Tax Cuts and Revisionist History

As the Bush tax cut for the undeserving rich was wending its inevitable way through a largely pliant Congress in early May, the citizens of Maine and Ohio were treated to an unprecedented and heavy-handed TV ad campaign aimed at securing the votes of two recalcitrant senators from those states, Olympia Snowe (R-Maine) and George Voinovich (R-Ohio). The media blitz, prepared by a right-wing lobby group called the Club for Growth, was unprecedented in that it targeted members of the president's own party who had the temerity to suggest holding the ill-advised cuts to a mere $350 billion over 10 years, half what the White House wanted. It was heavy-handed in that it employed crude allusions to the recent Iraq war, comparing senatorial resistance to the "traitorous" French refusal to join the so-called Coalition of the Willing.

The negative ad campaign, obviously condoned by the administration (which could have ended it with a phone call), was one other thing: It was deliberately misleading and played fast and loose with historical fact, besmirching the reputation of at least one former president of the US. That president was John F. Kennedy, whose proposed 1963 tax cut (enacted in 1964 under Lyndon Johnson), was held up as a legitimizing precedent comparable in every way to the 2003 Bush proposal and in line with Ronald Reagan's 1981 and 1986 supply-side cuts. One TV spot aired in Maine invoked JFK in the following words, "Tell Olympia Snowe to support the Kennedy, Reagan, Bush tax policy."

The disingenuous ads failed in their primary objective, which was to force through the entire $726 billion Bush reduction plan. On the other hand, they did persuade one of the two holdouts, Voinovich, to sign on to what was finally enacted, a Rube Goldbergian $330 billion tax giveaway that the Center on Budget and Policy Priorities says will eventually cost closer to $800 billion when various sunset provisions are removed through reauthorization -- something that will almost certainly take place down the road, since failure to do so will result in (horror of horrors!) periodic tax increases. So, the president ultimately got what he wanted: an irresponsible tax cut that will expand to grotesque proportions in coming years unless a gutsy Democrat with a ready veto pen sits in the White House.

In the short run, the center-left in American politics can't do much to stop the manic tax cutters; time and a swing of the political pendulum will eventually do that, as fiscal conditions deteriorate and money for popular programs, such as Social Security and Medicare, is found to be unavailable. For now, Republicans control all branches of the government, and as always, their knee-jerk response to a struggling economy is tax cuts geared to the upper- income strata; it's the only answer the GOP has, the sum total of contemporary Republican economic policy. And its bound to fail. What progressives do have the capacity to prevent in the meantime, however, is the hijacking of their political icons for the advancement of the conservative agenda.

The growing myth, perpetrated by free-market ideologues, that John F. Kennedy was a trickle-down supply-sider is as good a place as any to start. This particular canard probably originated with former HUD secretary and vice presidential candidate Jack Kemp, who popularized it in Republican circles in the 1980s and early 1990s. It was the Kemp mischaracterization of JFKs tax-cut program that the Club for Growth (whose leading lights include far-right economists Lawrence Kudlow and Milton Friedman, and National Review president Thomas Rhodes) latched unto for its own partisan purposes.

The Growth Clubbers, being clever individuals, knew better. Here's what they didn't tell the public: Kennedy's demand-side income-tax cut, which was mostly aimed at the bottom fivesixths of taxpayers, only reduced the top bracket from the 91% rate established during World War II (a confiscatory level, it can reasonably be argued) to 70%, still ensuring that the wealthy paid a hefty share; Bush, by contrast, has reduced the top bracket to 35% (from 39.6% under Clinton) one of the lowest levels in US history. Moreover, Kennedy's tax cut was proposed at a time when the federal government was taking in approximately as much money as it was spending; his 1963 budget deficit was just under $5 billion, compared to Bush's projected 2003 deficit of over $300 billion, the largest ever seen. In other words, Kennedy's tax cut was affordable; Bush's is profligate.

There are other differences. Kennedy maintained a 70% top rate on unearned dividend income, treating it much like wages and salaries; Bush, who tried to reward "the investor class" by abolishing dividend taxes entirely (part of a strategy to eliminate all taxation on capital), settled on reducing them for high-end -- that is to say, for most -- recipients from 38.6% to an absurdly low 15%. And Kennedy, it is conveniently forgotten by supply-siders, actually tried to enact a higher dividend-tax rate on incomes over $180,000, an initiative that failed passage.

In addition, Kennedy, whom GOP tax cutters claim Bush is emulating, made no attempt to abolish the estate tax paid primarily by the wealthiest Americans, which Bush has succeeded in phasing out. Instead, he favored a series of proposals geared to ending selective tax breaks, shelters, and loopholes for rich individuals and corporations. JFK himself explicitly stated, in his 1963 tax message to Congress, that his Keynesian reductions (unlike the later Reagan-Bush cuts) were intended to proportionately favor those "at the lower end of the income scale."

Time has validated that stimulative approach, whereas recent history has largely discredited the competing notion that federal tax cuts on upper-end incomes really spur investment and create jobs. Bill Clinton raised taxes on the wealthy in 1993, and a boom followed; George W. Bush lowered them substantially in 2001, and two million jobs were subsequently lost. This raises the unavoidable question of whether the latest Bush initiative is a genuine economic policy at all, or simply a sophisticated form of crony capitalism with reverse class-warfare implications. As for John F. Kennedy, he would undoubtedly be addressing the failing economy were he alive and president today, but almost certainly not with a lopsided, trickle-down tax plan.

O'Leary is a writer in Orono, Maine.

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