Voodoo, part two

Within the next week or two, government checks will begin turning up in mailboxes all over the country, and even if you’re not one of the 8 million set to receive one of these tax rebates, you’ll probably see a slightly bigger paycheck as a result of reduced federal-tax withholdings. It’s all part of the Bush administration’s $350 billion tax cut, an economic-stimulus program that is supposed to create more than a million new jobs.

So, what’s not to like?

Quite a lot, actually, if you think the long-term health of the economy is more important than the pittance you’re about to receive. To begin with, this latest round of tax reductions from President Bush is structured in a way that will increase the already widening gap between rich and poor dramatically. Bush’s plan is shamelessly biased in favor of the wealthy: The lower 60 percent of income earners will receive a total of $350 dollars in tax relief throughout the next four years, while the wealthiest 1 percent receive $96,634.

While you’re deciding how to spend that extra $11 per month, consider: The federal budget deficit already has grown to a staggering $6.7 trillion in the wake of the previous round of Bush tax cuts, which were the largest in history. Economists say that the latest plan is likely to drain the public coffers of $850 billion in the next 10 years. Add to that the untold costs of destroying and rebuilding Iraq, and it’s clear that Bush is creating a legacy of debt that will act as a dead weight, slowing economic progress for years to come.

Meanwhile, short-term benefits are likely to be negligible. The Bush administration initially predicted 1.4 million new jobs based on its original tax-cut proposal, which was about twice the size of the package ultimately passed by Congress. The estimate has not been revised yet, but it’s certain to drop considerably in light of the smaller cuts, and most economists are saying the cut is unlikely to produce a stimulus of any consequence. Recent studies show that the vast majority of taxpayers will not use their rebates to go on a spending spree but will pay down debt or increase savings—activities that don’t produce new employment.

What’s most frustrating perhaps is that we’ve been down this road before. When Ronald Reagan combined massive tax cuts for the wealthy with bloated military spending, promising to spur a booming “trickle down” economy, the result was a fiscal train wreck that sent the country reeling for a decade. It was a policy so wrong-headed that the elder George Bush dubbed it “voodoo economics.” It failed in the 1980s, and it’ll fail again. Yet, as Reagan himself might say, here we go again. Another round of tax cuts, another hike in military spending, to be followed inevitably by a ballooning deficit, the slashing of social programs, increasing interest rates, higher unemployment and a stagnant economy.

Our advice? Take that rebate and save it for rainy day. You’re going to need it. And remember all of this when the next election rolls around.