Thursday, December 26, 2002

December 26, 2002

Sizing up options for tax cuts

Donald Lambro

Democratic Sen. Max Baucus of Montana met recently with White House officials in a reportedly secret discussion to cut a deal on a tax-cut plan to stimulate faster economic growth.
Mr. Baucus, the outgoing chairman of the tax-writing Finance Committee, was one of the maverick Democrats who helped forge last year's compromise with the White House that led to enacting President Bush's $1.3 trillion tax-cut plan. Mr. Baucus wants to play broker again, and Mr. Bush's advisers are all too willing to deal.
At $160 billion, Mr. Baucus' stimulus plan is nowhere near the $300 billion package Mr. Bush wants and believes is necessary to push the economy forward.
Mr. Baucus' plan hews closely to liberal Democratic theology, with most of it for public works jobs and social welfare assistance — $75 billion in grants to the states; $4 billion in highway construction grants; a one-time $300 income tax cut for middle-class taxpayers; and $16 billion in tax incentives for businesses to boost capital investments.
Mr. Bush's plan would speed up and make permanent the 10-year income tax cuts passed last year, give businesses added incentives to buy new equipment, cut the tax rate on investor dividends to help strengthen stock prices and enlarge investment retirement plans.
Mr. Baucus told Mr. Bush's aides there were things in the president's plan that he liked, but could not embrace now for fear of angering Senate Democratic leader Tom Daschle of South Dakota.
In return, the senator, who gives up his chairmanship in January when Republicans assume power, was told that there was a lot in his plan that the White House liked. At one point in the secret meeting, Joshua Bolten, the president's domestic policy adviser, asked Mr. Baucus if he could support Mr. Bush's stepped-up tax cuts and dividend tax reductions.
"I said I was open," Mr. Baucus replied, according to an account in The Washington Post.
That raised eyebrows in Mr. Daschle's office. Mr. Baucus had worked hand-in-glove before with Mr. Bush on the core of his economic agenda. Now, it appeared, he was ready to do so again.
Administration officials tell me that other Senate Democrats who voted for the Mr. Bush tax plan last year have been sounded out, too, and several "are willing to play ball," the White House was told.
With the economy on tenterhooks over the likelihood of a war in Iraq or another terrorist attack here, the White House isn't willing to trust blue-chip forecasts of between 3.5 and 4 percent growth next year.
Not when Fed Chairman Alan Greenspan says, as he did last week, that the economy seems stuck in a "soft patch" that began this summer and shows few signs of abating.
"And the patch has certainly been soft," Mr. Greenspan told the New York Economic Club.
"The labor market has remained subdued, as businesses apparently have been reluctant to add to payrolls. The manufacturing sector remains especially damped, and non-residential construction has trended lower. By all reports, state and local governments continue to struggle with deterioration in their fiscal conditions. Oil prices have recently risen and, not least, the economies of most of our major trading partners have shown little vigor," he said.
A big factor holding back the economy is the reluctance of the business community to invest in the future. The reasons are "the uncertainties surrounding the business outlook and the geopolitical situation," he said. In other words, war in Iraq.
Taken together, these fundamentals "impose a rather formidable barrier to new investment," he said.
Not a pretty picture, and certainly not one that Mr. Bush wants to enter next year, as he kicks off the two-year presidential election cycle. The war in Iraq will likely will be quick, decisive and successful. But he knows from his father's sad experience after the Persian Gulf war that the voters could still turn against him if the economy continues to weaken.
Of course, the economy could bounce back on its own next year after a weak fourth quarter. Incomes are up because of Mr. Bush's tax cuts. Consumers continue to spend, especially for autos. Lower interest rates have fed a surge in new home sales and refinancings.
But as Mr. Greenspan points out, there are still many negatives in the U.S. and global economies to overcome. The banking crisis in Japan still looms. Venezuela is in political turmoil, raising fears of oil shortages. And higher gas prices will impose further cost pressures on our economy at a time we can least afford it.
That's why Mr. Bush's early deal making with Mr. Baucus and other like-minded Democrats are critical at this juncture in his presidency. If he is to win a second term, Mr. Bush must win two wars next year, the one in Iraq and the tax cut war in Congress for a stronger economy.

Donald Lambro, chief political correspondent for The Washington Times, is a nationally syndicated columnist.

Why the United States Should Not
Attack Iraq
by Ivan Eland and Bernard Gourley

Ivan Eland is director of defense policy studies at the Cato Institute. Bernard Gourley is an independent foreign policy analyst.


