Washington's Cross-Dresser
Bethell, Tom
S ince corning to Washington in 1975, I recall one truly pungent remark by a Republican leader. Rep. Newt Gingrich was its author—a decade before he became House Speaker. He said that Sen. Bob Dole...
...It's a reliable formula for creating an interim slump...
...Reagan did the same thing in his 1981 tax cut...
...But only one president in recent years did keep spending under tight control (at least until his final year...
...Now, at last, the Democrats have become the tax collectors for the welfare state...
...Let's say you sell hamburgers for five dollars...
...Corporations subject to confiscatory taxation responded by buying Rolls-Royces on the company account...
...Greenspan's preferred policy of delayed incentives indeed does create stagnation...
...The person most responsible for these good changes was Rep...
...Someone says you should cut the price...
...But I am not sure that Greenspan understands these things anymore...
...His series of thirteen small interest rate cuts was a poor way to revive an economy...
...Dumb...
...The Washington Post, the New York Times and the Democratic Party responded with one voice: "Whatever happened to the party of fiscal responsibility...
...The bureaucrats there are well entrenched, particularly a certain husband and wife team, and finding replacements is not always easy...
...By 1982, already seeming remorseful, he signed on to a substantial tax increase...
...the Orkin Man from Texas...
...I happened to meet Cheney the other day, if only for a few seconds, and I figured I had to do my bit to oppose the nay-saying about tax cuts that is a permanent feature of life in the capital...
...Cheney noted in a speech that "the actual impact [of the tax bill] on the deficit will be considerably smaller than the static projections because the president's package will generate new growth...
...Gold and other commodity prices have been going up...
...That would achieve the opposite of the intended effect...
...These switches are real revenue losers with few dynamic effects...
...You can't afford to, you think, but you do go down to four dollars...
...I like to think that before he became president, George W. pondered this question: "How come Poppy lost to Bill Clinton...
...Anyway, Bush pushed hard for this year's tax cut, and almost all the Republicans supported him...
...The situation in Britain was even worse than it was here...
...Keep doing things in the same old way...
...I must have sounded like a groupie when I shook his hand and said, "Congratulations on the tax cut...
...Tax cuts fall into two quite different categories...
...But at least the new low rates were scheduled to take effect before he had to face the voters again...
...Lowering those tax rates is equivalent to lowering the height of the dam...
...According to the Cato Institute's Alan Reynolds, one of our leading economists, Thomas succeeded despite the efforts of Fed Chairman Alan Greenspan, who argued for a phase-in of the 2001 tax cuts—the bad medicine he had advised under Reagan, twenty years earlier...
...Do you anticipate a 20 percent revenue loss...
...Companies like Wal-Mart and Home Depot are the beneficiaries...
...Earlier this year the Washington Post ran a worried news article ("GOP Seeks to Change Score on Tax Cuts...
...Gergen went on to work for Reagan and then (his true colors showing) Bill Clinton...
...Water, or saved money, will then flow over the top in any direction in the form of investment...
...In fact, his conduct of monetary policy has embodied an error that exactly parallels his bad advice about fiscal policy...
...Tom Daschle has called dynamic scoring "nuts," which tells you that it must be pursued...
...Candidates have therefore embarked on the hazardous course of promising to restore the taxes if elected...
...But this he has confused with deflation...
...And this year the change has been conspicuous...
...Democrats think the tax cuts are intended to defund the government, and they actually believe their own rhetoric...
...Supply-siders are now on the hook because they have long predicted that such changes will cause an immediate increase in investment (presumably also the sale of capital assets...
...More recently, Greenspan confused the markets once more...
...Sure enough, Bob Dole was its major architect...
...From the supply-side point of view, by far the most important tax changes are those that help the rich...
...Bush didn't cave...
...Will Democrats reverse roles and rein in spending in the years ahead...
...They were losers, didn't deserve anything better, and deep down they knew it...
...The permanent establishment, feeding on taxes as it does, has imposed a web of rules that makes it much harder to cut those taxes...
...As far as I could see, Ronald Reagan made little attempt to change this ritual...
...I am told that no such statements were ever made by senior officials in the Reagan years...
...To no avail...
...There are tax credits, personal exemptions, and the like, which simply switch chunks of money from the Treasury to individuals...
...I think he regarded it as a pretty good system overall...
...Sometimes things really do change for the better...
...Then, just as the long bond rates began ticking upward, signaling a possible revival of inflation, the Fed made one more small rate cut...
...A dynamic economy emerges...
...That would be "static scoring," Washington-style...
...For years supply-siders argued for the "dynamic scoring" of tax cuts...
...But it was as though, offstage, he quietly reassured the GOP elders: Don't worry—nothing much will change on my watch...
...The GOP has yet to confront the scare mongering about deficits that yielded these counterproductive rules...
...That defect in the 2001 law has now been corrected...
...When customers come to the store they find a new notice hinting at a bigger sale the following month...
...Strangely enough, his name was Bill Clinton...
