To get some boardroom help for his tax cut, Bush enlisted the likes of General Electric boss Jack Welch and Cisco System honcho John Chambers to mosey on down to Texas on Jan. 3 for an economic summit. Bush wanted Welch, Chambers, and 34 other corporate big shots to say the nation needs a huge tax cut to stop a coming recession. Do the execs actually believe that? Doubtful.
TOO MANY TACKS. But they supported Dubya during the campaign, both publicly and financially. And having come this far with him, they decided to give him the photo op he wanted. But Bush is the one who will pay the price. Serving up economics like this before he is even sworn in will only make Bush's life that much tougher should the economy really fall into a tailspin.
There's nothing at all wrong with cutting tax rates in the face of huge projected budget surpluses. But as a short-term fix for a slowing economy? A down payment on the "recovery"? Come on. I'd wager none of those CEOs really believes that.
It was campaign trail deja vu. At first, Bush did call for tax cuts as a way to return a chunk of the ballooning surplus to the public. Later, though, he veered off course by trying out a somewhat different argument: tax reductions to help financially stressed middle-class families. To make that point, Bush aides would find a demographically correct, well-scrubbed family to join him on the stump. And Bush would explain to the oft-bewildered couple just how much they'd get from his plan.
Now, Bush is flopping all over the place again. He has been, one might even say, Clintonesque in his willingness to put spin above substance on the tax issue.
SPECIAL-INTEREST GOODIES. For a while, Bush tried calling his package tax reform rather than tax cutting. But that just elicited giggles from real reformers, who see more special-interest goodies in our future, instead of a simplified investment-oriented code.
So, for much of the past month, Bush has been peddling the tax reduction as a way to stave off a looming recession. At every opportunity, he has been beating the drum for an old-fashioned Keynesian tax cut. To make the case, Dubya himself keeps talking about the need for a "recovery" and his fears that we are headed for a "tailspin."
To help, the Bushies brought those corporate pals down to Austin to flog the tax cut. But if you think they really believe in this as antirecession medicine, ask yourself a question: Would they have gone to Nashville to promote a similar scheme for Al Gore? Of course not.
HIGH-END PERKS. So, what were those CEOs doing in Texas, besides protecting their investment? Simple, they want to put a big tax cut in play this year. They don't really care much for the most popular elements of Bush's tax package. After all, reducing the marriage penalty won't help Welch sell many more jet engines. But once that tax bill gets rolling, it will be a breeze to slip in high-end corporate perks.
Fact is, an antirecession tax cut is actually music to Democrats' ears. Cutting corporate taxes to stimulate investment while trimming individual taxes to boost consumer spending has been part of Democratic fiscal policy ever since John F. Kennedy's tenure. And if the plan can be combined with some new spending, all the better. House Democratic Leader Dick Gephardt (D-Mo.) is beginning to like what he sees.
And there's the rub. Countercyclical tax cuts almost never work. In part, that's because it takes so long to get anything done in Washington. By the time the tax cut kicks in, the slowdown is usually over. Bush's newly named top economic adviser, Lawrence Lindsey, knows this well. Indeed, for years, Lindsey has argued against using tax cuts as a short-term economic stimulus. So, in fact, have most mainstream economists and nearly all GOP analysts. Corporate executives know it, too. But Bush is in a bind. The tax cut was the centerpiece of his campaign. So he keeps flogging it.
Here's how a good CEO would think about it: Is blowing $1.6 trillion on anything a very good idea? What about if you can't remember why the action was so important in the first place? Bush and his CEO friends ought to give this tax cut the clear-headed thinking it deserves. Gleckman is a a senior correspondent in Business Week's Washington bureau