It's "Alt-Fuels on Steroids"

In an interesting and slightly-related development to this week's column, the Bush administration is not allowing hybrid cars, like the Toyota Prius, that have both gasoline and electric power, to be classified as alternative-fuel vehicles and therefore able to use the HOV lane. However, an alt-fuel SUV with a "standby" gas tank, which may never actually use that propane, is just peachy. I guess the real difference between Republicans and Democrats is how much the government should subsidize the purchase of SUVs.

The column also is available via the East Valley Tribune website. I got my editor to go along with the "alt-fuels on steroids" line for the headline.


Subsidized SUVs
ARE YOU READY FOR 'ALT-FUELS ON STEROIDS'?
East Valley Tribune, Jan. 26, 2003

Who needs Jeff Groscost when you’ve got George W. Bush?

One expensive little nugget buried in the Bush economic plan would subsidize the purchasing an expensive SUVs by anybody with a corporation at the ready. The Bush proposal would increase an existing deduction for business capital equipment from $25,000 to $75,000.

Sounds reasonable enough. Unfortunately, an obscure wrinkle in existing tax law means that Bush’s proposed increase in that deduction would be available only for vehicles classified as “trucks.”

When this particular provision first entered the Internal Revenue Code in the early 1980’s, SUVs didn’t really exist, and the idea was to encourage purchases of vehicles thought to be used to generate jobs -- namely, trucks.

Now, of course, every high-priced lawyer, doctor, and soccer mom worth her or his salt drives a SUV, taking up 1.4 times the space on the road of the average car. The Bush plan would mean that a yuppie in the 38.6 percent tax bracket who wants a fully-loaded Hummer H2 (list price $102,581) would get back $33,634 from the government in a tax refund.

Meanwhile, a business that purchased a fuel-efficient and environmentally-gentler Toyota Prius (list price $20,500) would have to settle for a refund of $3,729, same as under current law. That’s one way to keep the Saudis happy, I suppose.

Businesses that depend on cars to generate jobs but don’t use SUVs, which includes most that I see, won’t benefit much from the Bush proposal. It’s limited to “trucks” under the law, which law the Bush administration hasn’t proposed to change.

So the Bush plan means the IRS writes huge checks to people who purchase huge vehicles, but nothing new for businesses who purchase regular cars. Call it “trickle down” automotive economics.

Sound familiar? Well, it should. For those of you not able to remember or otherwise born yesterday, the Arizona Legislature, at the behest of then-Speaker Jeff Groscost, adopted a tax-credit program for purchasers of “alternative fuel” vehicles. Just as Bush claims that his SUV subsidy will help the economy, Groscost claimed his would help the environment.

But Groscost’s sloppily-drafted, last-minute legislation didn’t require that these vehicles actually run on alternative fuels, only that they carry an alt-fuels tank they might theoretically use -- or might not. And the law lacked a cap on the amount of the tax credit subsidy, meaning that the more expensive a SUV you bought, the more the state paid through the tax credit.

Before the state stopped this particular gravy train for people who believed that bigger is better whenever somebody else pays, it threatened to blow a near-billion-dollar hole in the state budget. It also cost Groscost election to the state Senate in a slam-dunk GOP district.

But the alt-fuels debacle may pale compared to the fiscal carnage if the Bush plan passes. The tax savings available to SUV purchasers on their federal taxes could easily exceed the breaks Jeff Groscost and Jane Hull doled out in 2000. It’s “alt fuels on steroids.” And Bush wants the Treasury to write those checks without the bother of adding that pesky “auxiliary” tank to that new Navigator or Excursion.

Once again, the Bush administration manages to take a bad idea and make it worse. It’s apparently not bad enough that Groscost and Hull once decided to subsidize SUV purchasers in Arizona. Now George W. Bush wants to take that idea and roll it out nationwide.

Of course, in Bush’s plan, there’s no propane involved. But it still stinks.

Doing My Bit for the Napolitano Honeymoon

Here's this week's East Valley Tribune column. I'm not sure how the Arizona program compares to the Maine plan now before the U.S. Supreme Court, but that's a topic for another day. The article may be my help for the honeymoon, but the headline (and the placement, with a drawing no less) is all the Tribune's. Interesting.

SMARTS, IDEAS, DETERMINATION
New governor's executive orders as just as legal as Bush's; GOP needs to work with her, not sue
East Valley Tribune, Jan. 19, 2003

The Arizona Legislature is having a tough time adjusting to their new reality. They’re used to a governor who, when she talked about her time in the mountains, meant the country club in Pinetop. But when the new governor talks about mountains, she means her climb to the summit of Mount Kilimanjaro.

It’ll take some getting used to, apparently. Just as the DPS security detail is adapting to a somewhat more (ahem) active schedule, the Legislature will have to get used to having a governor with smarts, ideas, and the determination to accomplish them.

