a White House briefing featuring the secretary of the treasury Paul
O'Neill, fine things were done, however lightly.
Mr. O'Neill was there with budget director Mitch Daniels and National
Economic Council director Larry Lindsey to explain the president's
tax plan. Toward the conference's end, questions were raised that
generated philosophical answers. As might be expected, one question
had to do with how-much-will-the-rich get out of it.
Mr. Lindsey answered by coming in at the other end. The rich are
going to end up paying a larger share of the tax. "People making
now pay 61.9 percent of the taxes. They will
pay 64.1 percent of the taxes under the President's program."
Percentages can be playful entities, and the questioner instantly
prodded the director. "The question I'm asking is, of the 1.6 trillion
dollars cut, what percentage of that is going to the top 1 percent
of the richest Americans?"
All Mr. Lindsey would do is aver that the figures being used by
the Bush administration are those of the Joint Committee on Taxation,
which "only scores income taxes." That is the committee on whose
findings both parties rely in making their projections, so that
all Mr. Lindsey would say was that the income taxes that
would be paid under the Bush plan would fall more heavily than under
existing codes on the rich.
How can that be? Well, if the tax burden is reduced, say, by 10
percent, with the poorest being the principal beneficiaries, then
those who are paying at the higher level are likely to increase
the percentage of the whole. But this invited a look into the intricacy
of the whole tax question, and one correspondent wanted to know
what it costs us to reduce taxes, in that to do so delays paying
back the debt. One dollar's reduced debt load means, say, five cents
of interest payments on the debt. Therefore, a tax cut of
a dollar not only deprives the government of a dollar, it deprives
it also of the relief it would enjoy of five cents' interest no
That did it for Secretary O'Neill.
"Well, I'll tell you," the SecTreas said. "It's part of the crazy
conventions that we have of what I would call half dynamic scoring.
You know, the convention is
that if you propose a tax reduction
it's necessary to assume that that money otherwise would have been
used to pay down the debt" which of course does not historically
happen, the money usually going to federal spending. "And if you're
not paying down the debt with that tax reduction, then you have
to penalize yourself for the cost of the interest" you'd otherwise
have been paying.
Mr. O'Neill went on to say: Look, if you want to count that
derivative factor reduced interest benefits forsworn
go ahead, but weigh also other derivative factors. Most direct of
these is the "economic feedback." People who have more money to
spend, spend more money. O'Neill cited Martin Feldstein of Harvard.
"In his testimony before the Congress a week or ten days ago, [Feldstein]
said he thinks the feedback effect from the President's proposal
is $600 billion over this ten-year [plan]."
That projection sniffs at supply-side postulates, which don't tell
you that tax cuts pay absolutely for themselves, but do insist that
a dynamic view of the effect of tax cuts needs to consider what
they do in the way of generating more revenues.
Mr. O'Neill was wound up and spoke out soul-thoughts on the general
subject. "We talk about tax cuts
about distribution effects,
as though the government owned the money. Right? The money came
in here and as soon as it got here it lost its parentage. So we
[the government] now have an opportunity to re-decide what
the equitable distribution of tax should be. We didn't have that
conversation when we decided where it was going to come from in
the first instance."
He held back another raised hand to conclude, "I would remind you,
as a recent fugitive from the private sector, that all the money
that comes in here comes from people out there who work hard for
a living. And they pay their share. I've paid my share. I
have no regrets about paying my share."
It was a mistake to say that. Because it invites everyone in the
house, most vociferously the class-warfare types, to insist that
they know what a fair share is. The Socratic manner, Max Beerbohm
observed, is not a game at which two people can play. If the government
engages in redistributionist policies without any sense of the superordinate
right to property, there are no theoretical limits to the progressivity