SYNOPSIS: The Fiscal chicanery in the Bush Tax Plan should be grounds for a criminal investigation
So the Senate is about to change hands. Well, maybe that will make a difference. But there's a growing body of evidence that the usual rules don't apply to this administration. It came into power despite losing the popular vote, it has successfully governed until now as if it had a powerful mandate, and it has managed to sidestep ordinary restrictions like the one that says that you have to present a budget that specifies spending as well as tax cuts.
And now, despite the fact that the budget resolution called for a substantially smaller tax cut than the administration wanted, the tax cut agreed to in conference is actually almost as big as the administration's original proposal.
It's true that one item, the reduction in the tax rate on the top bracket, is a bit smaller than the administration wanted. But don't weep for the rich: the top 1 percent of taxpayers will still receive about 37 percent of the total tax cut once the plan is fully implemented; the bottom 60 percent of taxpayers will receive only 15 percent of the cut. The administration's determination to deliver a huge tax cut to America's wealthiest families, never mind the cost, has prevailed.
So how did the conferees manage to preserve almost the whole Bush tax cut despite a budget resolution that should have forced a substantially smaller cut? They lied.
Now in a way this is nothing new. Throughout the selling of this tax cut, its advocates have engaged in a disinformation campaign unprecedented in the history of U.S. economic policy — misrepresenting who would benefit from the plan (pretending that a tax cut mainly for the rich is actually aimed at the middle class) and understating its effects on revenue. Indeed, the pretense that taxes can be sharply cut without undermining the fiscal integrity of the nation has been maintained via financial fakery that, if practiced by the executives of any publicly traded company, would have landed them in jail.
Still, the fraud perpetrated late Friday night takes fiscal chicanery to a completely new level.
To understand what went down, you need to realize that Congress makes 10-year budgets, which are supposed to include consistent projections of revenues and outlays over the next decade — in this case, through the end of 2011. There's a lot wrong with that 10-year horizon. It encourages fiscal scams, like backloading tax breaks so that their true cost is hidden in the out-years; this final tax bill will surely reduce revenue by well over $4 trillion in its second decade. And the 10-year horizon is especially damaging at a time when the main fiscal concern of the federal government ought to be how to pay Social Security and Medicare benefits to the baby boom generation, which will start to retire — guess what — 11 years from now.
But never in my wildest dreams did I imagine that the tax cutters would engage in Friday's final scam.
Here's what they did: they made the tax bill fit within the budget resolution by assuming that the whole tax cut will expire at the end of 2010. That is, they simply waved their hands and made all the revenue that will actually be lost in the last year of the 10-year period — hundreds of billions of dollars — disappear from the accounting. One of my Capitol Hill contacts calls this "the miracle of the loaves and fishes."
Need I point out that absolutely nobody who supports this tax bill thinks of it as a temporary measure, to be canceled at the end of nine years? This is white-collar crime, pure and simple. We should call in the Securities and Exchange Commission, and send the whole crew — Democrats like Senator John Breaux and Senator Max Baucus as well as their Republican partners in crime — to a minimum-security installation somewhere unpleasant.
Until Friday night, I thought that the fraudulence of the tax plan would take a few months to become totally obvious. But I underestimated the smirking contempt of the tax cutters for the public's intelligence.
One last point: we should be aware of what a huge disservice Senator James Jeffords has just done the nation. As a gesture of gentlemanly courtesy, he delayed the shift of Senate control from the Republican Party until the tax bill went through. The result is this abomination. Should a gentleman aid and abet his colleagues in fraud?
Originally published in The New York Times, 5.27.01