Politics & Policy

A Victory

The latest Bush tax cut.

From the June 16, 2003, issue of National Review

Congress has just enacted the most pro-growth tax cut since 1981. The 1986 tax reform reduced tax rates but also included tax increases on capital. The 1997 tax cut focused narrowly on capital gains. The 2001 tax cut reduced tax rates, but did so over a painfully extended period. President Bush’s latest tax cut, on the other hand, cut tax rates, taxes on dividends, and taxes on capital gains — immediately. Not only did Bush get most of what he wanted from Congress; the capital-gains provision was an improvement on his original proposal.

#ad#The victory is all the more impressive given the missteps Republicans made on the way to achieving it. The administration did not prepare the ground for cutting taxes on dividends. While Bush, Dick Cheney, Treasury secretary John Snow, and commerce secretary Don Evans were tireless in arguing for tax cuts, they never made a particularly persuasive economic case for them. The plan made sense as a supply-side measure to increase incentives to work, save, invest, and allocate capital efficiently. But the administration thought it politically safer to talk about the money it would put in people’s pockets — opening the door to Democratic proposals that would put money in people’s pockets by spending money rather than cutting tax rates. Bush’s tactics are also open to question. By insisting that Congress cut taxes by $726 billion for weeks after it was clear that figure was unattainable, he may have missed the chance to cut a deal for $550 billion in tax cuts. In the end, he got $350 billion. Sen. Bill Frist got a lot of heat for a fumble in negotiations with the House, and Rep. Bill Thomas, head of the House Ways and Means Committee, was criticized for obstinacy on the details of the tax package. But the result of all the wrangling was a solid package that conservatives could wholeheartedly support.

Liberals have been furious in their criticism of the tax cut. They have represented it as huge. But $350 billion represents less than 1.5 percent of projected federal revenues over the next ten years. They have claimed that it is deceptive to have the tax cuts expire in a few years, since conservatives will press for the expiration date to be pushed back or eliminated. But the cut-off was necessary to squeeze the tax cut into the artificial limits that liberals insisted on.

The most justified liberal jape at the administration is that tax cuts are its entire economic policy. We would prefer that the tax cuts were supplemented by other salutary policies, such as trade liberalization, spending cuts, and deregulation, particularly of the telecom industry. But those measures have either already been precluded by administration policy or are politically unattainable. The bright side for Bush is that he has time for an economic recovery. Ronald Reagan’s recovery started later than this in his first term. And changes in the American economy since then — the increased importance of the stock market, above all — mean that recoveries can affect voters faster than they used to. If the markets rebound, lingering unemployment will not be so dangerous to Bush’s reelection.

The press has made a habit of speculating about whether President Bush will avoid or repeat the political mistakes of his father. He has now definitively avoided the principal mistakes: appearing indifferent to the economy and ceding the initiative to the Democrats. This was a substantial policy victory, and a political one as well.

The Editors — The Editors comprise the senior editorial staff of the National Review magazine and website.

Most Popular

Liberalism as Faith

The British philosopher John Gray is not someone to shy away from ‘difficult’ topics. If you are looking for a provocative long read this weekend, his new article in the Times Literary Supplement ought to be a contender. I didn’t agree with all of it (for example, I would argue that the supposedly ... Read More

Our Cultural Crisis: A Kirkian Response

Editors’ note: The following article is adapted from a speech the author delivered at the Heritage Foundation on March 14, 2018. Few would dispute that we are in the middle of a grave cultural crisis. A despairing conservative critic wrote: “We are on the road to cultural disaster.” He placed the ... Read More
Politics & Policy

An Enduring Error

Editor’s Note: The following piece originally appeared in City Journal. It is reprinted here with permission. Fifty-one years ago, in July 1967, in response to an explosion of rioting in poor black urban neighborhoods around the United States, President Lyndon B. Johnson created the National Advisory ... Read More

Confirm Pompeo

What on earth are the Democrats doing? President Trump has nominated CIA director Mike Pompeo, eminently qualified by any reasonable standard, to be America’s 70th secretary of state. And yet the Senate Democrats, led by Chuck Schumer, have perverted the advice and consent clause of the Constitution into a ... Read More

The Mournful, Magnificent Sally Mann

‘Does the earth remember?" The infinitely gifted photographer Sally Mann asks this question in the catalogue of her great retrospective at the National Gallery in Washington. On view there is her series of Civil War battlefield landscapes, among the most ravishing works of art from the early 2000s. Once sites ... Read More

James Comey’s Inadvertent Admission

The good folks at the Republican National Committee awaken and realize that perhaps former FBI agents make more compelling critics of James Comey than, say, Maxine Waters. Yesterday afternoon brought the first excerpts of James Comey’s new book, A Higher Loyalty, and we were expected to run around in ... Read More