Bush Rolls The Dice (Editorial)

Only a month ago, out of his own mouth, President Bush argued that a $350 billion tax cut was much too small to stimulate the economy. But when that was the best he could get out of Congress, he signed with a flourish.

Now, what can we expect this tax-cut package to do for us individually? for the state of Arkansas? for the nation?

For most readers of the Northwest Arkansas Business Journal, whose average income is far, far above the ordinary Arkansan, it will be a very pleasant thing. People who make between $100,000 and $200,000 will get a tax cut of more than $2,500 on their income alone. Those with taxable incomes between $200,000 and $500,000 can look forward to keeping an additional $5,000. The most wealthy also will gain by the reduction in taxes on dividends paid to stockholders and a reduction in taxes paid on capital gains when they sell investments.

The average tax cut for a middle-income household? $217.

Since Arkansas is heavily supplied with low-income households, the state won’t experience the kind of influx of money that wealthier states will enjoy. And much of the federal government’s largess will be claimed by the state government, which had to put a surcharge on the income tax to meet the rising cost of running the state. We fully expect to pay even more state taxes after the state comes up with a new public school plan this fall. That additional money will still be in circulation, of course, but it won’t be available for a consumer spending spree.

And the nation’s economy? The president’s first $1.3 trillion tax cut had little noticeable effect, and the economy remains in the doldrums. Maybe this one will work. Or maybe it will merely inflate the national debt, creating all the bad things — higher interest rates, tighter credit — that we were once taught to associate with deficit spending.

The Center on Budget and Policy Priorities says the real cost of the package through 2013 will be not $350 billion but $675 billion. And it could be $810 billion or more if some of the temporary breaks are made permanent.

In order to accommodate the tax cuts, Congress increased the nation’s debt ceiling by $984 billion — the single largest increase in our nation’s history. The federal government credit card now maxes out at $7.4 trillion. Remember when a $5.6 trillion surplus was projected?

The president has a lot riding on this gamble. Here’s hoping it’s as good for the country as he wants it to be for his re-election campaign.