Bush’s New Prosperity Initiative

It may come as a surprise to many television viewers, but George W. Bush has taken some interesting positions concerning a number of issues. After a month of daily reports, most people believe that he used cocaine 25 or more years ago. Pundits endlessly inform us that Bush may have gone too far to the right because he failed to climb to the top of the South Carolina state house and tear the confederate flag apart with his teeth. But those are the sorts of issues we will hear on television during the campaign. In the weeks following the South Carolina primary no one has bothered to question Fritz Hollings (Dem., S.C.) as to why he put up the flag in the first place. Of course, the senator may have been too busy. He must have spent a lot of time preparing his speech advocating the repeal of the First Amendment in order to pave the way for meaningful campaign finance reform.

Several months ago, Bush devoted an entire speech to his educational policies and there was very little in it to please libertarians. He doesn’t want to dismantle the Department of Education; in fact, he wants to increase its power. His plan calls for the states to implement tests to measure the effectiveness of local school districts. If a district isn’t meeting the state requirements it would be given 3 years to improve. If it doesn’t improve in that time, the government would issue educational vouchers so that the parents of the students could find better schools. Another of his proposals calls for a change in the Head Start program. Apparently, this program has strayed from its original purpose of enriching the pre-school education of underprivileged children. Head Start is now little more than another poverty program and Bush would emphasize its stated purpose.

These educational policy changes are very moderate, even timid. Like most Republicans, his implicit message is “We Republicans can administer socialism better than those Democrats.” He uses the radical idea of a voucher system only as a threat against poor school systems, not as a means to return the responsibility for education to parents. You might also say that he uses the word “vouchers” as a bone to throw to certain constituencies.

Last week, he presented the details of his “New Prosperity Initiative.” He identified a little discussed problem with the present tax code, “Picture a single mother with two children, working full-time, juggling all the responsibilities of home and work, and making $22,000 a year. Now picture a young corporate lawyer making ten times that much – $220,000 a year. Under the current tax code, that single mom actually pays a higher marginal tax rate than the lawyer does. In other words, just as she moves up and starts making more money, the federal government takes away nearly half of every dollar she earns through overtime and pay raises.”

I was shocked a couple of years ago to discover that I was paying a marginal rate of almost 50% on my last thousand dollars in income. Of course, you have to take into account, income tax, 14%+/- Social Security, and earned income credit. My microsolution has been very simple: Don’t work so much. Here’s Bush’s macrosolution, “Today, the wealthiest taxpayers – those earning more than $100,000 – account for 62 percent of total income taxes paid. Under my plan, this will increase to 64 percent. For all other income groups, their share of the tax burden will fall. . . . Under today's tax code, a single-parent family of three starts paying federal income taxes at about $21,000 in income. Under my plan, federal taxes for that family don't begin until $31,000.” Increasing the progressivity of the tax code is a traditional Democratic and liberal policy. This is also a good time to mention that neither Bush nor any of his other Republican opponents ever detailed sweeping cuts in federal expenditures as a means to reduce tax burdens.

“We will not nationalize our health care system.” That sounds good to some people but many others want free medical care. Here’s what Bush would do for them. “As president, I will propose a Family Health Credit. This credit will pay for 90 percent of the cost of an insurance policy, up to $2,000 a year, for every family making less than $30,000.” In a fascist economy, the government permits private ownership of industries while controlling the important segments of the economy for the good of the people or volk. Most Americans call this system “capitalism.” In any case, Bush’s proposal calls for a large redistribution of money to families earning less than $30,000.

Bush suggested one technical change, “Small businesses should be allowed to buy insurance from a trade association.” He states his general position, “We will promote individual choice. We will rely on private insurance. But make no mistake: In my administration, low income Americans will have access to high quality health care.” His positions amount to nothing more than a small increase in the socialism of our present mixed system. He does not address the problems that have kept foreign economies with socialized medicine stagnant. The most important problem is demand for free goods. When Hillary proposed sweeping changes in the American medical system, all the Clinton sock puppets tirelessly repeated on every talk show, “The demand for health care is inelastic.” Nothing could be farther from the truth, but Bush does not deal with any of the intrinsic problems in third party payer systems.

Bush suggests a novel idea for welfare recipients. “Right now the government offers help to low-income families, but mainly in the rental market. Through what's known as the Section 8 program, the federal government makes up the difference between fair-market rents and what a given family is able to pay. This is a good aim, as far as it goes – but we should extend it further. Instead of receiving monthly voucher payments to help with the rent, I propose a path to ownership.”

“Under my plan, low-income families can use up to a year's worth of rental payments to make a down payment on their own house. And for five years after that, as they pay their mortgage and build equity, they can still receive housing support, just as they would if they were still renting.” He also suggests a grant to low income people [not enrolled in Section 8 (whatever that is)] for 75% of the down payment on a house.

Along these lines, he also advocates a way to encourage savings by lower income people, “If a low-income person is able to save up to three hundred dollars, we will encourage banks, with a federal tax credit, to match that amount. The money can then be withdrawn tax free to pay for education, to help start a business or buy a home. This proposal should result in over a million new savings accounts.” The novelty of these two proposals lies in the use of the state to create wealth for poorer people. In the past, socialists have tried to transfer wealth from richer to poorer people. Somehow, these schemes have resulted in enlarging the gap between rich and poor and destroying social mobility.

I believe that Jack Kemp proposed using welfare to buy property rather than pay rents; I haven’t heard the idea of government’s subsidizing saving accounts before. These proposals redistribute wealth but they do so in a novel way. Instead of providing goods and services, they build the equity of the beneficiary. Presumably, they nudge poor people into the middle class. Once they get there, they, too, can have their wealth redistributed. The idea is to create enough wealthy people to finance government and then to keep creating them until redistribution becomes unnecessary. I doubt that these experiments will achieve the desired results, but they may slow down the stagnation that government causes the economy.

All of Bush’s proposals enlarge the government’s control over the individual and his property. Bush has outlined a number of baby steps toward increased socialism, but another novel feature of these proposals is their acknowledgement of market forces. The government will tell you what to buy with the “free” money it gives you. Health care, home ownership, education, and saving for specified ends will be subsidized by taxpayers: That’s the socialistic part. Money will be given to individuals to obtain these things. There will be no large beauracracies (at least no new ones) under the Bush’s New Prosperity Initiative: That’s the tip of the hat to market forces.

Bush says that he’s a “Compassionate Conservative” and a “Reformer with Results.” In this speech he said something that we might hear as frequently as we did the other two, “I believe in private property. I believe in private property so strongly, and so firmly, I want everyone to have some.” In other words, he believes in private property so strongly that he’s going to confiscate a bunch of it to give to poor people (under the conditions that he dictates).

If Bush can ever get his message through the filter of partisan television reporters, I think it will be very popular. After all, he’s the real “New Democrat.”