President Bush Misleads the Public on Tax Cuts

The Bush tax cuts are tax deferrals, to be paid back in full with interest.

October 18, 2004 -- In the third Presidential debate, President Bush said: People listening out there know the benefits of the tax cuts we passed. If you have a child, you got tax relief. If you're married, you got tax relief. If you pay any tax at all you got tax relief.

What the President did not say is that, under his economic plans, the non-partisan Congressional Budget Office (CBO) estimates that the federal deficit will balloon from $5.6 trillion in 2000 to $10.6 trillion in 2009. In fact, the Bush Administration has run increasingly large deficits of $158 Billion in 2002, $375 Billion in 2003, and $413 Billion in 2004, with the total government debt now surpassing $7.4 Trillion. Therefore, every single penny of the Bushs tax cut actually is being borrowed for future repayment. As a result, Bushs economic program is not based on tax cuts, but on tax deferrals -- to be paid back later with interest.

For entities that borrow money such as the Federal Government is doing at record pace, the cost of financing the debt can be an onerous. For example, the CBO estimates that interest payments on the public debt in 2009 will be $543 billion. This equates to the second largest expense in the federal budget -- and approximately equal to what our country will spend on all defense and homeland security expenditures combined.

Every household in the United States will have to work almost one full month per year just to pay off the interest expense on the federal debt -- even before any repayment of the debt itself occurs.

Bill Schaffer, the moderator of the third Presidential debate asked, how can you or any president, whoever is elected next time, keep your pledges without running this country deeper into debt and passing on more of the bills that we're running up to our children?

Senator Kerry answered: I'll tell you exactly how I can do it: by reinstating what President Bush took away, which is called pay-as-you-go.

President Bush responded: I'll tell you what PAYGO means when you're a senator from Massachusetts, when you're a colleague of Ted Kennedy. PAYGO means you pay and he goes ahead and spends.

What we do know is that Mr. Bush had opposed pay-as-you-go rules that required tax cuts and spending increases to be offset by other tax increases or spending cuts. Those rules were put in effect in the administration of Mr. Bush's father and remained throughout the Clinton years. With Mr. Bush's encouragement, they were allowed to expire. Had they been in effect, his tax cuts could not have been enacted.

We also know now that President Lyndon B. Johnsons guns and butter programs adopted in the 1960s before the pay-as-you-go rules led to hyper-inflation and high unemployment in the 1970s. We now have a President with an even worse economic recipe guns, butter and tax deferrals. Such a recipe will lead to higher interest rates, higher inflation and higher unemployment for years to come all for the short-term political gain of one man.

When it comes to fiscal discipline in the White House, we know factually from the massive deficits that President Bushs policies have been reckless. We now need a President who supports pay-as-you-go rules -- so that the true economic effect of the Presidents programs is passed onto consumer without deferral and the related interest charges. Without such rules, its tempting for politicians to try to mislead the public on fiscal policy, as this President has done.

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