T Nation

Domestic Policy - Pre-Debate Debate

The debate should be quite interesting – just today in an NYT article Kerry has said he and Bush have the same exact position on gay marriage, which came up in the Veep debate.

I predict Bush will try to hammer on the employment numbers released today, which put employment at the same level as when Clinton was re-elected in 1996 (5.4%, down from 6.3% – which, of course, is low historically for a recession) and talk a lot about tax cuts and those spending programs, NCLB and the Prescription Drug Benefit. Kerry may or may not try to demogogue outsourcing, and will surely do like Edwards and assure everyone that he has plans for everything, involving spending huge sums of money, while simultaneously having a plan to cut the deficit in half.

Also, George Will has an excellent column in the Washington Post today, arguing that the Democrats fear Bush’s domestic policies, which I’m sure will produce some commentary:

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GOP Power Plan
Why Democrats fear Bush’s domestic agenda

By George F. Will
Thursday, October 7, 2004; Page A39

If Sept. 11 had never happened – if debate about domestic policy had not been drowned out by the roar of war – the potential domestic ramifications of this election would give it unusual nation-shaping power. To understand why is to understand some of the Democratic rage about the specter of a second term for George W. Bush.

He has a multifaceted agenda for weakening crucial components of the Democratic Party, factions that depend on cosseting by the federal government. Consider trial lawyers and organized labor.

John Kerry’s selection of John Edwards as running mate was a blunder, and not just because Kerry probably will lose Edwards’s North Carolina. The Edwards selection ratifies a provocative fact: trial lawyers have become the Democrats’ most important faction. This has energized small-business owners, the self-employed, doctors and others who worry that they live one lawsuit away from ruin. Such people, now aroused, may propel tort reform that will curtail the windfalls that make trial lawyers the Democrats’ largest source of contributions.

Another Democratic faction, organized labor, profits from coercive laws that make mandatory some of the $8 billion it collects in members’ dues. Substantial sums flow into Democratic coffers. Furthermore, organized labor is, increasingly, government organized as an interest group – public employees unions. The growth of organized labor is in those unions, whose members tend to vote Democratic, for government growth.

Bush is pressing to put hundreds of thousands of federal jobs up for competition with the private sector. Grover Norquist of Americans for Tax Reform says: “The people who cut the Pentagon lawn are government employees. Why?” People listed in the phone book will do it cheaper. How many of the 15 million state and local government jobs could be privatized, with how many billions of dollars in savings?

The public education lobby – one in 10 delegates to the Democratic convention was a member of a teachers union – wants government to keep impediments in the way of competition. That means not empowering parents with school choice, including the choice of private schools, which have significantly lower per-pupil costs.

Welfare reform, the largest legislative achievement of the 1990s, diminished the Democratic Party’s dependency-bureaucracy complex. That complex consists of wards of government and their government supervisors. And Bush’s “ownership society” is another step in the plan to reduce the supply of government by reducing the demand for it.

That felicitous formulation, from Jonathan Rauch’s masterful analysis of Bush’s domestic ambitions (National Journal, July 26, 2003), follows from two axioms of which conservatives are fond: Give a person a fish and you give the person a meal; teach the person to fish and you give a livelihood. And: No one washes a rental car. Meaning people behave most responsibly about what they own. Hence Bush’s menu of incentives for private retirement, health, education and savings accounts.

Conservatives hope such measures will encourage aptitudes that will make the welfare state compatible with traditional American individualism and self-reliance. And conservatives hope such aptitudes will result in Republican attitudes, especially among the elderly and other people with portfolios of equities.

Forty years ago, when President Lyndon Johnson trounced Barry Goldwater, the elderly were the most conservative age cohort. Today the elderly are the most liberal.

About 2.4 million Americans die each year. Most are elderly, and a majority of that majority are Democrats, for two reasons: Most of them formed their political sensibilities in the Roosevelt-Truman-Kennedy-Johnson era of Democratic presidential ascendancy. And the elderly are devoted to big government: Social Security and Medicare by themselves are 33 percent of federal outlays.

About 7 million members of the elderly cohort from that Democratic presidential era have died since the 2000 election. And a Republican-leaning cohort that the Bush agenda aims to enlarge – owners of stock – continues to expand. In 1980, 20 percent of adults owned stock. Today 60 percent do, as do more than 70 percent of those who will vote on Nov. 2.

In addition to their economic rationale, the Bush tax cuts have the political purpose of crimping Democrats’ abilities to satisfy their factions’ desires for spending. And Bush’s private retirement, health and education savings accounts would implement the theory that, as Rauch says, Republicans will empower the people, who in turn will empower Republicans.

Furthermore, Social Security private investment accounts would simultaneously multiply investors and diminish both dependence on government and resistance to reduction of it. Among some prescient Democrats this pincer strategy provokes anxiety, and some of today’s fury.