Executive Summary

For months the Bush administration has been preparing the country for war with Iraq. The administration has argued that only a forcible regime change can neutralize the threat that Saddam Hussein is said to pose. But the assumptions that underlie the administration's policy range from cautiously pessimistic to outright fallacious. First, there is a prevalent belief that if Iraq is able to obtain nuclear weapons it will inevitably use them. Second, there is a notion that Hussein is totally irrational and cannot be trusted to act in a predictable manner; and, because of that, his leadership creates a substantial risk of instability in the Middle East. Finally, many people in the United States have come to believe that war in Iraq may be the only means of nullifying the threat posed by Iraq's nuclear, biological, and chemical weapons programs.

There are less costly strategies for dealing with Hussein than conducting a war. Hussein, while he may not act morally, is rational in the sense that economists and political scientists use the term. An examination of his past actions indicates that his principal need is to maintain his own physical and political survival. Using that knowledge, Washington can develop a strategy that would allow the United States to deter Hussein from taking actions detrimental to U.S. national security, without engaging him in warfare.

The key to neutralizing the Iraqi threat is to deter Hussein from aggressive action by sending a clear and credible message of commitment to protecting the United States against any challenge to its security; it is essential to communicate a willingness to massively retaliate in response to attacks against our homeland. This is crucially different from President Bush's message that overthrowing Hussein must be a top priority, regardless of his actual behavior. If Hussein believes that his political survival is being threatened, and there is nothing he can do about it, he may respond in a dangerous and unpredictable manner—with weapons of mass destruction.

Full Text of Policy Analysis No. 464 (PDF, 10 pgs, 55 Kb) © 2002 The Cato Institute
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What stinks about Washington

Patrick J. Buchanan
© 2002 Creators Syndicate, Inc.

He was an ancient among the boys of the Greatest Generation. Thirty-nine years old, a sitting judge at the time of Pearl Harbor, he resigned from the bench and volunteered for the 82nd Airborne, the bravest of the brave.

On D-Day, he crash-landed in a glider in France, hours before the Higgins boats hit the beach, and helped liberate Ste. Mere-Eglise. Days later, he was photographed driving a military vehicle that had lately been the property of the Third Reich. Decorated for wounds and valor, he was with the Army unit that liberated Buchenwald.

He was Lt. Col. J. Strom Thurmond. As governor of South Carolina in 1948, he was the nominee of the States Rights Party, the Dixiecrats who bolted Truman's Democratic party over civil rights. "Strom," as America would come to know him, carried only four states.

Elected to the Senate as a Democrat, he became the nation's most famous segregationist. For 23 hours, he filibustered the 1957 Civil Rights Act and stood with Barry Goldwater to vote "no" on the Civil Rights Act of 1964, bolted the party again and was crucial in leading the South into the Nixon camp at the Miami convention.

But as segregation died in Dixie, Strom adjusted. He courted black voters, hired black staffers, urged the nomination of black judges.

Last week, the grand old man was feted at a 100th birthday party at which the new majority leader, Trent Lott of Mississippi, declared: "I want to say this about my state. When Strom Thurmond ran for president, we voted for him. We're proud of it. And if the rest of the country had followed our lead, we wouldn't have had all these problems over these years, either."

The words were said in gracious tribute. But the malicious saw opportunity. Tom Edsall of the Washington Post dug up 54-year-old Thurmond quotes ("All the laws of Washington and all the bayonets of the Army cannot force the Negro into our homes, our schools, our churches"), then phoned around to elicit the "outrage" he had sought to incite. As ever, the left and a few neoconservatives were delighted to contribute.

"Oh, God," wailed William Kristol, whose old man, Irving, has not yet apologized for having been a Trotskyite two decades after Lenin and Trotsky began the extermination of Russian Christians.

David Frum, cashiered White House speechwriter, Jonah Goldberg of National Review and Andrew Sullivan piled on, parading their moral credentials by kicking Lott when he was down.

Al Gore, whose father voted with Strom to kill the Civil Rights Act of 1964, called Lott's tribute a "racist statement" and said he must resign. "It is not a small thing for one of the half-dozen most prominent political leaders in America to say that our problems are caused by integration and that we should have a segregationist candidate. ... That is divisive, and it is divisive along racial lines."

No, Al, it is you, with this malicious twisting of what Lott said and meant, who are mining the rich vein of racist politics. For keeping the races polarized and black folks believing Republicans want re-segregation, or worse, is how you "energize the base." In 2000, Gore suggested at a black church that what Bush meant by strict construction of the Constitution was to go back to when "some people were considered three-fifths of a human being."

Smelling blood, Jesse Jackson called for Lott's ouster. Lott, he said, "is an unrepentant Confederate who cannot speak for all Americans." But Trent Lott can surely speak for Mississippi. Who ever elected Rev. Jesse to speak for anybody?

