The War at Home

Under any circumstances, the new Bush budget would seem ideologically driven, lopsidedly tilted to the rich, and deeply flawed as a purported stimulus to growth. But the administration’s economic proposals are particularly peculiar and ominous in light of the administration’s drive toward war in Iraq.

In times of war, governments typically call for national unity, shared sacrifice and gestures of egalitarianism (despite tendencies to repress dissent). The federal government imposed estate taxes to pay for the Civil War and Spanish-American War. During both World Wars, union membership grew substantially with government encouragement. During the Vietnam War, Lyndon Johnson pushed through massive new social programs, such as Medicare and Medicaid.

But Bush’s economically ineffective program is virtually a declaration of domestic class war. “The only effect [of Bush’s proposals] is to make the very rich richer,” argues Nobel Prize-winning economist Franco Modigliani of MIT, “and the richer you are, the more you benefit.” It’s a “weapon of mass destruction aimed at middle-income households,” says fellow Nobelist Daniel McFadden of the University of California-Berkeley. It will “exacerbate the problem of inequality,” says Joseph Stiglitz of Columbia University, another Nobelist. “Rather than being a net stimulus, it may harm the economy in the short run and certainly will harm it in the long term.”

Yet in a disturbing way, Bush’s war at home complements, rather than contradicts, a war abroad. Both are part of an escalating ideological crusade to remake the world as a U.S.-dominated haven for corporations and the very rich, while undermining the role of government in providing anything but protection for those corporate interests. That effort includes bending the policies of other governments against the will of their citizens and transforming international institutions, from the U.N. Security Council and NATO to the International Monetary Fund and the World Trade Organization, into instruments of U.S. policy—or else threatening to dismantle them. Saddam Hussein is a conveniently demonic target, even if the administration has failed to make the case that he is an imminent threat to anyone other than his own citizens. But the ultimate point of war against Iraq—far more than the oil interests of the region or national security—is to assert American power.

This new American empire is not a classic imperial quest for control of other territory, even though it is driven by the self-interest of an American corporate and financial elite. Rather, it reflects the use of political and military power on behalf of ideology—a radical pro-corporate, anti-government, free-market fundamentalism. In many ways, this ideology mirrors the archaic and dangerous fundamentalism of the erstwhile Taliban and al-Qaeda, a zealous quest for ideological empire that justifies violent means and tolerates no disagreement.

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The empire builders of the Bush regime would like the world to think the choice is between their empire and the “axis of evil,” when the real choices before the world are—or should be—more numerous. Bush strategists also see war abroad as a way of providing political cover for the president in conducting the war at home, the domestic front of a long-standing global effort to enforce a free market fundamentalism that includes government austerity, privatization and deregulation.

The heart of Bush’s domestic programs are tax cuts highly skewed to the rich. Besides proposing to eliminate taxation of dividends, Bush outlined three new tax-sheltered savings vehicles that will mainly benefit the very affluent. He would make permanent the 2001 tax cuts (including income tax rate cuts and elimination of the estate tax). In addition, the administration promises to deliver a costly adjustment to the “alternative minimum tax.” A host of other tax cuts include an expensive refundable tax credit for buying private health insurance, which is part of Bush’s multifaceted effort to further privatize health care. The same federal money would be far more productively spent on expanding and improving Medicare to cover everyone.

The Center on Budget and Policy Priorities calculates that Bush’s new tax cuts will cost more than $2.5 trillion over the next 10 years—and the cost to the federal budget of some proposals would continue to escalate even beyond that time. Taken together, the tax cuts enacted or proposed since Bush took office would cost $4.4 trillion, a proportionately far bigger revenue loss than Reagan’s policies of the early ’80s. But even this understates the costs, because many state taxes, tied to federal policies, also have been placed on the chopping block.

Having come into office with a large budget surplus, the administration projects a record deficit of $300 billion this year—not counting the cost of a war. More serious, however, is that even Bush’s own budget proposals forecast a deficit of $200 billion a year after the economy recovers. That gaping hole doesn’t include many tax cuts, and it completely excludes the cost of a war in Iraq and subsequent occupation. Running a short-term deficit to stimulate the economy can make sense—especially if policy-makers direct government spending (or tax cuts) to low-income households or to accelerating needed public and private investment. But the long-term structural deficits put in place by Bush’s programs would be a drag on the economy, most notably through increasing interest rates.

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Despite the administration’s rhetoric, the point of the tax cuts is not really to stimulate the economy. Rather, the aim is to shift the burden of taxes away from investment income and toward either taxation of consumption—which the president’s Council of Economic Advisers advocates as a replacement for the income tax—or toward a less progressive income tax. In either case, the rich benefit enormously and almost exclusively, since much of the investment income that goes to middle-income households, such as in pension plans, is already tax-sheltered (and the poor have no investment income).