They’re going to go back and forth on tax cuts too – so this article by two writers for Reason Online, who will not be voting for Bush, provides an interesting analysis of the effects of the tax cuts on the middle class. What do you think of their contentions and methodology?


You May Already Be A Winner
Who really benefits from the Bush tax cuts?
Nick Gillespie and Mike Snell

The second presidential debate?which will focus on domestic issues, including the economy and the living standards of average Americans?is slated to darken TV screens across this sweet land of liberty at the end of the week. So it’s a good time to take stock of one of the major bones of contention between President George W. Bush and challenger John F. Kerry. We speak, of course, of Bush’s income tax cuts, which Kerry has consistently attacked as little more than a giveaway to the rich and powerful.

“George Bush has given more to those with the most, at the expense of the middle-class working families who are struggling to get ahead,” Kerry pronounced in a recent, and typical, speech.
In at least one sense, this statement is incontrovertibly true: Those at the top of the income pyramid get more money back from tax cuts. However, that’s mostly because they pay more in taxes. In a recent publication, the Congressional Budget Office concluded that the households comprising the top 10 percent of income earners in 2001 shouldered 67.7 percent of income tax liabilities.
So any cut in rates will reduce the burden of those paying the most.

But of course that’s not what Kerry, and many of his supporters, mean. They’ve consistently suggested that the Bush tax cuts push platefuls of cake to well-connected millionaires while reserving only a few crumbs for the vast majority of Americans whose income places them far lower on the income scale.

Is that true? Using tax amounts due in the pre-Bush tax cut year of 2000 as a baseline, we ran some numbers based on households that made between $50,000 and $75,000 a year in total income. We chose those numbers for a couple of important reasons. First, more households?18.4 percent in 2001, according to Census figures ( http://www.census.gov/prod/2004pubs/03statab/income.pdf )?reported an income in that range than in any other. Second, that same spread is the most typical range for income tax returns filed. Using 2001 IRS stats, 13 percent of all returns filed reported an adjusted gross income level of between $50,000 and $75,000. In fact, that range accounted for 18 percent of all returns when there was any taxable income reported. For each scenario below, we calculate cumulative savings by subtracting the amounts due under Bush’s cuts from the figure that would have been due if the 2000 rates had remained in place. That is, cumulative savings = (2000 tax x 3) - (2001 tax + 2002 tax + 2003 tax). Because the lower tax rates were phased in gradually, we’ve also noted the difference between amounts due in 2000 and 2003.

Consider first a married couple that brings in $75,000 a year in total income. That’s a lot of money?enough to put a household in the fourth-highest income quintile (go here for the upper limits on each quintile: http://www.census.gov/prod/2004pubs/03statab/income.pdf ). We assumed that they own a home and that their itemized deductions, including mortgage interest, property taxes, and charitable contributions, totals $13,500 (a typical amount). We ran the numbers for them as childless and with two kids. Here’s what their federal income tax came to in each of the last four years.

[Tables don’t come through well – follow the link to see the numbers]

In both the childless and two-child scenarios, the amount of taxes saved over the three years of Bush tax cuts is substantial. So is the difference between the 2000 and 2003 tax due.

Significant, if smaller, savings can be seen at a lower level of income, especially if there are children involved. Here are our calculations for a couple making $50,000 a year and taking the same $13,500 in itemized deductions.

[Tables don’t come through well – follow the link to see the numbers]

And here are the figures for a $50,000 a year household that lives in an apartment and takes the standard federal deduction.

[Tables don’t come through well – follow the link to see the numbers]

These calculations suggest that, contrary to John Kerry and other critics, the Bush income tax cuts have in fact put real money in the pockets of typical American families.

None of this should be taken as a brief for George W. Bush. One of us (Nick Gillespie) is on the record (in the November issue of Reason, on newsstands now!) as declaring that he will not vote for Bush; he has also consistently decried Bush’s policies
on trade, drug prohibition, gay marriage, public education, and the invasion of Iraq. One of us (Mike Snell) plans a principled vote for the guy who promises not just to cut taxes, but to abolish the income tax altogether.

But the fact remains that Bush’s cuts have reduced the amount of income tax we all pay. Though Kerry will certainly suggest otherwise in Friday’s debate, the trouble with Bush’s budget policy isn’t that he cut income taxes. It’s that he hasn’t cut spending. Indeed, perhaps the strongest case for electing Kerry may be that he will usher in an age of divided government that will restrain federal spending and the various problems that accompany it. That’s what happened the last time a Democratic president squared off against a Republican Congress. At least in fiscal terms, the results were pretty good, with discretionary spending increasing only a (relatively!) measly 3.4 percent annually under Clinton.

It’s a shame that we won’t hear Kerry making that sort of argument in the next debate. It’s just the sort of thing that might get him a few more votes from limited-government advocates who are disappointed with Bush.

