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For those who ever believed in it, Washington
"compassionate conservatism" just took off its mask. Federal deficits are soaring. State finances are sinking into their biggest
crisis since the Great Depression. So, what does the Bush White House propose?
No serious help for the states. Nor is there relief
from payroll taxes to encourage job creation. Sen. John McCain, R-Ariz., has rightly remarked on the lack of compassion in
the Bush administration's economic stimulus package. Its centerpiece, costing $364 billion of the $674 billion to be spent
over 10 years, is to reduce or end taxation of dividends, some 40 percent of which annually goes to the top 1 percent of wealthy
Americans. What this complicated proposal would stimulate is not the workaday economy but the already huge gap between the
wealthiest Americans and everyone else.
Historically, this is the great Republican Achilles'
heel favoritism to the rich. The 2003 Bush tax-cut proposal is the biggest, baldest example since the 1920s, when Treasury
Secretary Andrew Mellon decided that if Congress wouldn't let him cut income-tax rates enough he'd just start giving money
back, to individuals and corporations alike, through Treasury refunds, rebates and remissions. Given this recurrent thread
over eight decades of GOP fiscal history, White House and congressional Republicans may be setting up a dangerous issue for
the 2004 elections.
Still, you have to admire GOP chutzpah. Boldness often
pays. Republicans are gambling that ordinary Americans are too numb or too dumb either one works to go beyond the 20-second
sound bites to see who gets the meringue and who gets the filet mignon. They're gambling that John and Jane Q. Public won't
comprehend a thinly disguised bailout of upper-income stock investors as another round of old GOP trickle-down economics.
It's been 10 years since the first President Bush was
voted out of the White House on a wave of public indignation at his economic policies in particular, over how he had no sense
of what was happening on Main Street. All he could ever talk about was cutting the capital gains tax rate on behalf of investors.
You'd think that anyone at least 40 years old would
remember that myopia. You'd think they'd remember the old adage about the acorn not falling too far from the tree. Because
that's the economics involved: Like father, like son. In fact, we can go further: Like great-grandfather, like grandfather,
like father, like uncles, like siblings, like son. The predominant history of the Bush family for 100 years has been to work
in the investment business (sometimes with an oil tilt); interpret the economy through the lens of investment; and tailor
economic policies to favor friends, neighbors and relatives in the investment business.
If a president who came out of the widget industry spent
all his time trying to promote the widget business, it would be obvious and it would raise major ethical problems. But the
magnitude of the Bushes' investment involvement and bias is too little understood.
Great-grandfather George H. Walker was the president
of two major New York investment firms: G.H. Walker & Co. and W.A. Harriman and Co. Grandfather Prescott Bush was the
managing partner of Brown Bros., Harriman & Co. Presidential uncles Jonathan and Prescott Jr. have been, respectively,
the heads of small investment firms named J. Bush & Co. and Prescott Bush & Co. Prescott Bush Jr. has also been closely
involved with Asset Management International Financing and Settlement Ltd.
Presidential brother Marvin runs hedge funds at investment
company Winston Partners. Presidential brother Neil started an investment deal in Austin, Texas, and both George H.W. and
George W. Bush have been in the kind of oil business that is largely driven by tax shelters and financing from friends and
relatives.
Such finance doesn't look out for widows and orphans.
Besides President Bush's problems with the Securities and Exchange Commission over his sale of Harken Energy stock, his uncle,
Scott Pierce, resigned as president of the now-defunct securities firm E.F. Hutton after pleading guilty on behalf of the
firm to check-kiting. Brother Neil was fined because of his culpability in the Silverado savings and loan debacle in Colorado
in the 1980s. A Tokyo investment firm that hired Uncle Prescott as an adviser in 1989 was identified by Tokyo police as a
mob front.
The point is simply that the average American could
be forgiven for thinking that the Bush motto is "public service means private opportunity."
