. Yet these cuts

would save only about $66 billion per year, about one-sixth of the

budget deficit.

 

On the other side, a rollback of Mr. Bush's cuts in tax rates for

high-income brackets, on capital gains and on dividend income would

yield more than $120 billion per year in extra revenue - eliminating

almost a third of the budget deficit - yet have hardly any effect on

middle-income families. (Estimates from the Tax Policy Center of the

Urban Institute and the Brookings Institution show that such a

rollback would cost families with incomes between $25,000 and $80,000

an average of $156.)

 

Why, then, shouldn't a rollback of high-end tax cuts be on the table?

 

Democrats have surprised the Bush administration, and themselves, by

effectively pushing back against Mr. Bush's attempt to dismantle

Social Security. It's time for them to broaden their opposition, and

push back against Mr. Bush's tax policy.

 

E-mail: krugman

 

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