12/07/2005 08:09 pm ET Updated May 25, 2011

Bush's Fiscal Trade-Offs: Finally Becoming Transparent

As Congress wraps up votes on their initial reconciliation bills this week, I would love to get excited that at long last some moderate Republicans are beginning to express moral and economic queasiness about fiscal policy that combines escalating deficits and tax relief for the most fortunate with forced restraint and spending cuts for those Americans most in need. It was, after all refreshing to hear some in the GOP outright criticizing these reverse Robin Hood or reverse Willie Sutton Rule (cutting where the money isn't) fiscal policies.

On the positive side, before Congress broke for Thanksgiving the Senate opted to leave an extension in the capital gains and dividend tax cuts out of their reconciliation package and moderate Republicans in the House revolted against an appropriations bill that would have slashed funding to help at-risk youths and people with disabilities finds jobs, bring technology to disadvantaged schools and support rural health care. Sen. Arlen Specter had previously called the direction that spending bill took "scandalous" and "unconscionable." Rep. Mike Castle derided his leaders for "cutting taxes for the rich, and reducing programs for the poor." And Sen. Voinovich noted the absurdity of the situation when he said: "I do not know how anyone can say with a straight face that when we voted to cut spending last week to help achieve deficit reductions we can now then turn around two weeks later to provide tax cuts that exceed the reduction in spending…That is beyond me, and I am sure the American people."

But we are a long way from being able to celebrate a return to fiscal sanity or equity in our fiscal policy. First, let's remember where the House still is. Tomorrow they'll be back at work securing tax cuts for the well-off--voting on an extension of the capital gains and dividends tax cuts that have delivered nearly 80% of their benefits to the wealthiest 3% of Americans. This comes just weeks after they voted for a spending reconciliation bill that would deny food stamps to 220,000 people, revoke child care assistance for 330,000 children, and cut Medicaid by nearly $30 billion over the next ten years. While moderates forced House leaders to make some minor changes to the bill, it still passed with 98% of the proposed cuts to low-income Americans intact. Moreover, the Senate did not decide we could not afford such tax cuts to the most well-off -- only that since they do not expire until 2008 it was rather obscene to rush to extend them at a time of war, high deficits and the lingering effects of Katrina.

All that has really happened in this budget cycle is that value trade-offs that have always been implicit in Bush budget policies have finally become transparent. As I discuss in The Pro-Growth Progressive, a core element of the Bush strategy has been to divide up, phase in, and pretend to "sunset" their tax cuts to mislead the public about the true, permanent costs of the tax cuts and the trade-offs that escalating deficits would force in terms of generational responsibility and programs for children, workers, and the poor.

When the Bush Administration and the Republican leadership in Congress somehow decided that helping our fellow citizens recover from a natural disaster -- and not new corporate subsidies or repealing the estate tax -- was the only thing we needed to pay for, suddenly the value choices and trade-offs their policies entailed were so embarrassingly self-evident, even some in their own party had to distance themselves publicly.

Still, few consider the trade-offs built into the Bush budget that are equally offensive but not getting the attention because they are on autopilot. For example, while we are told we have no choice but to cut food stamps and Medicaid, two new tax exemptions -- the so called PEP and Pease provisions in the 2001 tax cut -- will increase the standard deduction and personal exemption only for taxpayers making over $150,000 and when phased in will cost about $150 billion a decade. The tax cut in the top individual income tax rate -- affecting the less than 1% of Americans making over $400,000 -- will be extended this year, with no vote, even though it will cost more than a quarter of a trillion dollars over the next 10 years.

The fact that some moderate Republicans are starting to feel a bit queasy about the trade-offs when they are made so transparent in this year's appropriations and reconciliation bills is a good first step. But we need to do a lot more to show the misguided choices the White House and Congress have already made—and that we should certainly revisit -- if we want to travel the longer road to fiscal sanity and restore a respect for the values of generational responsibility, fair starts, and upward mobility to our national budget.