From: Zhang, Yangkun (Yangkun.Zhang@FMR.COM)
Date: Mon Jan 29 2001 - 07:19:28 PST
Dan Seligman, Forbes Magazine, 02.05.01
Hypothesis: While the NEW President makes his case for a $1.6 trillion tax
cut over ten years-a figure representing less than a third of currently
projected surpluses in the decade-he will have to overcome some powerful
opposition in media circles, like, say, the New York Times. I recently
searched the Nexis database for mentions of taxes in the Times editorial
columns. Why this paper? Because the world is full of folks, many of them on
other media transmission belts, who look to the Times for clues about what's
right, and how issues must be framed, and which facial expression is
appropriate when the anchor is reading the script on taxes.
What I kept hoping to find in the world's greatest newspaper was some
awareness that taxes could be too high. This seems like a reasonable thing
to be aware of, as it says right there in the February 2000 report of the
Council of Economic Advisers that the federal government takes in tax
revenues in excess of 20% of gross domestic product, a level never
previously attained except during World War II. Adding in state and local
taxes gets you over 30%. And yet I cannot find the awareness I am looking
And not only at the federal level. When Rudolph Giuliani was elected mayor
of New York City in 1993, after a campaign that pledged tax cuts, the Times
cautioned him against keeping his promises, saying it would be impossible
without destroying city services. In fact, Rudy has reduced city taxes by $2
billion a year and has plainly improved city services.
In neighboring New Jersey James Florio ran for governor in 1989 on a
platform promising no new taxes. Once installed in office he earned
near-universal obloquy by pushing through the biggest tax increase in the
state's history. In calling for his reelection in 1993, the Times lovingly
recalled this double cross and opined: "In light of the prevailing anti-tax
sentiment, it was a brave move."
Timesians resisting tax cuts have many arguments at their disposal. When the
economy is strong, tax cuts are rated inflationary. After both houses of
Congress passed tax-cut bills in mid-1999, the Times proclaimed (July 19)
the case for such cuts "very weak," and added: "The economy is booming, and
... a tax cut now would be likely to bring on ... higher interest rates."
Okay, so what about when the economy is weakening? Like right now?
Addressing this question recently (Jan. 4), the editors argued that it's a
lousy idea because "the impacts of tax cuts are very hard to time" and can
result in overstimulating an economy that has already recovered.
Until the last few years, when eternal deficits were suddenly replaced by
soaring surpluses, the Times invariably cited the deficit in its argument
against tax cuts. On Dec. 21, 1994, when it briefly appeared that Congress
and Clinton would deliver a middle-class tax cut, the Times cluck-clucked
that the middle class could lose in the end, because the deficit would rise,
increasing interest rates. Okay, so what about tax cuts when we've got huge
surpluses? It seems that's not a good idea, either. First, because the
surpluses will not last forever, and the proposed Bush tax cut "would risk
deficits down the road" (Dec. 15). Second, because serious tax cuts get in
the way of reducing the national debt (Dec. 20). Third, because the
preferred alternative to tax cuts is "using swelling revenues in future
budgets to deal more ambitiously with health care, schools, and unmet social
needs" (Nov. 19, 1999). Might spending on unmet social needs, which are
infinite, be a threat to debt reduction? The possibility is not considered.
Of all the taxes the Times yearns not to cut, the clear favorite is the one
on capital gains. All during the 1990s efforts by Republicans to cut this
tax were repeatedly characterized as "a giveaway," "a tax subsidy for the
rich," "a windfall profit for rich families." Efforts by the elder Bush to
lower the taxes were repeatedly (e.g., Oct. 17, 1990) deemed "obsessive."
A doctor might diagnose an obsession among the editorialists-with making the
federal government as big as possible.
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