Fog of War Shrouds a 'Horrendous' Tax Cut Bill

By: Saul Friedman

Americans of every generation, especially those of us who have witnessed war or have been part of a nation at war, will meet our obligations as citizens - supporting the young men and women who will fight in this latest conflict, or protesting it in the free streets of our land.

But what are we to make of those national leaders who would spend the public treasure waging this war while slashing taxes for the wealthiest among us, then ask for sacrifices that they won't be called on to make while using the fog of war to cut the programs on which the poorest, oldest, youngest, and most voiceless Americans depend?

Consider the House (Republican) budget resolution, which passed on a narrow, party-line vote on March 21 and was based on the President's proposed tax cuts of $726 billion over the next decade. To help pay for those cuts and the war, the resolution orders $265 billion in spending cuts over those 10 years, most of it - $159 billion - from basic domestic entitlement programs.

According to Washington's nonpartisan Center on Budget and Policy Priorities, the cuts would eliminate $92 billion in Medicaid, the basic federal-state health insurance program for the very poor, mostly children, and the elderly and the disabled; $19 billion in Supplemental Security Income; $14 billion in veterans benefits; $14 billion in the earned income tax credit for the working poor who don't make enough to pay taxes; $13 billion in food stamps; $8 billion in temporary assistance to needy families; $7 billion in farmer assistance; $6 billion for child nutrition and school lunches; and $2 billion in the State Children's Health Insurance Program (SCHIP), which Republicans had hailed for providing health coverage for children whose parents have none.

Social Security was off limits, but unemployment compensation, benefits for retired military personnel, and Medicare were the only entitlement programs spared. House Republican leaders were forced to rescind cuts of $215 billion in Medicare by Republican moderates whose middle-income constituents depend on Medicare. The moderates made no such protest on behalf of Medicaid beneficiaries, most of whom are politically invisible.

The Center estimates that New York State will lose more than $18.8 billion in federal funds from these program cuts between 2004 and 2013, including $12.7 billion for Medicaid and SCHIP. Once upon a time, Republican governors (now in the administration) protested such cuts. The estimated losses in neighboring states include $4 billion in New Jersey and $1.7 billion in Connecticut.

Center director Robert Greenstein calls the House proposal - which could be modified in the Senate - an example of "class warfare", with "lavish tax cuts for the nation's richest individuals" and "deep budget cuts that could harshly affect the poor, the vulnerable, and many middle-class Americans".

Here's an example of how this proposed budget pits Americans against each other. The House proposal sets aside $400 billion over 10 years for Medicare "reform" and a prescription drug benefit. Reform, as we've reported, means turning over much of the program to insurers, an issue that may kill any compromise on a drug benefit.

But even if the reform issue is put aside and all $400 billion were spent on prescription drugs, it would not come close to what's needed to provide a decent benefit for 40 million Medicare beneficiaries. A veteran seniors lobbyist told me that Medicare advocates may be forced to choose a benefit for only the very poor, plus catastrophic coverage (costs over $4,000), or no benefit at all. For the first time, Medicare's coverage would be split according to class, or one's ability to pay.

Greenstein suggested that the House budget serves a useful purpose, demonstrating that "these large tax cuts aren't free and that, at bottom, the issue is one of national priorities". He hit on the real reason for the tax cuts, to change the national priorities, to get the government out of the business of providing health insurance or welfare. Indeed, as with the Reagan administration, the Bush tax cuts and the inevitable deficits are deliberately designed to force reductions in domestic spending and permanently reduce the size of government.

Economist George Akerlof of the University of California at Berkeley, one of 10 Nobel laureates among the 450 economists who petitioned the White House to withdraw its tax cut proposal, told a campus interviewer that the administration's "stimulus package" is no such thing. In fact, the tax cut has about as much to do with "stimulus" as the attack on Iraq has to do with weapons of mass destruction.

"It's a horrendous bill", Akerlof said. "But the public does not seem to be aware of the extraordinarily serious consequences... The deficits being contemplated are out of sight... Most of these tax cuts are envisaged as being permanent. That means a shortfall on revenues as far as the eye can see into the future... One cannot even contemplate how we are going to pay for our governmental needs, but especially on our promises to the elderly."

A new study by the Center estimates that the revenue lost to the Treasury via the tax cut would be more than enough to keep Social Security solvent until 2075. As it is, the trustees reported on March 17 that the system's trust fund grew by 13.6% last year, to $1.378 trillion. That means without the tax cut, the United States could fund Medicaid and a Medicare drug benefit and even pay for the war - with help from my Social Security trust fund.