GOP Tax Bill: Send It to the Grandkids

Back in the old days, the Republican Party worshiped at the altar of fiscal responsibility. Since 1981, though, there has been a reformation of sorts, and now, the “tax-and-spend” Democrats have been joined by the “borrow-and-spend” Republicans. The difference is a moral one. The Democrats demand higher taxes so the adults of today pay. The GOP’s approach runs up the national debt so the adults of 2076 will get the bills. The GOP is raising taxes on the grandkids.

The latest example of cutting taxes during wartime (no other world leader in history has done this) is the $70 billion tax bill that extends the 15% cap on dividends and capital gains. The GOP still believes that lower rates of taxation result in higher government revenues, which is why the federal budget deficit soars when they get their way. There is an optimum rate; above it, the nation is over-taxed and under produces, but below it, the government goes into debt. As proof, a 0% tax rate does not result in infinite revenues but no revenues. Cutting the rate of taxation, at some stage, is counterproductive, a level that Mr. Bush likely blew past in his first year or two of office.

Nonetheless, Treasury Secretary John Snow (who has been begging to leave office for over a year, but no replacement has emerged) said, “The revenues to the US government are surging, and with this surging revenue we are going to be in a position to see the deficit come down.” Well, they always surge in April, because that’s when most Americans file their income tax returns and pay what they owe if they owe. Mr. Snow is like the Christmas tree salesman who extrapolates a good December result into a very profitable January and a spectacular February.

Worse, the tax relief that is being extended is on unearned income. If the GOP really values people who work to pull themselves up by their own bootstraps, one would think they wouldn’t tax them so that the already well-off can afford another vacation. The Democratic-leaning Center on Budget and Policy Priorities says the average household will get about $40 in tax relief from this bill, almost enough for a tank of $3 a gallon gas. Households with incomes above $1 million will get an additional $42,000, not just the price of the gas but of a luxury car as well.

This profligate spending, though, is party policy. According to Steve McGourdy who has made a study of these things, under Mr. Clinton the national debt rose an average of 4.3% per year; under the Republican Presidents (Messrs. Reagan, Bush the Elder and Bush the Lesser) the debt increased an average of 10.8% per year. Mr. McGourdy said, "That is, for every dollar a Democratic President has raised the national debt in the past 25 years Republican Presidents have raised the debt by $2.59." According to Congressman Earl Pomeroy (D-ND) the debt was $5.6 trillion when Mr. Bush came in and will be around $11 trillion when he leaves in January 2009.

How will this get paid off? Quite simply by a decline in the value of the dollar, a loss of productivity in future years, a smaller GDP than otherwise in 2010 to 2090 and beyond, and greater than necessary unemployment. But the good news is that most of the people making the decisions now will be dead by then. Their grandchildren can pay. Thanks, kids.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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