Clicking on banner ads enables JWR to constantly improve
Jewish World Review May 22, 2001 / 29 Iyar, 5761

Amity Shlaes

Amity Shlaes
JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Ann Coulter
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
James Glassman
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
David Limbaugh
Michelle Malkin
Jackie Mason
Chris Matthews
Michael Medved
Kathleen Parker
Wes Pruden
Sam Schulman
Roger Simon
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports

Republicans sample the rhetoric of confidence

Remarks by Treasury secretary Paul O'Neill show an administration now confident enough to spread its wings -- Members of the US cabinet are not supposed to dream out loud. The president, their peers and their own underlings muzzle them, striking each unvetted word. There is a reason for this regime of control. Discordant governments lose credibility fast.

But the all-as-one style of management also tends to reduce the opportunity for policy debate. Its obsession with decorum and process inhibits the sort of vigorous exchanges that can generate a stronger consensus, and bolder leadership.

The tightly managed campaign that George W. Bush ran from Texas appeared to portend the first sort of presidency. So did the administration's early days. This winter, for example, it seemed that the Bush team would confine its work on taxes to copying a blueprint written in Austin. And that blueprint was a limited document. While perceived as huge because of its $1,350bn price tag, the tax legislation put forward by the White House did not even go as far as to push down the bellwether top income tax rate to the level that obtained under the president's father.

This timidity disheartened many Republicans, who hankered after bigger changes. Opponents wondered why the Republican leadership was choosing to spend so much capital on a reform that wasn't.

Lately, though, things have become more interesting. The new defence department has advocated a "strong" America, while Colin Powell, the secretary of state, has been more conciliatory. Now there are signs of differing views being aired on tax.

Consider the interview given by Paul O'Neill, the Treasury secretary, to the Financial Times last week. Mr O'Neill dubbed the recent tax legislation "breathtaking". But he swiftly moved on to present a broad outline for tax reform that made the first work look like so much fiddling. The fact that that initial legislation now looks likely to become law - Mr O'Neill says it may be signed by the president on Friday - probably liberated the secretary's tongue.

But Mr O'Neill is not operating entirely in isolation. Lately, Larry Lindsey, the president's top economic adviser, has also expanded his tax rhetoric, telling The Washington Post that "there is a general moral question about how much of a person's labour a government has a right to in peacetime". By making controversial proposals - Mr O'Neill backs the abolition of taxes on business - the Treasury secretary signals that the administration feels itself stronger than before, and is now ready to tackle larger problems.

For starters, Mr O'Neill says, it is time to review the purpose of taxation. Rather than seeing it as a simple mechanism to raise revenue, America must ask why it exists. It must also challenge progressive taxation, something no Republican administration has done before in a serious way. It must ask "how much money we the people as a collective group need to extract from each other to pay for public goods and services". National defence is a federal responsibility, says Mr O'Neill, but all other outlays need review.

Mr O'Neill would include America's entitlement programmes for senior citizens in his survey. Currently, the government guarantees pensions and senior healthcare. Mr O'Neill questions this guarantee, the roots of which lie in Roosevelt's New Deal. "Able-bodied adults should save enough on a regular basis so that they can provide for their own retirement and, for that matter, health and medical needs," he says.

Uttering such a statement is political dynamite in a Washington that sees its main job as increasing entitlements. At this very moment, Congress is mulling an expansion of benefits for pensioners to include subsidies on drugs. But the entitlement question is interesting, for the US, like other western countries, is reaching the limit of what it can spend on an ageing population.

Mr O'Neill also worries about the complexity of the tax code. The secretary spoke of his horror over a typical taxpayer, who complained of his anxiety that taxpayers "weren't satisfied at the end that they have truly understood and complied with what the supposed law of the land is".

The 9,500-page tax code is so impenetrable that even Americans who seek to follow the law fear running foul of the authorities. This has generated voter cynicism, something it is time Congress considered.

Third, Mr O'Neill "absolutely" backs the abolition of taxes on corporations. Instead, he says, the tax burden should be shifted to the individual. On the surface, this statement seems wildly at odds with the Bush line. It implies, in the short-term at least, higher tax rates on individuals. Led by Mr Lindsey, the administration has tended to argue that tax rates for the individual should be reduced, and that the individual taxpayer is himself a business. Mr O'Neill's own Treasury has supplied much of the statistical ammunition for this argument.