Which is why this latest embrace of "investment" is
not only unfair but the policy equivalent of self-dealing. When the Bushes start talking about investment, ordinary folks
should start circling their Chevrolets. But can such a mix of historical evidence ever make it through the terrorism and war
milieu now in operation? Can voters smell greed through the reek of aviation gasoline in the Persian Gulf?
In a sense, war itself is becoming a shelter for would-be
tax shelters. When World War II broke out, public and congressional skepticism still reflected the role of finance in the
1929 Wall Street crash. Taxes on the dividend income of the rich were high, so, as war profits flowed in, many companies cut
dividends and used the capital to pump up their stock prices. The higher prices would translate into capital gains, which
were taxed at a lower rate. The partial remedy was to tax excess corporate profits, but critics said that even this did not
reach subtly retained income.
Instead of becoming a spur to rein in excess profits,
flying bullets have become covering fire for political opportunism: Bill Clinton's 1998 cruise missile attacks on Sudan and
Afghanistan timed to divert attention from his personal peccadilloes, Republican willingness to wag the dog to take the focus
off class-driven economics.
Meanwhile, no wartime excess-profits tax has been imposed
on corporate America since the United Nations endorsed and launched the Korean War in 1950, and we can assume that the Bush
administration will not request one if the international body signs off on an invasion of Iraq. Rather, the administration
is seeking to gut the dividend tax under the dubious pretense of stimulus and long-term growth possibly even in the name of
making the United States a nation worthy of the men and women in uniform who may be fighting and dying in the Middle East
(as Congress weighs this fiscal shamelessness).
Will the Democrats, who in recent years have baa-baaed
around Washington like clueless sheep on an Idaho hillside, somehow turn and swing this issue like a political power saw?
They show some movement, but they have displayed too little knowledge of their own history Thomas Jefferson's fear of the
money power; Franklin D. Roosevelt's bold use of the inheritance tax; Harry S. Truman's lambasting of Wall Street to assume
that they can call up a memory of the Republican fiscal heritage, however vulnerable.
Yet, the vulnerability is potentially huge. As Bush
fiscal policy suns itself in the mentality of Coolidge-Hoover-era Treasury Secretary Mellon, it disdains the better legacies
of other GOP presidents. Dwight D. Eisenhower favored taxes on excess wartime profits; Richard Nixon signed legislation imposing
a higher top tax rate on unearned, rather than earned, income; Ronald Reagan's 1986 tax reform insisted on equal top rates
for earned vs. stock-market income, eliminating the preference for capital gains.
The first President Bush was the succeeding president
who cried incessantly to restore capital-gains favoritism to investors. We should also mention Theodore Roosevelt, who called
in peacetime for the progressive tax on large inherited fortunes that George W. Bush works to eliminate in wartime; and Abraham
Lincoln, whose wartime taxes covered dividend income.
The Lincoln-Roosevelt-Eisenhower-Nixon-Reagan viewpoint
still commands a fair minority of the Republican rank and file, if not among its Bush-era leadership. The only major Republican
voice speaking for the old party, however, is that of McCain, who said in December, "We probably need to have tax cuts directed
at lower-income Americans, such as payroll-tax reductions. Low-income Americans in totality bear a much higher tax burden
than wealthy Americans do; therefore, there is a growing gap between the wealthiest and poorest Americans."
McCain scoffed at the notion that Bush's tax policy
embodies compassionate conservatism. McCain's father and grandfather were four-star admirals; he learned a different tradition
than that of the tax-shelter salesmen.
It is probably too much to expect Republican McCain
to lead the fight against the kind of arrogant misprioritization that earmarks $364 billion, out of a $674 billion economic
"stimulus" program, for ending the taxation of stock market dividends. But surely the Democrats must.
If they're afraid to fight under the old Democratic
banners of Jefferson, Jackson, FDR and Truman, this time they can invoke the Republican fiscal precedents of Lincoln, Teddy
Roosevelt, Eisenhower, Nixon and Reagan.
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