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A Huge Price Tag

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The nation's three-year, tax cut feeding frenzy is now coming due

On January 8, 2000, a front page story in many American newspapers carried this lead paragraph: "Federal budget surpluses for the next decade could be $800 billion larger than last year's $3 trillion surplus estimate." Only two and a half years later, our taxpayers are facing not huge surpluses, but record federal deficits of $4 trillion barreling throughout the next decade. That's a $7 trillion dollar red ink flip-flop.

Through the years Americans have learned that creating deficits is easy. The difficult task, both economically and politically, lies in finding ways to lay up surpluses. For many years, under both Democrats and Republicans, the federal debt grew gradually and non-threateningly until the 1980s when spending, notably a doubling of the Pentagon's budget, together with massive tax cuts, tripled the federal deficit. Then, for eight years in the '90s we witnessed what many thought impossible—balanced budgets accompanied by healthy federal surpluses and a booming economy. Instead of using ten to 20 percent of each of our tax dollars to pay interest on the debt, those dollars were going to highways, research, educating our youth, and many other federal investments.

Tragically, those budget-sane days quickly ended. Today's long economic recession, the horrible events of September 11th, a collapsed stock market, scandalized corporations, and two whopping tax cuts in three years have combined to plunge our nation deep into red ink.

Although arguments will rage over the major reason for the deficit, it is foolish to ignore the revenue side of the budget—taxes. Of course, spending is the other side of the ledger and also a deficit contributor. However, during the past three years, domestic discretionary spending is not only being held in check, but in many programs has been reduced. The huge federal appropriation increases which have occurred have been limited to "Homeland Security" and the controversial military engagements in Afghanistan and Iraq, the aftershocks of which are costing taxpayers $6 billion each month. 

The real deficit culprit is on the revenue side and the responsibility for that clearly lies in the massive tax cuts of the past three years. Under the economic pretense of halting the recession, the President and a majority within the Congress raided the public's treasure. 

Recently, the White House admitted that today's deficit is already 50% larger than they had predicted just a few months ago, a whopping $455 billion. Most analysts predict our annual red ink will soar beyond a record one-half trillion dollars next year.

The worst of it is that the ill-considered, untimely tax reductions certainly have not and likely will not cause the economic rebound the White House and a handful of Democrats promised. Once again trickle-down economics is failing. There are plenty of legitimate arguments for tax cuts, but the current and predicted sorry state of the American economy amply demonstrates that the three year, tax cut, feeding frenzy in the White House and on Capitol Hill was a mistake and carries a huge hidden price tag.

Perhaps if the tax cuts had gone to the people who could really use the money and would have spent it, this latest "river boat gamble" might have paid off. Tax cuts for middle-income folks and our small business people would not only have met the fairness test but might have acted as a quick economic stimulus. The administration's "trickle down" tax cuts have neither of those advantages and recent studies have revealed the wealthiest 1% of Americans, who pay one-fourth of all federal taxes, will receive 52% of the tax cuts, and the next richest 10% will get most of what's left. That leaves 89% of our middle-income and small business people with the tax cut crumbs.

There they go again — you get the future costs of paying off the deficit while the wealthy pocket the cash. Now that's real class warfare.

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Author info

Rep. Pat Williams Rep. Pat Williams served nine terms as a U.S. Representative from Montana. After his retirement, he returned to Montana and is teaching at the University of Montana where he also serves as a Senior Fellow at the Center for the Rocky Mountain West and is Northern Director of Western Progress.

Tagged as:

taxes, Homeland Security, In Montana, federal deficits, tax cuts

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