On election morning, I opened the front section of the New York
Times and immediately got a bad feeling. Positioned prominently on
page A3 was an eye-catching and ominous ad.
"How long do I have?" James Pierson asked, trying to maintain eye
contact with the man behind the desk.
"Three months, eleven days, seven hours and forty-three minutes,"
David Barnett said.
"Well, it's now the afternoon of August 19, 2010," Barnett said. "We're
advising people not to wait until the very last day. December 31 is a
time when there can be a certain amount of New Year's Eve chaos at
hospitals, and that could put the death certificate over until next
year, or at least muddy the waters if there's a question that ends up in
court. So, getting it done in 2010, if you're being prudent, means
getting it done before December 31, or three months, eleven days, seven
hours and forty-three minutes from now."
Pierson swallowed. He found the phrase "getting it done" off-putting.
Finally, he said, "I don't suppose there's a chance that this could be
"Well, in theory there's always a chance," Barnett said. "The Democrats
could come back after recess and announce that they've changed their
minds, and, despite everything they've said in the nine years since
2001, they're going to make the repeal of the inheritance tax permanent,
but I don't think it would be wise to count on that happening."
"So it's now or never is what you're saying?" Pierson said.
"Well, it's this year or never. Look, under the provisions of the
original law, the exemption has been raised and the rates lowered every
year for the past nine years. It would have been shortsighted to die in
order to take advantage of any of those tax reductions, because this
year the tax is gone altogether. But the law still has its sunset
provision: It fades away on December 31, 2010, unless it's renewed. So,
given the Democratic majorities in both houses and the current deficit,
it's likely that starting January 1, 2011, the estate tax will be the
same as it was before the rates started coming down. From a tax
liability standpoint, there is no alternative to taking advantage of
this window of opportunity."
"Look, Jim," Barnett said, "Why are you in the business you're in?"
"Because the company had enormous paper losses that saved me a bundle in
taxes and the only thing it actually owned was shares in some airliners
that we depreciated the hell out of before we fobbed them off on some
bush airline in Central America."
"And why do you drive the vehicle you drive, even though the dozer
attachment makes it difficult to park in any space smaller than the
Wal-Mart parking lot?"
"Because we can write it off as farm equipment, of course," Pierson
"This is my point," Barnett said. "You've always run your life according
to what makes sense from a tax-liability standpoint. You have a vacation
condo in Louisiana, where you exist in what amounts to a steam bath all
summer, because it's in a development that juts out into the gulf and we
figured out how to depreciate it as a shrimp boat. You and Margaret
tried to time the birth of your children for late December to get an
extra year's deduction. You've planted a lot of weird-looking trees so
we could have your backyard declared an experimental forest and take a
$14,000 loss every year, not to mention deducting what you pay the kid
to mow the lawn. I'm just your tax consultant, Jim. But it seems to me
that if you don't take advantage of the 2010 window, you wouldn't be
"I'd be alive, of course," Pierson said. "There's that."
"But don't you see: You'd just be living for the government," Barnett
said. "Just because you live past 2010, 50 percent of your estate will
go right into Uncle Sam's pocket. What's the point?"
"Fifty percent!" Pierson blurted out--and then, before he realized what
he was saying, added, "I'd sooner die than give the government 50
"Exactly!" Barnett said.
Pierson was silent for a while. Then, his voice still tentative, he
said, "Have you been making any suggestions about method? When you said
'window of opportunity' a moment ago..."
"No, no," Barnett said. "What we're recommending is a high-quality
hunting rifle. It's dependable, easy to operate and almost certain to be
completely undamaged by the incident, so that it can be passed on in
mint condition to the heirs--who, of course, would pay absolutely no
inheritance tax on it."
"A high-quality hunting rifle would be rather expensive," Pierson said.
"I don't suppose..."
"Yes, we believe that under a loophole in a rider to the Reserve Officer
Training Act, as rewritten in 1978, we have a way to deduct it," Barnett
said, "as long as you register your cellar as an Alternate Emergency
Munitions Collection Point."
