STIMULATING WHAT?
BY JULIANNE MALVEAUX

President George W. Bush says he wants to stimulate the economy, and he says he knows exactly how to do it. He offered a plan to eliminate the tax on dividends for stock options, as if his narrowly focused proposal could jump start the economy and pull money into the already stagnant stock market. Mr. Bush’s proposal is, at best, laughable. Even his corporate supporters have raised questions about the stimulation that will result from eliminating the so-called double taxation on dividends.

Bush’s proposal is a perfect example of Nero fiddling while Rome burns. He is targeting his largesse to a small group of investors, kowtowing to their interests while ignoring the concerns of the majority. Half of all Americans don’t have any stock investments, so they are ineligible for any dividend tax reductions. Most of those who own stock own it through a retirement account, so they aren’t especially concerned about a reduction in the dividend tax. It’s a stretch to say that one in ten Americans has the kind of stock investments for which dividend tax reductions will make a difference. They gain, but not so much that their behavior will be modified by dividend tax reductions.

Instead, President Bush is making it clear where his loyalty lies. He wants to reward stockholders to the exclusion of those at the bottom, the least and the left out. He wants to make it clear, $400 per child tax credit notwithstanding, that his loyalty is with high-rolling individual investors. There is hubris in his stimulus package, an arrogance that suggests that he can pander to the wealthy without consequence. As long as his minions talk the talk of class warfare, he gets a pass at his skewed proposals. A more somber analysis suggests that a president who purported to lead everyone would provide more balance in his proposals.

Between the dividend tax reduction, the acceleration of tax cuts, the reduction in estate taxes, and other provisions, Mr. Bush has made it clear that he is all about the wealthy. His only nod to the working and middle class seems to be the child tax credit rebate, at $400 per child, an amount more generous than Democrats offered. Of course, Democrats said they’d cut taxes by $150 billion, while the Bush tax cut was nearly $700 billion. Proportionately, then, the Democrats are offering a more reasonable stimulus plan than has the President.

It is especially important to note that the President has made an economic stimulus proposal that is independent of the notion of impending war. Estimates of war spending range from as little as $100 billion to as much as a trillion dollars. This spending is likely to increase the size of our deficit, and may well crowd out important domestic spending. It was disappointing to hear the President so cursorily deal with matters of impending war. It was also important to reference the proposal by New York Democrat Charles Rangel that the draft be reinstated so that matters of war are more frontally dealt with. Who will pay for war on Iraq? Whose lives will be placed in jeopardy, and who will die? While the President can sidestep the issue in his economic stimulus plan, Congressman Rangel is not prepared to allow him to sidestep it in terms of military preparedness.

There is a class bias in both the economic stimulus package and in our rush to war. Who are our reserves? Our National Guard? Our enlisted troops? They are, disproportionately, African American and Latino, folks who have been attracted to the military because of its economic benefits. They are the folk who would benefit from a reduction in the payroll tax. But they won’t get those cuts because the President is far more interested in cutting taxation on dividends than on putting more cash in poor people’s pockets.

After the dismal holiday shopping season, it is interesting to contemplate the concept of economic stimulus. What, exactly, is our President trying to stimulate. The stimulus on stock investment is interesting, if ineffective, since not all stock pay dividends. He has set up a hierarchy where some stock investments will get different tax status than others, and created a situation where long-term investment is undervalued for the hit-and-run investment of the moment.

At the same time, consumer confidence is at an all-time low and it is clear that we can bolster that confidence by putting a few dollars in the pockets of average folks. It ought to be a no brainer. Instead, the president’s stimulus package is a joke. We won’t jump start the economy through dividend tax reductions. Instead, our national leader thumbs his nose in all our faces by tilting to the wealthy with his version of stimulus.