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Bush punched up his tax rhetoric yesterday in a feisty speech before
the U.S. Chamber of Commerce. Bush
pointed out the extraordinary bite out of the economy taken by the
federal government, and rapped Congress for spending at a pace that
will double the discretionary budget by 2010. It was quite a strong
performance, and yet an important component of the case for tax
cuts was missing almost entirely.
Now, not every speech can say everything, but it was notable how
little Bush's tax talk took account of the economy and the need
to revitalize it. Instead, Bush gave a speech that he could have
delivered a year ago, emphasizing first principles and the sheer
justice of tax relief. This, at a time when almost every day brings
more distressing economic news (yesterday's was Cisco's meltdown).
So, what's going on? The problem is partly that the Bushies don't
appear to be supply-siders down in their bones. Judging by their
performance during the campaign, they are just more comfortable
selling tax cuts as a matter of morals. But it also may be that
the administration feels burned by its initial attempts this year
to sell the tax cut as elixir for the looming recession.
Two things happened when the administration adopted an anti-recession
argument. The first was that the Democrats accused Bush of "talking
down the economy." This line of attack was absurd, but apparently
it had some effect, as Bush has toned down his rhetoric. This represents
a crucial tactical victory for the Democrats, because it sets the
table for them to charge Bush with ignoring the downturn should
it eventually come with a vengeance.
The second more important Bush setback was the fact that his tax
package actually has little in the way of supply-side growth incentives,
and almost none in the first couple of years. So, the Bushies had
to sell the growth effects of the cut in rather crude terms, arguing
that rather than increasing savings and investment (the supply-side
case) that it would simply put more money in consumers' pockets.
This provided a crucial opening for the Democrats to propose a rebate
as a faster, fairer way to get money into the hand of consumers.
So, here we are, with Bush failing to exploit a key economic condition
— the grinding slowdown of the economy — in a big tax
speech on tax day. Indeed, Bush risks getting caught in a nightmare
scenario: a recession that drags into next year, one that he gets
blamed for partly because he has been scared away from talking about
it frankly. Meanwhile, his tax cut contains nothing much that will
prompt a recovery, even though it has occasionally been sold by
the administration half-heartedly as a growth measure.
All of this may be symptom of what Byron York writes about in the
current National Review: a certain non-political strain in
the Bushies, an admirable commitment to substance that prompts them
sometimes to ignore obvious political considerations. So, Bush sticks
with his carefully crafted tax plan even as the political currents
shift around him. What he should be doing is ripping the thing up,
stuffing it with pro-growth tax relief like a capital-gains cut,
and calling it the "Economic Revitalization Act of 2001."
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