Pierson nodded his head silently, and then said, "I wouldn't imagine..."
"Yes," Bartlett said. "We believe we've figured out a way that your
heirs could depreciate the hunting rifle."
"Over ten or fifteen years?"
"Six years," Bartlett said, beaming with pride.
"Six years!" Pierson said.
"Wow!" He nodded his head again, slapped his hands on his knees, and
stood up. Then he said, with new resolution in his voice, "That settles
"Not over my dead body will they raise your taxes," George W. Bush cryptically proclaimed. The press dutifully translated what he really meant, but few commented on the tastelessness of a wartime leader with troops in the field saying he was willing to die for the cause of lower taxes for the wealthy.
Never mind. The President's speech had no high public purpose or occasion. It was a political document, intended to undercut Senate majority leader Tom Daschle's prescriptions for economic recovery the previous day; it had more to do with gearing up for the 2002 Congressional elections than with speeding up the economic recovery. Bush's riposte signaled that the not-so-great debate of '02 is on.
Besides standing foursquare against any tax hikes, Bush offered only the same prescription for economic recovery as he has in the past: Let those at the top of the heap keep more of what they've got. Despite a stratospheric approval rating and a nation united behind him, he reaffirmed his fealty to his corporate underwriters and offered tax cuts for the rich at a time of obscene inequality. His partisan posturing on the stimulus plan showed that he thinks the economy will recover on its own, leaving the swelling ranks of jobless folk on their own.
Although superior to Bush's package, Daschle's was securely in the lineage of Bill Clinton's efforts to be both fiscal conservative and compassionate centrist. It positioned Democrats to campaign, amid economic recession, as the hair-shirt party of "fiscal responsibility," blaming Bush's tax cuts for the vanished (and largely notional) budget surpluses and evoking public nostalgia for the giddy boom of the late 1990s, which actually began heading south before Bush came to town. Daschle's minimalist list of stimulus measures shows a party leader out of touch with real conditions who thinks this downturn is a nonthreatening event that will soon be over, just as the stock-market cheerleaders are forecasting. Wiser heads on Wall Street, however, warn that any recovery will be weak and perhaps transient.
Even if the recession proves less serious than feared, the Democrats should be advocating spending on badly needed long-term projects, from schools to railroads, while pushing for extended and expanded unemployment compensation and health insurance and aid to states hard hit by new national-security costs.
Along with this expansive agenda the Dems should overcome their timidity and make the case for repeal of the bulk of last year's Bush tax cuts, particularly those provisions that benefit the wealthiest Americans. Those cuts will do little to stimulate the economy (even if they operate as promised--a dubious assumption), since they don't take effect for another three to six years. Instead, by assuring a greater stream of revenue from those who can best afford to pay, the Democrats can help forestall inevitable GOP efforts to claim that social programs must be cut to allow for military needs, while at the same time providing funds to address housing, hunger and poverty.
Teddy Roosevelt, whose biography is on Bush's bedside table, may have been less a foe of the malefactors of great wealth than his rhetoric claimed, but he did espouse a progressive agenda of reform, which included antitrust, financial regulation, the eight-hour workday, even a living wage. And Franklin Roosevelt in 1944 outlined an economic bill of rights that would redeem wartime sacrifices and secure the gains in income of the working class. All Bush can come up with is a thank-you note for his campaign donors.
Bush says he'd take a thousand whacks
Before he'd let the income tax
Of all the richest people go back up.
Remember Daddy's tax-hike fix.
An old dog may not learn new tricks,
But demonstrates the flubbed ones to his pup.
Talk about the politics of class struggle. George W. Bush now is apparently willing to give his life to make the rich richer.
How much does the White House stand to save from Bush's tax cut?
