San Diego Union Tribune

August 27, 2004

2004 VOTE
Tax cuts at center of domestic agenda

By Finlay Lewis

File photo

In 2002, President Bush waited to speak about his No Child Left Behind educational initiatives during a presentation at a magnet school in Little Rock, Ark. The initiative bears Bush's imprint as part of an effort to put flesh on his "compassionate conservative" self-portrait unveiled in the 2000 campaign.

WASHINGTON When George W. Bush took the oath of office on Jan. 20, 2001, he and the nation looked forward to a projected $5.6 trillion surplus over the next decade and to retrieving some of that money through tax cuts.

Four months into his presidency, Bush signed the largest tax cut in two decades. That was followed less than a year later by a similar but much smaller measure designed to stimulate the economy.

Last year brought a third major tax reduction, this one on the cusp of Bush's re-election campaign.

"If you look back at the record, we usually only cut taxes in a significant way maybe one time in a decade," said economist Bruce Bartlett, who worked in the Reagan administration. "So the fact that the president has been able to ram three major tax cuts through Congress in three years is a pretty amazing achievement."

As Bush enters the final months of the campaign, the tax cuts stand as the centerpiece of his domestic agenda. Critics contend the tax cuts disproportionately benefit the wealthiest Americans and have helped fuel record deficits.

The Bush presidency

Monday: How the candidate who promised a "humble" foreign policy became a president who established a strategy of pre-emptive wars.

Wednesday: Has President Bush made the country safer from terrorists today than before 9/11? How voters answer that question may determine the election.

Today: Elected as a fiscal conservative, Bush has followed through with promised tax cuts but federal spending has exploded under his watch.

Since Bush became president, the $5.6 trillion surplus projected for the end of this decade has morphed into a projected $4.4 trillion deficit.

The tax cuts came against the backdrop of the bursting of the stock market bubble followed by recession, the Sept. 11 terrorist attacks and costly conflicts in Afghanistan and Iraq. Those developments and the tax cuts combined to destroy the budgetary cushion that Bush inherited upon taking office.

Fiscal policy isn't Bush's only controversy on the domestic front.

Early in his presidency, he broke with Republican orthodoxy by working to strengthen the federal role in primary and secondary school education. Brokered with key Democrats such as Sen. Edward Kennedy of Massachusetts, the No Child Left Behind law bears Bush's imprint as part of an effort to put flesh on his "compassionate conservative" self-portrait unveiled in the 2000 campaign.

But many local authorities are rebelling against the program's use of penalties to raise student achievement scores, and funding problems have further clouded the picture. The alliance that accompanied the program's birth has disintegrated as Kennedy and other Democrats now denounce the White House's approach to implementing the law.

Bush's faith-based initiative has foundered in the face of political and constitutional problems stemming from the attempt to get religious charities more deeply involved in running public social service programs.

Bush also made an early stab at shaping an ambitious energy program aimed at increasing domestic production, but that ran into trouble with congressional Democrats over provisions such as oil drilling in the Alaska wilderness. The package remains in legislative limbo, with some critics complaining that Bush over-reached politically.

Bush's decision to place limits on federal funding of stem-cell research pleased religious conservatives as has his support for a constitutional ban on same-sex marriages and his opposition to abortion. But the scientific and medical communities, along with a growing number of Republican politicians, have urged Bush to back off his stem-cell funding policy, contending it could stymie breakthroughs for treating illnesses.

File photo

Caribou grazed in the Arctic National Wildlife Refuge in Alaska in this undated photo. President Bush's ambitious energy program, which included provisions such as oil drilling in the Alaska wilderness, remains in legislative limbo.

Meanwhile, Bush has strengthened his ties to the business community both by the tax cuts and by a pro-development approach to the regulatory policies of the Environmental Protection Agency and the Occupational Safety and Health Administration.

The president also has received support from his Republican base by filling judicial appointments with conservatives, though his choices have stirred controversy in the Senate.

