TAKE A BATH IN FUZZY MATH

New York Times
February 10, 2004
Mr. Bush's Revisionism

ust as he did on Iraq and national security, President Bush laid the economic foundation for his re-election campaign during a television interview broadcast Sunday. In a preview of how his campaign will respond to complaints about the huge deficit and overall job losses, Mr. Bush defended his tax cuts as ways to stimulate the economy, blamed Congress for not getting spending under control and made vague promises about avoiding catastrophic red ink in the long run by reforming Medicare and Social Security. None of what we heard made much sense.

Mr. Bush would have us believe that he was compelled by sluggish economic times to cut taxes. When his interviewer, Tim Russert, referred to a devastating chart showing the economy's decline in the last three years and asked Mr. Bush why he should be re-elected, he answered, "Because I have been the president during a time of tremendous stress on our economy, and made the decisions necessary to lead that would enhance recovery." He called his tax cuts an "economic stimulus plan."

This would make for a stirring tale of a president responding firmly to a national emergency, if only the president's supposed stimulus plan had been just that. It wasn't. His ambitious back-loaded tax cuts were unveiled during the last campaign, in the heady days of 1999, when the federal government was projected to amass trillions in surpluses in the next decade. Members of the Bush team drew up the tax cuts essentially as a rebate to the affluent for the excess money they said Washington had been taking. They stuck to the game plan even after it was clear that the rosy revenue projections would not hold up in the face of a wilting stock market.

Instead of altering its plan to conform to changing facts, the White House simply altered its rationale for the tax cuts. The supposedly affordable luxury of a handout to the wealthy over the next decade was relabeled, improbably enough, as a short-term stimulus package. Mr. Bush disregarded the sound advice of Paul O'Neill, his first Treasury secretary, and Alan Greenspan, who said future tax cuts should be conditioned on the availability of surpluses.

Mr. Bush was absolutely right when he pointed out that he did not cause the economic slowdown, which lingered on as a result of the Sept. 11 attacks and corporate scandals. But it was hard to take the president seriously on Sunday when he said it had been his tax cuts alone that had turned things around. That version of recent history overlooks the Federal Reserve's central role in minimizing the damage from the recession by its aggressive interest-rate cuts. It is also hard to figure out how cutting such taxes as those on investors' dividend income, or phasing out the estate tax over 10 years, stimulates consumer demand. Smaller, more targeted tax cuts in 2001 and 2002 — like a suspension of certain payroll taxes — could have done more to stimulate the economy at a far lower cost to the Treasury.

What is clear is that by drastically reducing federal revenues as a percentage of the economy to levels not seen in a half-century, Mr. Bush is saddling the nation with oppressive long-term liabilities. Even some of his conservative allies are becoming nervous about the administration's fiscal recklessness, a development that may account for Mr. Bush's defensive but ultimately inaccurate statement in the interview that discretionary spending had fallen during his term.

The president, who has never vetoed a single spending bill during his time in office, answered questions about the yawning gap between revenue and spending by recalling his plan to "cut the deficit in half" in the next five years. That plan avoids considering the consequences of locking in the current tax cuts, fails to address the needed indexing of the alternative minimum tax and does not even reflect the continuing costs of the war in Iraq. He threw up several other smokescreens, including reforming Social Security, without acknowledging that his own plan for the partial privatization of Social Security would require enormous new spending to cover the cost of the changeover. He seemed to regard this year's Medicare bill as another victory for cost controls, a peculiar stance for a law that includes a new entitlement priced at more than $50 billion a year.

The public, which already seems engaged in this campaign, will have nine months to consider Mr. Bush's rationale. We suspect the term "fuzzy math" will come back to haunt him.




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