Jewish World Review Jan. 14, 2003 / 11 Shevat, 5763
Dems can't afford to be bold
http://www.NewsAndOpinion.com | Class politics is back. Rich versus poor. Haves versus have-nots. The coupon-clippers versus the horny-handed sons of toil. Does it mean "Happy Days are Here Again'' for Democrats?
President Bush's economic plan overwhelmingly favors the wealthiest Americans. The President is up front about it. "There's no better way to help our economy to grow than to leave more money in the hands of the men and women who earned it,'' Bush said in Chicago on January 7.
Democrats are aghast at the brazenness of the President's proposal. "This plan is obscene,'' Senate Democratic leader Tom Daschle said. "It is wrong in how it is directed to the wealthy. It is wrong in how it is timed to benefit the rich, not just this year, but years beyond.'' Mr. Bush's response: there they go again. "If some would like to turn this into class warfare, that's not how I think,'' the President said.
In fact, Democrats have gone there many times. Way back in 1896, William Jennings Bryan lambasted the rich at the Democratic convention: "Thou shalt not crucify mankind upon a cross of gold!'' As recently as 2000, Al Gore ran for President on the theme, "the people versus the powerful.'' Funny thing though. Both of them lost.
But now, President Bush has come up with a plan so blatantly skewed toward the rich, Democrats see a juicy target. Former Vermont Governor, and current presidential candidate, Howard Dean charged, "Clearly it is the Republicans practicing class warfare because it is for one class of people, and that is not us.''
The centerpiece of the President's plan is his proposal to stop taxing income from dividends. According to an analysis by the Tax Policy Center, nearly two thirds of that tax cut would go to the wealthiest five percent of taxpayers. Remember the "supply side'' economists? They're the guys who convinced President Reagan back in the '80s that you could cut taxes and still balance the budget. It didn't quite work out that way. Because Congress refused to cut domestic spending, they said.
Supply siders like Club for Growth president Stephen Moore and former Reagan economic adviser Lawrence Kudlow have been railing against the dividend tax for years. They hate the idea that money can be taxed twice. Corporations pay tax on profits. Then shareholders pay a tax on dividends. Outrageous! Even though lots of money is taxed twice. Like income: first the income tax, then sales taxes.
Insiders point to a key moment at the White House Economic Forum in Waco last August. Business leader Charles Schwab was addressing a panel as President Bush took furious notes. "They ought to reduce the double taxation of dividends,'' Schwab said, "encourage companies to pay more in dividends and reward long-term investors.'' President Bush commented a few minutes later, "I love your ideas about the double taxation of dividends. That makes a lot of sense.''
Why is this suddenly the right time for a dividend tax cut? Because the stock market has been dropping for two years now. The idea can be sold, not as a tax cut for the wealthy -- which it is -- but as a way to boost stock prices -- which it could be. "By ending the double taxation of dividends, we will increase the return on investing, which will draw more money into the markets,'' Bush said in his speech announcing the plan. As Club for Growth President Moore put it, "98 million Americans who are investors are going to benefit from this. Anyone who owns stock is going to see an increase in the valuation of their stock.''
That would be good news for millions of Americans who hold stocks in their pension plans. They won't get a tax cut, however, because their dividends are not taxed now. They'll still have to pay income taxes when they retire and take the money out. But that's years from now.
Democrats know class politics paid off big time for them in the 1930s, when President Roosevelt attacked opponents of the New Deal. "These economic royalists complain that we seek to overthrow the institutions of America,'' FDR thundered to the 1936 Democratic convention. "What they really complain of is that we seek to take away their power.'' Notice how it happened: President Roosevelt was doing soomething to turn the economy around. Republicans were resisting.
Class politics did not work for Democrats in the 1980s, when they accused Ronald Reagan of favoring the rich. That's because the tables were turned. Reagan was doing something to turn the economy around. Democrats were resisting.
Now President Bush is proposing a big, ambitious plan to turn the economy around. He knows what happened when his father failed to do that in 1992. "I proposed a bold plan because the need for this plan is urgent,'' Bush said. Meanwhile Democrats are resisting. "It's an enormous budget buster,'' Sen. John Edwards (D-N.C.) complained. "The President has presented no plan to get us back to a balanced budget, back to surpluses. This is going to deepen our hole on deficit spending.''
See what's happened? Democrats have taken up the cause of fiscal responsibility. The same hopeless cause that Republicans defended in the 1930s. House Democrats have come up with their own economic plan, but it's far more modest than President Bush's. In fact, Bush's plan is five times larger.
Democrats can't afford to be bold. That's their problem.
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