Alex's Outlook

Thursday, September 04, 2003

President Bush today outlined a "Six-Point Plan" to improve the nation's rate of economic growth.

All the items he outlined have been proposed before. Now they are being grouped under one program. The bare bones of the program include: Medical Savings Accounts as a form of national health insurance; caps on malpractice awards; drilling for oil domestically; more bilateral free-trade agreements; and making permanent all tax cuts that he hasn't made permanent, notably the marriage penalty exemption, the small-business break, the "child tax credit", the estate tax elimination and the capital-gains/dividend cut. Cumulative with his 2001 cuts, that would add up to the gov't losing $2.8 trillion over the next ten years, or 10-12% of its total revenue.

Of course, none of those agenda items will pass in the current climate of a $455 billion deficit, with the possibility of free-trade accords. Congress recently passed free-trade agreements with Chile and Singapore by healthy majorities, and I see no reason why that trend can't continue into the future. The Democrats will fight tax cuts, drilling in ANWR and malpractice caps until their last breath, and they only need 41 votes in the Senate to stop it.

The economic recovery is gathering steam every day. Is there a chance - just an off-chance - that the Republican party establishment might have convinced itself that its tax cuts actually *worked*? (as opposed to just catering to the base and hoping the economy picks up on its own?) The best-case scenario would be for the Republicans to hammer the Democrats with how much their tax cuts have worked all through 2003, and then go into the 2004 budget deliberations and cut about $80 billion in spending and translate that into more tax cuts. (The budget resolution only requires a 51-50 majority, while issues outside of the budget generally require 60 votes.)

I would hope that the Republican establishment has taken the success of their tax cuts to heart. We will find out when the Republicans decide whether to slash spending in favor of more tax cuts, or not, in 2004. With current deficits as they are, further tax cuts will be impossible without dramatic cuts in spending.

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