On Tuesday, President Bush announced his plan to bring the economy back up to speed. As expected, his proposal cuts taxes, including abolishing all taxes on corporate stock dividends. In all, the cost of the plan is a staggering $670 billion over 10 years. It sounds like an ill-timed attack of ’80s nostalgia.
We have a major problem with this plan. It is very much the same supply-side Reaganomics we’ve seen for more than two decades. For the past 20 years, Republicans have championed this style of economic policy on the theory that it will “float all boats” by freeing up more money for businessmen to create jobs and stimulate the economy. The problem is, that only works if you go on the assumption that the economy is predicated on the idea of making a little bit of profit.
Instead, as anyone who has taken elementary economics knows, the object of business is to maximize the possible profit, less any operating costs. Business owners and the wealthy aren’t likely to start paying workers more or providing job security because they get a giant tax gift from Bush.
Think of it this way: Is Target going to hire a whole bunch more people to run the cash registers now that their investors have more money to invest? No. Target’s job is to bring in more profit with fewer workers, actually. But instead, if the Bush plan gave lower- and middle-income workers an additional $1,000 or $1,500, they would likely go buy more consumable goods, which would increase business at Target, and would likely make the company hire more workers.
These realities show the Bush plan to be either inadvertently or purposefully widening the gap between the wealthy business owner and the common worker, who will not find a boosted economy if the plan is adopted. The gap in the plan is wide. According to the Brookings Institute and Urban Institute, Americans earning a million dollars or more would save $27,000 a year. Those earning $40,000 to $50,000 a year would save $84.
While we enjoy that electroclash music sounds like new wave, and we appreciate the humor of “Square Pegs,” Bush’s old-school, “voodoo economics” recovery plan is one thing that should have been left in the ’80s. It is not going to work any better today than it did back then.