As tax plan passes, critics blast GOP priorities
When President Bush signed the new "jobs and growth" tax-cut bill with great fanfare at the White House last Wednesday, he devoted one sentence to the fact that earlier in the day he had signed legislation extending unemployment-insurance benefits for an extra 13 weeks.
The unveiling of a new tax plan arguably represents a more significant event than an extension of benefits. But to Maurice Emsellem, an advocate for the jobless, the ceremony symbolizes the priorities of the administration.
The latest tax-cut bill theoretically will cost the government $350 billion over 10 years, and raise the after-tax income of most people by less than 1 percent. Those making more than $1 million a year receive, on average, an after-tax income boost of 4.4 percent.
As for the nation's 8.7 million unemployed, the Republican-controlled Congress voted to add 13 weeks of benefits to those who remain without work after 26 weeks of looking for a job. Such benefits are expected to cost $5.9 billion this year. The federal program was set to expire at the end of May.
A week prior to passage, Republican congressional leaders were signaling that an extension wasn't needed, says Isaac Shapiro, an economist at the Center on Budget and Policy Priorities (CBPP), a liberal group in Washington.
Then Republican moderates insisted on the measure, expressing concern that Democrats would charge them with giving tax breaks to the rich while ignoring the plight of the jobless. So everybody piled on, with the measure passing the House 409-19.
But to Mr. Emsellem, the measure is skimpy. "It left 1.1 million workers without benefits," says the policy director of the National Employment Policy Project (NELP). These are the jobless who have already run through their 26 weeks, plus 13 weeks from a previous extension of federal benefits. Another 680,000 people are likely to exhaust their benefits in the next three months. These long-term unemployed most often need help, he says.
Some conservatives figure the jobless are lay-abouts, not looking hard for work.
But a survey of 413 unemployed adults by Peter D. Hart Research Associates for NELP found that they on average had applied for no fewer than 29 jobs, 58 percent cut back on food expenditures, 6 in 10 have spent a significant amount of their savings, and almost half have borrowed money to pay current expenses. (See story.)
In other words, being jobless is difficult. Three in 4 said stress within their family has increased. Some of the jobless fall into poverty, some even become homeless.
Henry Farber, a Princeton University economist, has looked at job loss between 1981 and the end of 2001. He finds that though less-educated workers had the highest rates of job loss overall in the 1990s, the job-loss rate of more-educated workers has increased.
In other words, business has become more willing to lay off accountants, engineers, office workers, and other white-collar types.
Since 2001, the job market has become even tougher, Mr. Farber figures.
By now, the average time the jobless are out of work is 20 weeks. That's a 20-year record, even though the 6 percent unemployment rate for April is not so high in historic terms.
At the White House, the president portrayed the tax cuts as wonderful for all Americans. "This combination of income-tax rate reductions, a higher child credit, and a reduction in the marriage penalty will make a difference for families in every part of this country," Mr. Bush proclaimed.
But liberal critics are picking holes.
Millions of families with incomes from $10,500 to $26,625 will receive no benefit from the child tax credit, notes the CBPP. These families include 11.9 million children, or 1 of every 6 under 17.
The Senate version would have assisted these low-income working families. The final version ignores them. Only those with more income will get a $400-a-child check this summer as the credit rises to $1,000 from $600.
The Urban Institute-Brookings Institution Tax Policy Center also accuses the administration of exaggerating. The average tax cut in 2003 for households in the middle fifth of the income spectrum will be $217, it says, less than a fifth the amount stated by the Treasury.
Fifty-three percent of households, or 74 million, will get a tax cut of $100 or less. Of these, 50 million will receive no tax cut whatsoever, according to the Tax Policy Center.
In contrast, millionaires will receive on average $93,500 in cuts this year.
Perhaps most damaging for the administration is the recent revelation that it shelved a report commissioned by the Treasury showing that the US currently faces a future of chronic federal budget deficits totalling at least $44.2 trillion.
That is roughly equivalent to 10 times the national debt now held by the public.
Robert Greenstein, executive director of CBPP, charges that the tax cut will actually cost $800 billion to $1 trillion over 10 years. "We are now on course toward a budget train wreck in future decades, with the bills being passed on to our children," he maintains.