The Consequences of Tax Cuts

Paul Krugman has a piece in this weekend’s New York Times Magazine about the long-term consequences of the Bush tax cuts. His argument is one that has been made elsewhere, but is nevertheless compelling: the Republican tax cuts have intentionally set the US on the path that will lead to the end of the social safety net. Here’s an excerpt:

The advocates of tax cuts are relentless, even fanatical. An indication of the movement’s fervor — and of its political power — came during the Iraq war. War is expensive and is almost always accompanied by tax increases. But not in 2003. ”Nothing is more important in the face of a war,” declared Tom DeLay, the House majority leader, ”than cutting taxes.” And sure enough, taxes were cut, not just in a time of war but also in the face of record budget deficits. Nor will it be easy to reverse those tax cuts: the tax-cut movement has convinced many Americans that everybody still pays far too much in taxes.

A result of the tax-cut crusade is that there is now a fundamental mismatch between the benefits Americans expect to receive from the government and the revenues government collects. This mismatch is already having profound effects at the state and local levels: teachers and policemen are being laid off and children are being denied health insurance. The federal government can mask its problems for a while, by running huge budget deficits, but it, too, will eventually have to decide whether to cut services or raise taxes. And we are not talking about minor policy adjustments. If taxes stay as low as they are now, government as we know it cannot be maintained. In particular, Social Security will have to become far less generous; Medicare will no longer be able to guarantee comprehensive medical care to older Americans; Medicaid will no longer provide basic medical care to the poor.

It’s an extreme scenario, but Krugman may have a very good point. Could the Bush tax cuts really be part of a deliberate plot to dismantle Social Security and Medicare? After all, the Republicans no longer even pretend to have any idea about how to balance the budget anytime in the next 10 years. I’d love to hear someone ask President Bush how and when he expects the budget to be balanced. While they’re at it, I’d love it if they also asked President Bush how much tax revenue he thinks the government should collect. According to some of the things he’s said in the past, I wouldn’t be surprised if it’s zero.

Which is why he is sure to continue appealing to the voters of Alabama.