Reason editor-in-chief Nick Gillespie is editor of Choice: The Best of Reason. Mike Snell is a tax consultant specializing in tax planning for small business.

Buy Choice: The Best of Reason

There were over 5 million people completely dropped from the tax rolls. I know first hand that the Bush tax cuts put money in peoples pockets - rich and poor.

I’ll give you two examples:

Exhibit A: Young single mother with 3 kids. Adjusted Gross Income - $11,000. Amount of refund - over $6,000. She made money from having kids. She paid no taxes. With the Child tax credit and the EIC, she turned a profit. She recieved more money than she paid in.

Exhibit B: Farmer, married, no children. 2003 AGI - 100,000. Tax bill - over 25,000, including SE tax. Same guy 2001: AGI 100,000. Tax bill - 28,000 including SE tax.

How does one quantify how much of a tax cut ‘A’ recieved? She paid no taxes, but instead ‘made money’ on the deal.

‘B’ had a far greater tax savings than ‘A’ - yet still paid $25,000 in tax. Is that unfair to ‘A’ because ‘B’ saved so much in taxes? According to Kerry it is.

Has Kerry proposed an overall spending plan and budget? I just think its absolutely impossible to reconcile his claims, on the one hand, that Bush has underspent on education (despite an unheard-of increase in education spending of just under 60%) and health care (despite the prescription drug bill) and that Kerry will unveil new spending plans there, as well as not cut-and-run in Iraq, and increase spending on the War on Terror and Homeland Security, and yet on the other that he has a plan to reduce the deficit by 1/2?

Bush has been doing guns-and-butter spending, and that’s a big reason for the deficit – yet Kerry promises more all around via his unstated plans, and also to reduce the deficit? What gives?

From an editorial at Bloomberg:

“How U.S. Income Tax Cuts Are Really Tax Increases: John Wasik”
(snip)"While purring about middle-class tax breaks, U.S. lawmakers who backed them ignored how the cuts would further accelerate state and local tax increases…

What families may save on slightly lower federal tax bills, though, will be offset by higher state and local taxes." (/snip)


Bush has only one idea for the economy- tax cuts. It begins and ends there. Other than tax cuts, Bush has no ideas.

Bush claimed the tax cuts would create 2 million new jobs (net). Instead, under Bush we’ve lost 833,000 jobs net. He’s the first president since the Great Depression 70 years ago, to oversee a net loss of jobs. Other presidents have had wars and recessions and national crises, and still managed to do better with the economy than Bush.

As far as the debate goes, if Bush meets a basic level of competence and doesn’t embarrass himself again, I expect the mainstream media to declare a Bush win, or a tie at the minimum. The media wants it to be a horse race that goes down to the wire.

Personally, I am expecting another big Bush Choke. Why?

Bush has gotten precious little experience answering tough questions on the fly over the past four years. He’s only given 13 press conferences while in office (his father gave over 70). His campaign appearances screen the crowd for fans, who ask “questions” like 'do you have any pets?" and “thank uou for your brave service in the Texas Air National Guard” (not even a question there).

Also, Kerry showed he has Bush’s number in debate #1. Expect to see Kerry compare Dubya’s shitty record to his father’s record, a real sore spot.

Bush’s record over the past four years is so dismal, it would take a far better politician than he is to defend it.

You guys are talking like the question is “who has better ideas for the economy”. That’s not what the re-election campaign of an incumbent hinges on… it’s all about whether the last four years justify rehiring the president for a second go-round.

I think after tonight, it’s going to be pretty obvious that George W. Bush doesn’t deserve any additional time in office, based on his current record.

(And if there is a clear Kerry win, I expect to see a Code Orange terror alert, as a way to distract people.)


Huge problem with the Bloomberg editorial: Unless the state taxes are indexed to the federal rate, which isn’t the case with any state’s income tax of which I’m aware (but is the case with the Death Tax, and I think is the case with some states’ cap gains taxes), they don’t fall when federal taxes are cut. Additionally, the revenues the states get from the feds aren’t dependent on the federal tax rates – they’re dependent on congressional spending bills.

Also, the Bloomberg editorial implies that state and local governments aren’t responsible to control their own spending. The real problem for the states over the past few years is that they jacked their spending, increasing bureacracy and benefits, based on the increased tax revenues they were seeing during the bubble years – this is particularly true of CA. I know it was the case in TN, as I was there when Tenn-care, which was a state-level version of Hillary-care that Tennessee had passed back when Bill and Hill were pushing for national health care, was eating the state budget alive.

Then of course, the bubble burst, and they were stuck with the increased spending commitments and decreased revenues. Tough position, but one of the states’ own making.

As to the debate predictions, I think the format favors Bush – and I think the whole negotiation over this format was a ploy by James Baker. A classic bait-and-switch to let Bush get other debate concessions, as Kerry wanted as many debates as he could get Bush to agree to (classic position for a challenger with an incumbent in a close race).