But in economic theory - including theory put forward at other moments by figures such as Mr Lindsey - Mr O'Neill is right. While they may not know it, citizens already foot the bill for business taxes, in higher prices and lower salaries and slower overall economic growth. A rationalisation of the system does not require an increase in the collective tax burden in the long term, and could indeed lighten that burden.

Many will interpret Mr O'Neill's audacity as proof that he is an unreliable maverick, as well as evidence of destructive disunity within the administration. What is more likely is that the Bush team now feels free to spread its wings, and to attempt to become a government of ideas. Given the amount of political disillusionment that exists across the political spectrum, this shift is valuable for its inspirational power alone.

JWR contributor Amity Shlaes is a columnist for Financial Times . Her latest book is The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.


05/16/01: Boeing has been promised $60m to site its headquarters in Illinois. The deal looks a poor one for taxpayers
05/14/01: Adam Smith in love
05/09/01: Those rotten Russian capitalists
05/07/01: Why tax havens provide shelter for everyone
05/04/01: Middle classes pay for get-the-rich folly
05/01/01: Money can't buy happiness? Think again.
04/26/01: Calling America's rogues and entrepreneurs
04/19/01: High earners right to feel lonely at the top
04/11/01: The right must learn the comfort of strangers
04/04/01: When domestic law arrives by the back door
03/30/01: A Lexus tax cut suits the jalopy driver
03/27/01: The unchallenged dominance of King Dollar
03/20/01: Natural selection of an intellectual aristocracy
03/16/01: The hidden danger of a regulatory recession
03/14/01: Is the American condition that boring? Why so many Oscar nominated movies aren't set in America
03/07/01: Trampling on the theory of path dependence
03/05/01: Fighting the good fight
03/01/01: It is time for Fannie and Freddie to grow up
02/27/01: IT's important
02/22/01: The guilty conscience of America's millionaires
02/14/01: The benefits of helping the 'rich'
02/09/01: The Danger and Promise of the Bush Schools Plan
02/05/01: Crack and Compassion
01/31/01: Debt is good
01/29/01: Clueless
01/24/01: A gloomy end for a half-hearted undertaking
01/17/01: The challenge of an ally with its own mind
01/15/01: An unexpected American family portrait
01/10/01: A fitting legacy for America's beloved dictator
01/08/01: The trick of tax 'convenience'
01/03/01: Time to stop blaming Greenspan over taxes
12/11/00: So smart they're dumb
12/06/00: How economic bad news came good for Bush
12/04/00: The Boies factor
11/30/00: "The inevitable demands for recounts erupted like acne…"
11/28/00: Fair play and the rules of the electoral game
11/23/00: The shining prospect beyond a cloudy election
11/21/00: Try the Cleveland model
11/16/00: A surprising winner emerges in the US election
11/09/00: Those powerful expats
11/07/00: What's right for America versus what works
11/02/00: Time to turn off big government's autopilot
10/30/00: Canada beating America in financial sensibility
10/26/00: When progressiveness leads to backwardness
10/24/00: The most accurate poll
10/19/00: The Middle East tells us the hawks were right
10/17/00: The split personalities of America's super rich
10/10/00: 'Equity Rights' or Wake up and Smell the Starbucks
10/04/00: Trapped in the basement of global capitalism
09/21/00: The final act of a grand presidential tragedy
09/21/00: Europeans strike back at the fuel tax monster. Should Americans follow?
09/18/00: First steps to success
09/13/00: America rejects the human rights transplant
09/07/00: Minimum wage, maximum cost
09/05/00: Prudent Al Gore plans some serious spending
08/31/00: A revolution fails to bring power to the people
08/28/00: A reali$tic poll
08/21/00: "I Goofed"
08/16/00: Part of the union, but not part of the party
08/09/00: Silicon Alley Secrets
08/02/00: Radical Republicans warm up for Philadelphia
07/31/00: I'll Cry if I Want To
07/27/00: Cold warrior of the new world
07/25/00: The Estate Tax will drop dead
07/18/00: Shooting down the anti-missile defence myths
07/14/00: A convenient punchbag for America's leaders
07/07/00: How to destroy the pharmaceutical industry
07/05/00: Patriots and bleeding hearts
06/30/00: Candidates beware: New Washington consensus on robust growth stands the old wisdom on its head
06/28/00: White America's flight to educational quality
06/26/00: How Hillary inspired the feminist infobabes

© 2001, Financial Times