"He ran on a very precise platform very unusual for a presidential candidate. It was almost as if he had an agenda that he could instantly drop in the hopper when he took the oath of office . . . and he moved quite rapidly in the first six months to realize that," observed Stephen Hess, a presidential scholar at the liberal-leaning Brookings Institution.

"And then 9/11 came," Hess said, "and it became a totally different administration than he had planned for, (than he) told us it would be."

Bush contends his tax cuts have helped to turn around the economy. But while fiscal conservatives praise Bush's tax cuts, they have voiced increasing concern about his spending.

Total federal spending during 2000, President Clinton's final full year in office, amounted to 18.4 percent of the value of the nation's economy. By 2003, it climbed to 19.9 percent. According to a projection six months ago by Bush's economic advisers, the figure will climb a bit higher this year before falling back to 2003 levels.

Moreover, under prodding by Bush, Congress enacted a costly prescription drug benefit as part of a Medicare overhaul this year. The measure will begin costing taxpayers significant sums when it is fully in force in 2006. In addition to adding muscle and money to the Department of Education, other parts of the bureaucracy have grown, mainly in the effort to protect domestic security.

Bush also signed legislation that is likely to result in the payment of dramatically higher subsidies to farmers if the market for their products sours and farm income plummets.

Bush's record alarms even some Republicans.

Joe Nixon, a Pennsylvanian who supported Bush in 2000, showed up at a rally for Democratic nominee Sen. John Kerry in Harrisburg sporting a lapel pin proclaiming, "Another Republican for Kerry."

Nixon, who worked in the administration of former Gov. Richard Thornburgh, said, "The Republican Party stands for smaller government and balanced budgets. . . . What a major disappointment."

Some experts who have studied the Bush administration say that critics and disillusioned Republicans fail to consider the consequences of Sept. 11.

"That is night and day," said Earl Black, a political scientist at Rice University. "That is the reason we have the combination of deficits and domestic spending, and an issue that affects the personal security of every American as far ahead as the eye can see. I don't think you can understand it . . . without beginning with 9/11. It's like World War II. It's like Pearl Harbor."

Still, the Bush administration has deviated from the pattern of wartime presidents who demanded sacrifice from the country to pay for the costs of defending the country often by increasing taxes.

"We know that the costs of security are higher than we had anticipated earlier," said Maya MacGuineas, executive director of the nonpartisan Committee for a Responsible Federal Budget. "We know that those costs continue into the future, and that we have to find a way to pay for them whether it is through new revenues or a reduction in other government spending. The administration has a choice of which to do. But to ignore that there are new costs and to push those costs into the future is unfair to future generations."

All but ignored by Bush and Congress is the impending retirement of the baby-boom generation. Their departure from the workplace is expected to set in motion a huge increase in the federal debt as they draw on the prescription drug benefit and enroll in Social Security and Medicare.

If the tax cuts are extended indefinitely, as Bush has proposed, and if government spending remains at current levels, the federal debt could rise from its current 38 percent of the economy to 100 percent by 2022 and 150 percent six years later, according to research by Rudy Penner, a former director of the Congressional Budget Office.

Penner describes that outlook as "truly frightening."

As a candidate, Bush proposed to change Social Security by allowing workers to put a percentage of their payroll-tax contributions into private accounts.

Some of the political energy behind that effort faded, though, when a prolonged stock market slump reminded many of the risks of investment. Other than appointing a commission to study the idea, the president appears to have decided to put off revamping the program.

Facing opposition from Congress and powerful lobbies, Bush has backed away from other sweeping proposals to inject more competition into public education and the health care industry. But Republican strategists say the plans have laid the groundwork for a debate over the role of government.

While dismayed by the White House's failure to reduce spending, the economist Bartlett noted that the Republican leadership in Congress is also complicitous.

"There is a lot of blame to go around, and it is not all Bush's," Bartlett said.