Something to keep in mind as you spend those tax checks
Now that tax checks from the Treasury are arriving in mailboxes around the country, it is time for a check of another sort — a reality check.
The money arriving from the government — “Bush Bucks” a friend calls his share — is an advance on 2001 tax returns. ThatÆs right, the IRS calls it an “Advance Payment,” words taken from irs.gov. The money will be subtracted from returns next tax filing season. Even another friend who works for the IRS in data entry didnÆt know that the check he got — which helped him make his car payment — was an advance and not a give-away.
Come early 2002, reality is going to sink in, and it will be interesting to see the publicÆs reaction. Not that early returns are such a bad idea, unless the cost to the government and wisdom of the policy are considered. First the question begs to be answered, whatÆs the point?
A clue is written right on the checks: “Tax Relief for American Workers,” a motto lifted straight from President BushÆs presidential campaign.
Reality check: This “tax relief” is a political gimmick, one of those tricks thatágrease elections and lube the contribution pipeline. A lot of people are saying the Prez isnÆt such a bad guy if heÆll put some cash in my pocket, and thatÆs the point. Slick move.
And expensive. Just mailing the millions of the “rebate” notices cost $33.9 million, then tack on the expense of the checks themselves, complete with campaign motto. The White House has been quick to add that printing a few extra words on the checks didnÆt add to the cost, and really the amount of money we’re talking about here is comparable to forking over a buck for a soda. ItÆs pocket change for Uncle Sam.
But other costs loomáfor the nationÆs finances. Already Democrats are beating the drums over the dwindling budget surplus. The money-gusher has been capped, and even Bush coyly says “Surplus? What surplus?” when asked what happened. He wants to sink billions into missile defense but the money is simply not available, and that means other priorities like Medicare and education are not going to get a badly needed infusion of cash. Republicans say they “took the money off the table” so it couldnÆt be spent “for liberal pork projects.”
What theyÆve done is reverse the lastácommander’s chief accomplishment with the economy. Wise management of the nationÆs finances restored the confidence of the markets in the governmentÆs ability to handle its budget, spurring the greatest period of growth ever in the mid and late 90s. Strangely enough, the gold rush began after Bill Clinton passed a budget-balancing and politically risky tax hike as one of his first major accomplishments.
However, President Bush subscribes to the old school of supply-side economics and the notion that the rich know how to best use money. ThatÆs really what this tax cut is about. The pocket change arriving in peopleÆs mailboxes is pennies to dollars compared to what the richest American taxpayers got out of the deal. IÆm afraid weÆve been down this road before and results wonÆt be much better this time.
Last time down the supply side of the economic road, starting ReaganÆs first year, the budget drove off a cliff into huge deficits. With the government borrowing heavily to pay its bills in the 80s and early 90s, credit markets were sucked dry, making less money available for private financing for everything from homes to businesses. The economy was in a doldrums û it had no wind. Clinton turned all that around by weaning the government off of deficits, making lots of cheap financing available for Internet ventures and SUVs. The government even paid billions off of the national debt and ran up record surpluses.
Those days are over.
It remains to be seen if huge deficits are the result of this latest tax cutting experiment. All it takes is for some more of those rosy economic projections to come in below expectation for the money well to sputter dry and the budget to go into the red. Then all of the creative accounting in the world wonÆt do a bit of good, and itÆs exactly the sort of gimmickry used by the White House lately that contributed to the last recession and the marketsÆ loss of confidence in the governmentÆs honesty.
The first real reality check comes this fall when thereÆs no money to pay for Democratic priorities like Medicare and extended unemployment benefits. Reality strikes again in April as people realize they didnÆt really save much money from the tax cut as they thought they might. Some people might feel a little duped that these early checks came with a price, but many wonÆt care, like my friend who made his car payment. As long he doesnÆt have to pay anything back, Bush is a good olÆ guy.
Finally, the ultimate reality check comes as the government deals with tight budgets and a sluggish economy. If the tax cut doesnÆt create growth as advertised and the economy sinks like a lead balloon, Bush and his buddies in Congress will get a reality check of their own.