Narrowing the highway to the American Dream

By Ed Muir

Recently published data highlight the extent to which the Bush administration tax cuts have benefited the wealthy. Those making $43,000 or less (60 percent of tax filers) had cuts this year worth an average of $334 each. Those making $357,000 or more (the wealthiest 1 percent) had cuts averaging more than $40,000. Meanwhile, as a share of the economy, federal revenues have plummeted to the lowest they have been since 1950. As a result, over the next few years, we will borrow up to $600 billion a year and face budget cuts.

The tax cuts do little to bolster economic performance because the wealthy are not compelled to pump their savings back into the economy. In cleaving to this particular policy, President Bush confuses support for the privileged with economic stimulus. And the confusion shows. The economy is in a shallow and unevenly shared recovery. We were promised that these tax cuts would create 3.7 million new jobs by June. We are 2.2 million jobs short of that goal. Real wages are down. Costs for college, energy and prescription drugs are up. And the tax cuts have robbed us of resources to provide a more effective stimulus or to better fund critical programs.

Common sense calls for maintaining those tax cuts that put dollars in the hands of working families (whose spending will infuse the U.S. economy) and diverting the rest to fund healthcare, education, training or to reduce the deficit. Some Democrats and Republicans in Congress took a step in this direction with a compromise bill to make permanent those tax cuts that provide 80 percent of their benefits to middle-class Americans. But the White House scotched the deal to prevent the tax cuts for the wealthiest from being isolated and eliminated. The administration’s initial failure to create an effective economic stimulus was bad enough. Its failure to admit that it made a mistake and its use of tax cuts for the middle class as a hostage for tax cuts for the wealthiest are the latest examples of how the American Dream is being jeopardized for all of us.

Franklin Roosevelt described the American Dream as “sufficiency of life, rather than … a plethora of riches” and “good health, good food, good education, good working conditions.” Those attaining this dream would advance “along a broad highway on which thousands of your fellow men and women are advancing with you.” In building this highway, he said, “the federal government has a continuous responsibility for human welfare.”

If so, the federal budget is an annual payment (somewhat costly at $2.2 trillion) on that broad highway. Where does the money go? Payments on federal debt take 7 percent. Three large programs—Social Security, Medicare and Medicaid—account for another 41 percent. Other safety-net entitlements, such as unemployment insurance, food stamps, foster care and the earned income tax credit, are another 9 percent. Benefits for federal retirees are 6 percent. After defense spending is accounted for, there is less than $450 billion left for domestic programs like education, transportation, homeland security, environmental protection and agriculture.

The Washington Post recently revealed that the Bush White House is projecting cuts of 5 percent in domestic discretionary programs over the next two years, even with these deficits. For those in education, healthcare and other public services, this means fewer resources. For all, the highway narrows.