...Maybe he realized that his father's decision to renege on his no-new-taxes pledge was the key error...
...That would take into account the probability that some tax rate reductions will collect more revenue, not less...
...Exactly...
...But, aware of their reputation as the party of fiscal responsibility, they would oblige the Democrats by supporting the tax increases the new programs would require...
...They were actually scheduled to take effect in a future administration...
...Not effective until 1983, it encouraged the recession of 1982...
...the Republicans would be blamed for miserliness...
...So Capitol Hill's tax accounting needs to be revised, to make it harder for liberals to claim that we "can't afford" tax cuts...
...From his origins as a devotee of Ayn Rand, he has grown more and more comfortable with the conventional wisdom—the editorial opinions of the Washington Post...
...He was a politician of genius, but his ambition at times seemed mostly personal...
...Markets fall every time...
...On the other hand, taxes on capital and on high income should be thought of as dams...
...Year after year, the GOP fell for it...
...He did exert himself to win support for his own major tax cut...
...The most important sign was the new tax cut, enacted in the spring...
...But it noted with relief that the Joint Committee on Taxation "will continue to use the static approach for years to come...
...The usual appeals to envy seem to have lost their malevolent appeal...
...In his earlier tax cut, George W. Bush had erred by phasing in lower tax rates over several years...
...They must be encouraged to invest capital, not to park it in municipal bonds...
...The Democrats provided him with a limousine...
...That was how Washington worked for decades—and you will be glad to see the past tense...
...Imagine a department store that advertises a sale next month...
...This encouraged the sidelining of capital until the new rates took effect...
...How come Poppy lost to Bill Clinton...
...With a better understanding of Capitol Hill constraints and realities than the Bush team, he maneuvered Bush into a winning position...
...In the postwar period, tax rates may have been at their most counterproductive in the 1950s...
...They probably increase consumption by families...
...Bush's proposed prescription drug benefit is just one sign that he is quite content with huge spending increases...
...Bill Thomas of California, the chairman of the House Ways and Means Committee...
...Tax rates are the price of government, and no matter how much you raise or lower it, the assumption has been that people are reliable automata...
...So the GOP has been growing in self-confidence, but a major budgetary problem remains...
...Where is Bob Dole now that we need him...
...Gingrich thereby memorialized the subservience that had overpowered the GOP for many years...
...They knew their place...
...The rate reductions have been advanced to this year...
...That key committee has been "dragging its feet," according to Glenn Hubbard, the former chairman of Bush's Council of Economic Advisers...
...If they persist, Bush should win the election in a landslide...
...And instead of old reliable Bob Michel, the Democrats and the media now faced...
...In addition to Dole, the congressman who most typified the whipped-dog GOP was Bob Michel of Illinois—the House minority leaderfor years...
...But things have slowly improved since Gingrich, I suspect...
...Bob Dole was "the tax collector for the welfare state...
...In addition, the top capital gains tax rate has been reduced to 15 percent, and the tax rate on dividends halved...
...The new tax cut did several good things at once...
...Greenspan, surely, is the most overrated man in Washington...
...In the end, of course, the Democrats would get the credit for compassion...
...Or played along...
...Should conditions warrant, we may need to ease again:' he likes to tell Congress...
...The Congressional Budget Office has taken baby steps in the right direction...
...Tom DeLay regards liberals as the pests...
...That is why President Bush's tax bills had to incorporate such absurd features as the restoration in the years ahead of some newly cut taxes...
...Investment was turned into consumption...
...The Wall Street Journal said in response: "What we'd like to hear from the Fed for a while is nothing?' Investors should not be encouraged to "sit on their cash for one more month, or two, to see if rates have a chance to go still lower...
...They will keep working as hard as ever, or investing as optimistically as ever, even when government seizes 95 percent of the proceeds...
...High tax rates cripple investment, and that is why any move to lower them will benefit the economy...
...Bob Dole was behind that too...
...The vote among the senators was a tie, and Vice President Cheney cast the deciding vote...
...Democrats added to the welfare state, while Republicans voted "no...
...President Bush expended his own political capital to get it through the Senate—something that Reagan was most reluctant to do...
...Nonetheless, Bruce Bartlett, a supply-sider who keeps track of these things, sees a looming parallel to 1972, when Nixon won in a landslide but with no higher purpose in mind...
...The Democrats even have their new McGovern in Howard Dean...
...Don't count on it...
...To quote Harvard's Martin Feldstein, the assumption has long been that high tax rates "don't affect the economy?' Likewise, reducing those rates won't affect behavior...
...Tom DeLay should pay them a visit with his bug spray...
...In the 1980 campaign, supply-siders proposed that lower tax rates would change behavior, and the economy...
...Discretionary purchases would be postponed, causing a sales slump...
...He started using the word "deflation...
...There is no deflation...
...That was derided as "voodoo economics" by David Gergen, then working for George H. W. Bush...
...Yet that has been Greenspan's method...
...They are the biggest taxpayers, but more important it is their decisions that shape the economy...
Vol. 36 • August 2003 • No. 4
