WASHINGTON — Economics is a science of single instances, hence it is hardly a science. So how much the president’s most recent tax cuts will stimulate the economy is conjectural, a conjecture being a guess by a Ph.D.
The Los Angeles Times, using Commerce Department figures, says the economy may be expanded "by somewhere between the annual output of North Dakota, the smallest of the states in economic terms, and Nevada, which ranks 31st," or by the equivalent of "adding another Sears, Roebuck &Co. and Dell Computer Corp."
But as a stimulus to the president’s political stock and conservatives’ aspirations, the latest tax cuts, signed Wednesday, will be doubly successful. They will make it more difficult for a Democrat to win the presidency. And should one win, the cuts will make it more difficult to use the presidency for Democratic purposes.
The cuts were the third set Bush has signed in 24 months. Were he to keep up that pace through a second term, by 2009 the government’s revenue base would be significantly smaller, and quite differently composed. Both House Majority Leader Tom DeLay, who is a firebrand, and Senate Majority Leader Bill Frist, who is not, say there soon will be more tax cut proposals.
Some will seek to make permanent the new cuts, almost all of which are, in theory, "sunsetted" — set to expire — beginning next year. Others will continue the incremental but brisk march toward truly radical tax reform. It is a march away from taxing investment income — the new rates on capital gains and dividends are the lowest since the Depression — and perhaps away from taxing all sorts of income, and instead taxing consumption.
The sunset provisions serve the transparent fiction that the new cuts will deprive the government of no more than $350 billion over 10 years, the number that several deficit-phobic Republican senators insisted on. But given the success of Republican rhetoric — a success deriving from the public’s common sense — in arguing that allowing a tax cut to lapse is equivalent to increasing taxes, the sun will set on few, if any, of these cuts.
So the 10-year cost to the government may exceed even the president’s original goal of $726 billion, which he supposedly "compromised" in half. Democrats, noting that Bush has achieved all this with almost no help from congressional Democrats and with little enthusiasm from the public, are probably muttering to themselves, as they have been muttering since election night 2000: It is a good thing George W. Bush is dumb as a stump or we’d really be in trouble.
Democrats had hoped to reprise 1992 in 2004 by convincing the country that Bush is so focused abroad, he is inattentive to the economy. But soon about 25 million households will begin receiving $400 rebate checks for each child, a result of a supposedly temporary increase, retroactive to 2002, in the child credit from $600 to $1,000. And paychecks will have reduced withholdings as a result of the acceleration of the rate reductions enacted in 2001.
Democrats had hoped to assail Bush for running up large deficits that "must" cause rising interest rates, and hence slow economic growth. But the postulated causation seems shaky: With deficit projections soaring, 10-year Treasury notes are near a 45-year low.
Besides, based on decades of disappointments, Republicans can tell Democrats a thing or two about the difficulty of turning deficit anxieties into votes. Americans are ideological budget-balancers but operational deficit-spenders. Repeated collisions with that fact helped make Republicans receptive to supply-side economics.
The core of that doctrine is the not-at-all exotic notion that at certain times, certain tax cuts will so stimulate the economy that they will be largely or entirely self-financing. Ronald Reagan, apostle of conservatism with a smiling face rather than conservatism scowling beneath a bookkeeper’s green eyeshade, accepted that economic rationale for tax cuts, and added a political rationale:
Even when tax cuts are not stimulative, they are justified as the most effective restraint on government spending. Today’s Democratic presidential candidates are proposing universal health care and increased spending on school construction, teachers’ pay, national service programs, medical research, energy research, infrastructure and on and on and on. They can either avoid the subject of how they plan to pay for all this, or they can promise tax increases — repeals and sunsets of all the Bush tax cuts — totaling about $2 trillion over 10 years.
Thus has Bush used tax cuts to prepare the terrain for what he can call the $2 trillion election.
George Will can be reached at The Washington Post Writers Group, 1150 15th St. NW, Washington, DC 20071-9200.
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