But beyond being regressive and unfair, this shift of the tax burden will make it harder to win future support for government programs. Less money will be available to government, and that money will be drawn more heavily from those who have the least. This is the heart of the administration’s strategy, as increasing numbers of conservative commentators, including Nobel Prize-winners Milton Friedman and Gary Becker have made clear.

Whatever damage is done to the economy and the social fabric is all worthwhile, they argue, because huge structural deficits will force the government to cut spending and shrink. For example, Becker wrote in his Business Week column, “Deficits created by lower tax rates may be the only effective way to curb the perpetual desire of politicians and interest groups to increase outlays on their favorite projects.”

Add in the rise in military spending, the uncalculated costs of war in Iraq, and burgeoning “homeland security” spending (especially if there is backlash from U.S. attacks on Iraq), and both the deficits and crunch on government social spending deepen. That will make it hard to protect what exists, let alone enact new and needed initiatives. The lessons from decades of tax and budget politics seem clear. Running campaigns against tax increases is more potent than championing balanced budgets, the old Republican mainstream conservative position now adopted by most Democrats—who should instead be championing progressive taxation and more spending on crucial social needs.

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Bush’s budget for the current fiscal year proposed slashing many already underfunded programs. He wanted to effectively cut job training, Head Start, public housing vouchers, low-income heating assistance, aid to dislocated workers, youth training and childcare funding, to name just a few. Overall, the Center on Budget and Policy Priorities calculates, Bush is proposing to cut more than 4 percent from programs targeted to low-income households.

Next year’s budget would continue to pare back the same social programs. Under the guise of increasing state flexibility, it would cut funding for Medicaid, says Robert Greenstein, director of the Center on Budget and Policy Priorities. There will be new, stricter standards of eligibility for many programs that help low-income families. The limits set under federal voucher programs to help low-income renters would be turned into price floors, squeezing those who are most vulnerable and increasing homelessness.

Funding for education would increase but still be $6 billion less than Bush promised in his “No Child Left Behind” legislation. Bush’s proposal to add new prescription drug benefits to Medicare, but limit them to people who choose private health care plans, would undermine the current system of guaranteeing the same coverage for all Medicare beneficiaries. Worse, the plan would restrict the options available to people on Medicare who need benefits the most.

The failure of the Bush administration to offer any aid to financially troubled states and localities, while worsening their fiscal crisis through new tax cuts, also will result in the deep erosion of important public services. Combined with layoffs of state and local government workers, such retrenchment not only hurts needy families, but further depresses a shaky economy. State governments face deficits estimated as high as $85 billion for the upcoming state fiscal year, equivalent to nearly one-fifth of state revenues, but nearly all of them are forced to balance their budgets. One result of the conservative abandonment of government responsibilities to the states—almost certainly intentional—will be deeper cutbacks in any government role except that of the police and military.

The combined federal and state deficits will grow under the Bush plan, thus setting up a potentially lethal collision with the needs of Social Security and Medicare in years to come. While the threat of Social Security shortfalls has been widely overstated, Bush’s tax cuts and deficit strategy add to the difficulties in assuring that Social Security will be adequately funded. But conservatives hope to exploit a crisis in order to privatize Social Security, destroying the bedrock of America’s modest experiments in social democracy.

Bush has already made it clear that the war at home—often linked with the “war against terrorism”—is directed toward unions: He intervened in the West Coast longshore workers’ contract dispute last fall, moved to deny union rights to many federal workers, and plans to privatize the jobs of 1 million federal workers.

House Majority Leader Tom DeLay underscored that offensive with his January letter—which he subsequently denied authorizing—on behalf of the anti-union National Right to Work Foundation. In a striking inversion of reality, DeLay claimed that “union bosses strive to use the war on terror as a cover for a new drive for power.” The letter with his signature said that the “power grab” by Big Labor “presents a clear-and-present danger to the security of the United States at home and the safety of our Armed Forces overseas.”

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Some Bush administration strategists justify a pre-emptive strike against Iraq as a “liberation” effort through which the United States would impose a new democratic regime that would spread throughout the Middle East. But the attacks on democracy at home make such claims to spread democracy overseas ring hollow. Likewise, the failure of the United States to provide substantial aid to Afghanistan once again illustrates how this administration is interested only in wielding military power. Rosy projections about Iraq’s future seem dubious at best.

The record, going back long before Bush, is clear: Washington is quite willing to tolerate friendly tyrants, even if it slightly prefers docile, nominally democratic regimes that bow to U.S. influence and the dictates of global financial markets.

The real agenda, however, is not democracy. The Bush administration’s agenda is to assert the political and military supremacy of the United States to advance the cause of free market, corporate fundamentalism. The war in Iraq fits neatly into that strategy. So does the war at home.