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Monday, June 05, 2006

Paul Krugman: Shameless in the Senate

Paul Krugman asks how congress can justify eliminating or substantially reducing the estate tax after arguing it had to cut essential social services such as health insurance for children to trim the deficit in a bill signed in February:

Shameless in the Senate, by Paul Krugman, Estate Tax Commentary, NY Times: The Senate almost voted to repeal the estate tax last fall, but Republican leaders postponed the vote after Hurricane Katrina. It's easy to see why: the public might have made the connection between scenes of Americans abandoned in the Superdome and scenes of well-heeled senators voting huge tax breaks for their even wealthier campaign contributors.

But memories of Katrina have faded, and they're about to try again. ... So it's important to realize that there's still a clear connection between tax breaks for the rich and failure to help Americans in need. ... To understand this point, ... look at what Congress has been doing lately in the name of deficit reduction. The Deficit Reduction Act of 2005, which was signed in February, consists mainly of cuts to spending on Medicare, Medicaid and education. The Medicaid cuts will ... cause 65,000 people, mainly children, to lose health insurance, and lead many people who retain insurance to skip needed medical care because they can't afford increased co-payments.

Congressional leaders justified these harsh measures by saying that we have to reduce the budget deficit, and there's no way to do that without inflicting pain. But those same leaders now propose making the deficit worse by repealing the estate tax. Apparently deficits aren't such a big problem after all, as long as we're running up debts to provide bigger inheritances to wealthy heirs rather than to provide medical care to children. ...

Who would benefit from this largess? The estate tax is overwhelmingly a tax on the very, very wealthy; only about one estate in 200 pays any tax at all. The campaign for estate tax repeal has largely been financed by just 18 powerful business dynasties, including the family that owns Wal-Mart.

You may have heard tales of family farms and small businesses broken up to pay taxes, but those stories are pure propaganda... Nonetheless, the estate tax is up for a vote this week. First, Republicans will try to repeal the estate tax altogether. If that fails, they'll offer a compromise ... like a plan suggested by Senator Jon Kyl, Republican of Arizona, that would cost almost as much as full repeal, or a plan suggested by Senator Max Baucus, Democrat of Montana, that is only slightly cheaper.

In each case, the crucial vote will be procedural: if 60 senators vote to close off debate, estate tax repeal ... will surely pass. Any senator who votes for cloture but against estate tax repeal — which I'm told is what John McCain may do — is simply a hypocrite, trying to have it both ways.

But will the Senate vote for cloture? The answer depends on two groups of senators: Democrats like Mr. Baucus who habitually stake out "centrist" positions that give Republicans almost everything they want, and moderate Republicans like Lincoln Chafee ... who consistently cave in to their party's right wing. Will these senators show more spine than they have in the past?

In the interest of stiffening those spines, let me remind senators that this isn't just a fiscal issue, it's also a moral issue. Congress has already declared that the budget deficit is serious enough to warrant depriving children of health care; how can it now say that it's worth enlarging the deficit to give Paris Hilton a tax break?

Previous (6/2) column: Paul Krugman: Secretary, Protect Yourself
Next (6/9) column: Paul Krugman: The DeLay Principle

Update: Brad DeLong adds: Any Advocates of Estate Tax Repeal?

The Republican congressional leadership is trying to push permanent repeal of the estate tax through the Senate this week--without, of course, any offsetting spending cuts to neutralize the impact on the federal deficit. This is, as Bob Reich pointed out, a deficit-widening move of about the same order of magnitude as Social Security's long-run 75-year deficit.

I haven't found anybody serious willing to argue that this $5 trillion present value increase in the deficit and steeply regressive change in the tax code is good public policy, save for Ed Prescott:

Prescott, "Death and Taxes"

Is there any other serious economist arguing that this is a good deal? Any other half-serious economist? Quarter serious?

    Posted by on Monday, June 5, 2006 at 12:15 AM in Economics, Income Distribution, Policy, Politics, Taxes | Permalink  TrackBack (0)  Comments (49)

          

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