SYNOPSIS: Economists really can see the future, especially when watching Predictable Factors
Scenes from the selling of the tax cut:
January 2001: The White House economic adviser Lawrence Lindsey argues that George W. Bush's tax cut — not interest rate cuts — is the right solution to the economic slowdown, because the tax cut has a "much bigger heft." Economists are puzzled by the attempt to sell a long- term tax cut as the answer to a short- run economic slowdown, especially given the fact that most of the cuts proposed by Mr. Bush wouldn't take place until the second half of the decade. Later, when Congress passes a budget resolution authorizing $1.35 trillion in tax cuts, administration allies try to eliminate language requiring that $100 billion of that total be reserved for immediate tax breaks to stimulate the economy. They would prefer to use the money for tax breaks for high-income families, even though those breaks will not phase in fully until 2006.
March 2001: President Bush declares that "nationwide there are more than 17.4 million small-business owners and entrepreneurs who stand to benefit from dropping the top rate from 39.6 to 33 percent." A press release from the Treasury Department seems to back him up, declaring that "it is evident that at least 17.4 million small-business owners and entrepreneurs, many of whom currently pay at the 39.6 percent rate, stand to benefit from the president's tax relief plan." Economists are puzzled, since only about a million taxpayers have any income taxed at the 39.6 percent rate, and most of those are not small-business owners. Independent estimates suggest that only about 1 percent of small businesses would receive any benefit from a cut in the top rate, giving a new meaning to the term "many."
May 2001: Mr. Bush is asked what his administration plans to do in the face of high gasoline prices. "Let me say it again, see if I can be more clear," he replies. "To the Congress, who is interested in helping consumers pay high gas prices: `Pass the tax relief as quickly as possible.' We've set aside $100 billion to help consumers with high energy prices. That's the quickest way to help consumers. I am deeply concerned about consumers. I'm deeply concerned about high gas prices. To anybody who wants to figure out how to help the consumers, pass the tax relief package as quickly as possible." Economists are puzzled, since the poorest families, who are most affected by the gasoline price spike, will receive no tax cut under the Bush plan. Also, that $100 billion that Mr. Bush says he has set aside "to help consumers with high energy prices" is the short-term tax cut that his Congressional allies tried to eliminate from the budget resolution.
June 2001: Soaring electricity prices cause hardship for many families and small businesses in several parts of the United States. Mr. Bush continues to insist that there are no short-term solutions to energy problems, that the answer is to drill for oil in the Arctic National Wildlife Refuge. However, he adds that his tax relief package will help families afford electricity, or buy candles and propane lamps.
July 2001: Foot-and-mouth disease breaks out in the United States, and spreads rapidly. Mr. Bush denies that the outbreak calls into question planned cuts in the Agriculture Department budget. The best answer, he argues, is broad tax relief, which will help farmers buy new animals, help consumers pay higher food prices and allow housewives to take courses in vegetarian cooking.
August 2001: Adverse weather conditions and lax pollution regulations lead to severe air-quality problems in Houston, which during Mr. Bush's governorship took the lead from Los Angeles in ozone pollution. Mr. Bush denies that the pollution is a warning sign for his production-oriented energy policy, and argues that his tax cut will help alleviate the problem, by giving families the money with which to pay for air filters, respirators and medical care.
September 2001: Critics pan the new fall television lineup, describing it as "must-avoid TV" and calling it the worst set of new programs in decades. Mr. Bush declares that he is "very concerned" about the deteriorating quality of broadcast entertainment. He urges TV viewers to support his plan for tax relief, which will provide families with money they can use to subscribe to HBO, allowing them to watch "The Sopranos."
Originally published in The New York Times, 5.16.01