"Lott's statement is the kind of callous, calculated, hateful bigotry that has no place in the halls of Congress. His remarks are dangerously divisive," said Kweisi Mfume of the NAACP, doing his best to deepen that division. Put Mfume's comment alongside Lott's and decide for yourself which manifests "hateful bigotry."

When Democratic leader Tom Daschle suggested that Lott meant no harm, Black Caucus Rep. Maxine Waters landed on him with both feet. A scorched Daschle hurriedly saw the light. Lott's words, he said, "were offensive to those who believe in freedom and equality."

Trying to stem the tide of venom coming his way, Lott offered an apology: "A poor choice of words conveyed to some the impression that I embraced the discarded politics of the past. Nothing could be further from the truth, and I apologize to anyone who was offended by my statement."

But the bleating of sheep only excites the gathering wolves, and the clamor grows for a full grovel, or resignation. What we are witnessing is the lynching of a good man who made a bad choice of words in a birthday tribute to an old man whose sins are no more scarlet than those of the rest of us. It stinks to heaven, but it is what passes for morality in Washington.

Wednesday, December 25, 2002

Airline passenger cited for remark about drinking
Associated Press

MADISON, Wis. - An airline passenger was cited for disorderly conduct Tuesday after the plane's crew accused him of insinuating the pilot had been drinking.

The remark caused Comair to cancel the 9:30 a.m. flight to Cincinnati, forcing 26 passengers to make other travel plans, said Lt. Michael Krembs of the Dane County Sheriff's Department.

Steven M. Wiese, 33, of Cottage Grove, was accused of leaning into the cockpit and remarking to the pilot, "I hope you haven't been drinking," Krembs said.

Federal Aviation Administration regulations require the flight crew to be tested for controlled substances when drug or alcohol abuse allegations are made.

"My assumption is it was a flippant remark," Krembs said. "But in this day and age of heightened airport security, you just don't joke about stuff anymore."

The airline refused to allow Wiese and his wife on another flight Tuesday, Krembs said.

His citation carries a $225 fine. The sheriff's department has referred the case to the FBI for further investigation.

Tuesday, December 17, 2002

A man in Phoenix calls his son in New York the day before Christmas and
says, "I hate to ruin your day, but I have to tell you that your Mom and I
are divorcing; 45 years of misery is enough."

"Pop, what are you talking about?" the son screams.

"We can't stand the sight of each other any longer," the father says.

"We're sick of each other, and I'm sick of talking about this, so you call
your sister in Chicago and tell her."

Frantic, the son calls his sister, who explodes on the phone.
"Like hell they're getting divorced," she shouts. "I'll take care of this."
She calls Phoenix immediately and screams at her father, "You are NOT
getting divorced. Don't do a single thing until I get there. I'm calling my
brother back, and we'll both be there tomorrow. Until then, don't do a
thing, DO YOU HEAR ME?" and hangs up.

The old man hangs up his phone, turns to his wife and says, "Okay,
they're coming for Christmas and paying their own way."

Saturday, November 30, 2002

Payroll Tax Tilts Burden
Onto Poor, Middle Class

By focusing exclusively on the individual income tax, your Nov. 20 editorial "The Non-Taxpaying Class" was extremely misleading.

While you mention payroll taxes in passing, every one of the statistics you cited that seeks to argue that the rich pay a disproportionate amount of the tax burden failed to account for the payroll tax burden, which increased dramatically over the past 20 years for the poor and middle class.

Almost as much revenue is now raised under the regressive payroll taxes as is raised under the individual income tax, whereas until 1963 the individual income tax raised more than twice as much revenue as the payroll taxes. The payroll taxes are paid chiefly by the poor and middle class. They are imposed only on labor income (not capital income, which is concentrated in the wealthiest households), there are no personal exemptions or deductions, and wages and self-employment income above about $85,000 are subject to tax at only a 2.9% rate, while labor income below that amount is subject to tax at 15.3%, thus concentrating the tax on lower and middle class workers.

When both payroll taxes and income taxes are considered, those households with income below $50,000 per year (about the median income) have seen their aggregate federal tax burden increase (not decrease, as you imply) between 1979 and 1999, while upper-income households experienced a tax decrease. These numbers will become even more pungent when the phase-in of the 2001 tax act, which decreases marginal income rates for the wealthy and repeals the estate tax, is complete.

The top 1% of wealth holders now own nearly 40% of private wealth in this country, while the bottom 95% own about the same amount. Yet, the top 1% pays less than 20% of the aggregate federal tax burden, when all taxes are considered (including the regressive payroll taxes), not only the individual income tax, on which you myopically focus.

Deborah A. Geier
Professor of Law
Cleveland-Marshall College of Law
Cleveland State University