Friday Archive Strolling

This week I take a look at one of Paul Krugman's first columns written during the brand new Bush adminstration in early 2001. From the NYTimes:

Call it a "Bush trillion." It's a sum that is either much more or much less than $1 trillion -- whichever is convenient -- but one that George W. Bush thinks he can get away with calling "a trillion dollars" in speeches.

During the campaign Mr. Bush, to emphasize his moderation, claimed that he was matching a trillion dollars in tax cuts with a trillion dollars of new spending. In fact he proposed less than half a trillion in new programs, and now he proposes no real increase in spending at all. The tax cut, on the other hand, turns out to be $1.6 trillion, except that it's really $2 trillion once you count the interest costs. And it will be $2.5 trillion if it is accelerated, something Mr. Bush has urged but not factored into his numbers, and if a major wrinkle involving the alternative minimum tax is ironed out.

Meanwhile Mr. Bush has come up with another trillion, this time his "trillion-dollar contingency fund." It comes as no surprise that the actual number in his budget is only a bit more than $800 billion. And more than half of that consists of funds that Medicare was supposed to be setting aside for the needs of an aging population. So maybe we also need to define a "Bush contingency," as in: "Gee, people might get older, and they might have medical expenses. We can't be sure -- but it could happen."

Which brings us to the question of identifying the victims.

For there will be victims. The latest line from tax-cut supporters is that this isn't really a big cut, that we can easily afford it. But if that were true, Mr. Bush would be able to justify his plans with honest accounting, and would be able to honor his own party's promises to protect the retirement trust funds. Yes, his cut is somewhat smaller as a share of G.D.P. than Ronald Reagan's. But Mr. Reagan's tax cut was a fiscal disaster, and would have been even worse had his irresponsibility not been partly offset by increases in the payroll tax that finances Social Security and Medicare.

So who will be hurt? First, of course, the usual suspects: the poor and near-poor, who, because they pay no income tax (though they pay quite a lot in other taxes), will get nothing from the tax cut but will bear the brunt of the spending austerity that the tax cut will force. And these victims include a third of the nation's children.

But there will be other victims: middle-income baby boomers.

We keep hearing about the "typical" family that will receive a $1,600 tax cut. Now it's true that under Mr. Bush's plan a median-income family of two adults and two children under the age of 17 would get a $1,600 cut starting in 2006. Most of that, however, comes not from lower tax rates but from an increased child credit. A couple whose children are grown (or even college-age) get only $600, a widow or widower gets only $300. So for middle-income baby boomers, there just isn't much of a tax break. (You can also start to see why 88 percent of families will get less than that "typical" $1,600 break, in most cases much less.)

Needless to say, there is no comparable fine print when it comes to tax cuts for the rich.

During those early months of the Bush administration, Krugman was roundly criticized for being unduly cynical about Bush. And in some ways, he probably was. But in hindsight, many of the themes that he first touched on six years ago in columns like these - themes like budget obfuscation, income-skewed policies, and attempts to cut back on the social safety net - are themes that have become uncontroversial elements of mainstream criticism of Bush.

Plus ca change...