Political cross-dressing by the Democrats ended on January 25 in Washington when their erstwhile conservative patron, Alan Greenspan, abruptly jilted them. Under Bill Clinton's tutelage, the party of working people held the hem of the Federal Reserve chairman's dark robes and pretended to be fiscal conservatives, just like him. We must not cut taxes, they insisted piously, we must instead use the burgeoning federal surpluses to pay off the national debt. Greenspan would solemnly bless these expressions of Hooverite restraint.
Then he blew them off. The Fed chairman announced his support for George W. Bush's broad agenda of major tax cuts and, for good measure, the dismantling of Social Security as we know it. He is, as ever, an astute opportunist. During the Clinton years, Greenspan did his own turn at cross-dressing, making chummy with a Democratic President who followed his directions. Now that a new President from the Party of Money is in power, Greenspan returns to the one true faith--rescuing business and the wealthy from the clutches of government. His pronouncements will inspire a lobbying contest among the upscale interests to see who can extract the most boodle from the Treasury.
Democrats are feeling hurt and disoriented. They fully deserve their embarrassment. Their embrace of conservative fiscal orthodoxy seemed clever at the time--a stalling tactic to hold off more GOP tax cuts for the wealthy--but like so many of Clinton's too-cute tactics, it was always a dead-end strategy for liberals. An activist party committed to addressing major public problems was, in effect, promising to do little or nothing of significance while massive surpluses accumulated for the next ten or fifteen years. The GOP could say, and did: If the government is collecting so much extra tax revenue, why not give some of it back to the people? Alternatively, Democrats might have proposed a major down payment on healthcare and other neglected social problems. Instead, we got Al Gore's "lockbox"--much ridiculed because it was always a ridiculous gimmick. Bookkeepers, it turns out, do not make very compelling presidential candidates.
Now, as the economy weakens so quickly that the Fed has moved twice to lower interest rates, Democrats are scrambling to be pro-tax cuts and belatedly trying to figure out what that means. This is the minority party's first great post-Clinton opportunity to restore its progressive reputation and show that it still has some fight. We have suggestions. First, Democratic leaders in the House and Senate should draw a bright line of principled resistance to yet another regressive tax package (never mind that some in their ranks are already defecting). For two decades, Democrats have collaborated in the Republicans' hog-feeding splurges, joining in the bidding wars to reward contributors and favored interests. This time, even if the prospects look doubtful, the party must oppose the giveaways--estate tax repeal, another capital gains tax cut, the phony tax incentive for corporate R&D, and other goodies Republicans are putting on the table. If income tax rates are to be reduced, don't acquiesce again in the Reaganite sleight of hand that cuts the top and bottom rates across the board as though the wealthiest are getting equal treatment with the least fortunate.
The positive principle, in addition to providing emergency stimulus for the economy, should be: Heal the wounded, the people whose incomes and family conditions have been squeezed for a generation, even during boom times. That means delivering the bulk of tax relief, whether the package is $800 billion or twice that much, to those on the bottom half or bottom two-thirds of the income ladder. Don't try to do this with lots of fanciful conditions that pretend to target particular social problems--just send them the money, as promptly as possible. There are many different ways to accomplish this: For example, suspend a point or two on the payroll tax paid by workers (but not employers) for a specified period of one or two years; or enact a bigger child deduction, progressively larger for families at or below the median household income level; or simply cut the lower-bracket marginal rates (while leaving the top rate alone), with an immediate cut in withholding. The important thing is not to let the principle get lost in tricky details. The principle is: The Democratic Party fights on behalf of the working middle class and poor (even if it disappoints some of its major contributors in the process). When and if the vast public hears this message from Democrats, most of them will probably not believe it. Democrats will not persuade until they learn to make the fight for real.
As for the Federal Reserve, our advice to Alan Greenspan is: Butt out. Greenspan, remember, is the wizard who supposedly "saved" Social Security back in 1983 when his blue-ribbon commission initiated the massive payroll tax increases on working people. Now he wants to save it again by destroying it. If the central bank wishes to preserve its protected status "independent" of politics, the chairman had better confine his Republican ideological preachments to dinners at the club.