IT'S THE ECONOMY, STUPID (Don't Wreck It)
Michael Hammerschlag

Alan Greenspan, until now an aloof and remote figure who dispensed his pearls of economic wisdom before the simpletons of Congress, did an abrupt about face Thursday, endorsing a tax cut, if not the reckless tax cuts GB2 is determined to enact.

The change obviously came a few weeks ago, when he emerged from a meeting with George Bush with the blissful dazed look men get coming out of a bordello. He started to walk past the cameras, but George grabbed his arm and swung him back like an errant steer. Comon back here boy! What exactly occurred there won't be known, but I suspect Bush led off with a stick, "We ARE going to get this tax cut through, you can get on the bus or get run over. No one is indispensable." Here George's eyes would narrow and brow furrow in that tough West Texas way. Then came the carrot. Draping his arm over the untouchable potentate he waxed magnanimous, "Al, what do you want? I'm the President now. I want a tax cut. What in the world do you want?"

Judging from the Bushes, Powells (son becomes head of FCC), Thurmonds (son becomes Dep US attorney), McConnells (wife becomes Labor Secretary), we should expect the progeny or relatives of Greenspan to be appointed to some position wildly out of range of their experience and capabilities. Republicans are good to their friends, and it's not that hard to become one. Al was tamed.

Greenspan, whose previous acts were to raise the interest rates twice to stop nonexistent inflation (carefully timed to decimate my meager holdings), came out with the novel and amazing thesis that the projected surpluses were so large that a tax cut would be needed to reduce them: "problems" might result from all that extra cash. Do WHAT!! How about funding Social Security, paying off the nat. debt? These worthy and steep aspirations are suddenly done deals. Projecting these huge surpluses forward 10 years, Greenspan worried about the Government having to use all that cash to buy up private assets. Uh huh. Greenspan is unparalleled at saying all things to all people, but he is usually less mendacious.

George Bush, unable to shift from campaigner to ruler, has continued the tactics of lowering expectations, ruminating about the coming recession as if he could inoculate himself from the blame for it. As the President with the duty of inspiring and looking forward, this is incredibly irresponsible: he could provoke such events by talking about them as inevitable. As long as he isn't blamed, that doesn't matter. He now wants to cut taxes, not as a payoff to rich contributors, but to stimulate the economy; a notion that no one, including Greenspan, really believes. "Tax cuts would be better than government spending," was his only concession to this line of thought.

All these proposals rely on these huge continuing surpluses (which due to Social Security underfunding don't really exist), but these could end in a few months, if the possible recession throws a lot of people out of work. In fact, the very idea of assuming these unprecedented surpluses will last a decade, let alone a few years, is idiotic. Ask anyone who had Internet stocks. What goes up does come down. But George wants to commit the entire surplus now to encourage the economy not to tank, and pray that 2 or 5 years down the road, the money will exist. He also wants to build a $1 trillion missile defense system that, uh, doesn't exist. And put people's Social Security funds into the tumultuous stock market, which Greenspan also seemed to endorse (luckily not last March). Once upon a time Republicans embodied fiscal responsibility.

Newsweek's entertaining financial editor Allan Sloan is dismissive: "I think the idea of stimulating the economy with a tax cut Bush is proposing is baloney. For one thing, getting rid of the estate tax isn't going to stimulate anything except the net worths of rich people. Second, the people who would get the biggest cuts--probably me, since I'm in a very high bracket--aren't going to run out and spend, I'm probably going to save. I think the long-term surplus forecasts are very unreliable because all long-term federal budget numbers are unreliable and committing essentially all the projected non-SS and non-Medicare surplus to a tax cut is nuts. Bush's tax-cut is backloaded, and the 10-year period we're in comes just before 2013, when the social security crunch is scheduled to start. And if the Bushies think that the economy is crap, then all the surplus projections are wrong, because they depend on a good economy."

20 years ago, for those too young or condemned to repetition, Ronald Reagan promised a massive tax cut, gigantic rise in military spending, and a balancing of the budget. It was a prescription for failure. Some people made a lot of money, a trillion dollars of banks failed, half stolen by organized crime (due to ending most federal regulation), and Carter's projected $58 billion 1981 deficit ballooned to $220-450 billion every year for 12 years of the Reagan/Bush reign. The total deficit accumulated from George Washington's time pentupled, the $3.7 trillion publicly held debt* remaining means 14¢ of every tax dollar goes to pay interest on this debt, down the tubes forever.

This Bush wants to do it again.

The inexplicably durable Castro weighed in with his considered opinion, guaranteed to earn him a division of Airborne troops somewhere down the road: "I hope he is not as stupid as he seems." The White House had no comment.

Copyright © 2001 Michael Hammerschlag

*there is also another $~1.7 trillion of government debt, mostly Social Security trust funds, also increasing. Sloan expounded, "A point I keep on making, which is totally ignored by everyone, was that during the campaign, both the Gore and Bush budget proposals projected an increase in total debt even though the publicly held national debt was projected to go down a ton in Gore's numbers, half a ton in Bush's."