Bush does well in a more interactive format, and he connects well with people in person. Also, the buzz coming from the background is he’s going to begin a focus a lot more on Kerry’s liberal voting record in the Senate, which should play well – in fact, given my questions above, I think Kerry almost set up an impossible situation for himself vis-a-vis an attack on him as a classic tax-and-spend liberal.

Kerry will be ultra prepared, and is pretty good at answering questions on his feet from all that debate-team preparation over his life. But in this situation he is going to have to make clear statements on positions, or the reaction of the audience will give quite an impression. I am imagining Kerry giving a classic, 2 minute nuanced response where he takes one position in the beginning and hits the other side by the end, and the camera showing the bewildered “What the hell did he just say?” looks on the audiences faces.

I’m bitter because I think I am going to have to miss this one too, unless I happen to be able to catch it on a replay tonight. I have to go to another wedding tomorrow, and I have a flight out tonight. The fiancee was not OK with my attempts to beg off attending the wedding of her friends after she went to KC for my brother last weekend. I haven’t been 0-2 in debate watching since Reagan v. Carter, when I was 5.

It’s really not the Fed’s job to worry about state/local taxes. Why should someone living in Texas have to subsidize California? That’s what happens with Federal taxes - my tax dollars go to finance a pregnant crack-whore in San Fran. At least now, California dollars have to pay for more of their own problems.

The closer to home the taxes are levied, the more control an individual has over those levying the taxes.

But that’s what the lib’s can’t stand. How dare we have a say in the way our money is spent. Especially on the Federal level.

It would be my contention that all taxes be levied at the state/local level, and put the feds on hind tit for a while. After all, are we not a federation of states?

[quote]rainjack wrote:
Why should someone living in Texas have to subsidize California? That’s what happens with Federal taxes - my tax dollars go to finance a pregnant crack-whore in San Fran. At least now, California dollars have to pay for more of their own problems. [/quote]

You’re dreaming. California pays out far more in federal taxes than what they get back in federal spending. Ironically, many Red states generally seem to pay less in federal taxes while getting more back in federal spending. If anything, California taxpayers are helping to pay for your pregnant Texas crack whores (to use your own bizarre example).

"The Tax Foundation has released a fascinating report showing which states benefit from federal tax and spending policies, and which states foot the bill.

The report shows that of the 32 states (and the District of Columbia) that are “winners” – receiving more in federal spending than they pay in federal taxes – 76% are Red States that voted for George Bush in 2000. Indeed, 17 of the 20 (85%) states receiving the most federal spending per dollar of federal taxes paid are Red States. Here are the Top 10 states that feed at the federal trough (with Red States highlighted in bold):

States Receiving Most in Federal Spending Per Dollar of Federal Taxes Paid:

  1. D.C. ($6.17)
    [/b]2. North Dakota ($2.03)[/b]
  2. New Mexico ($1.89)
    [/b]4. Mississippi ($1.84)
  3. Alaska ($1.82)
  4. West Virginia ($1.74)
  5. Montana ($1.64)
  6. Alabama ($1.61)
  7. South Dakota ($1.59)
  8. Arkansas ($1.53)[/b]

In contrast, of the 16 states that are “losers” – receiving less in federal spending than they pay in federal taxes – 69% are Blue States that voted for Al Gore in 2000. Indeed, 11 of the 14 (79%) of the states receiving the least federal spending per dollar of federal taxes paid are Blue States. Here are the Top 10 states that supply feed for the federal trough (with Blue States highlighted in bold):

States Receiving Least in Federal Spending Per Dollar of Federal Taxes Paid:

1. New Jersey ($0.62)
2. Connecticut ($0.64)

3. New Hampshire ($0.68)
4. Nevada ($0.73)
5. Illinois ($0.77)
6. Minnesota ($0.77)

7. Colorado ($0.79)
8. Massachusetts ($0.79)
9. California ($0.81)
10. New York ($0.81)

Two states – Florida and Oregon (coincidentally, the two closest states in the 2000 Presidential election) – received $1.00 in federal spending for each $1.00 in federal taxes paid."

OK, Senator Kerry has continued with his promises with respect to spending and the deficit.

Can anyone reassure me about the fact that Mr. Kerry has promised to cut taxes for the “middle class”, to increase taxes on the wealthiest Americans to 1990’s levels (which according to Mr. Kerry’s own statement, would generate only $89 billion in extra revenue per year), to oppose any slowdown in the rate of growth of spending on Medicare and Social Security, and to cut the federal budget deficit in half in four years?

My question for Mr. Kerry’s supporters is this: given these 4 promises (each of which is utterly unnecessary) where, where, where is President Kerry going to find enough money to increase spending on the U.S. military?