The immediate source of friction with the legislature is Gov. Janet Napolitano’s first-day executive order creating a prescription drug discount program through the state’s Medicaid program, AHCCCS. The program takes advantage of the state’s buying power as a huge purchaser of health care by negotiating volume discounts on drugs, available to seniors who pay $25 to join the program.

The plan could make prescription drugs available to participating seniors at 20 or 25 percent (or more) less than regular retail. AHCCCS negotiates with pharmaceutical suppliers anyway; they’ll just bargain for discounts for senior citizens as well as for low-income AHCCCS plan members. And it should cost the state nothing, with the annual $25 fee paying its costs.

You’d think this kind of proposal would warm the hearts of the flintiest conservative, with its voluntary nature, reliance on market forces, and zero net cost to the taxpayers. But while even my quite-flinty friends on The Tribune editorial page saluted Gov. Napolitano’s move, it’s given a severe case of heartburn to GOP legislative leaders.

The Republicans are upset because they believe that the governor can’t make this kind of policy by executive order. She’s usurping the Legislature’s prerogatives and given short-shrift to comity between co-equal branches of government, complained House GOP leader “Fast Eddie” Farnsworth.

Of course, these very same Republicans have absolutely, positively, and entirely no problem with President Bush enacting his “faith-based” initiative by executive order, because of the fundamental, vital, and principled distinction that, well, he’s a Republican and Gov. Napolitano is a Democrat.

A key GOP legislator is especially upset because he claims the Legislature considered such a program as part of the budget process last session, but was told by their attorneys that it would take legislation. While the Legislature historically has never listened to its lawyers unless the advice supports what they wanted to do anyway, this time, for some unrecorded reason, they dropped the idea.

They never sought a second opinion, and now had better get used to being legally outflanked. Not only does the new governor apparently have better lawyers than they do, but the governor herself is a better lawyer than their lawyers.

But leaving the attorneys aside for a moment, it’s an interesting admission. The GOP admits that the Legislature considered a good idea, but dropped it because it would require legislation. Well, isn’t legislation what the Legislature is supposed to do?

And it’s not like they ever run out of raw material down there, or have to wait for a new shipment of stock to arrive. Think about it: the Legislature couldn’t get it done because it would have taken legislation. Doesn’t make sense to me, either.

The Legislature is considering filing a lawsuit to block the discount prescription drug program. They claim there’s a principle involved, one that’s apparently more important than saving senior citizens money and making their health care more affordable.

They’re more than welcome to try to explain to their constituents exactly what is that vital and important principle that requires making older people pay more for their prescriptions.

Hey, Right-Wingers -- What's In Your Wallet?

Ooh, the 'wingers didn't like this one. But it's a really easy response to their outraged emails--do you want a tax cut that benefits you more than me, or me more than you? Why? Here's the response I'm now clipping-and-pasting into the emails:

I support tax cuts that help those at the bottom and the middle, not the top; those at the top are doing just fine and don't need the help like you must. If you've reported your financial situation accurately, the congressional Democratic plan puts more money in your pocket than Bush's. So which side do you support?

Net jobs created during Clinton administration (1993-2000): 22 million.
Net jobs created during Bush I (1989-1992) and Bush II (2001-2003) administrations: zero.

Oh, and did you see this from today's LA Times?:

Old question: What did you do in the war, Daddy?
New answer: I pocketed a large tax cut, honey.
[Pause.]
And then I passed the bill for the war onto you.

Maybe that's the way to fight this plan. Point out just how it happens to be oh-so-convenient for the people supporting it.

The Bush Economic Stimulus
A WINDFALL FOR ME -- BUT BAD FOR THE COUNTRY
East Valley Tribune, Jan. 12, 2003

George W. Bush’s “stimulus” plan is a colossally stupid idea. It’s also a screaming deal for Sam Coppersmith. Perhaps that second fact will help convince you of the first.

I make out like a bandit under the Bush’s $674 billion proposal. I get increased child tax credits, something unavailable to those without minor children. As both my wife and I work, speeding up the so-called “marriage penalty” adjustment means another sizeable break, inapplicable to singles who make exactly what we do. And while modesty demands I not disclose the precise percentile, with our adjusted gross income toward the top of the pyramid, we’ll pocket a nice chunk from acceleration of the upper-income tax cuts.

But those are just the appetizers in this particular financial banquet. Check out the vast menu of more obscure entrees.

We might make enough that we even get a piece of the proposed adjustments to the alternative minimum tax. Then consider the “small business purchases” incentives, tax credits we could use to get a plasma screen for the conference room. Cool!

But the Big Enchilada, where the real money is, is the exemption of dividend income from taxation. When my parents died, I inherited some dividend-paying stocks, and I’ve done my best to save and invest, too. Now, lots of people own stocks, but most own them in pension plans, where any dividends are tax-free already.

The Bush plan thus doesn’t help the majority one bit; a senior administration official confirmed that dividends accumulated in a 401(k) would indeed be taxed as ordinary income when withdrawn. Too bad for you. But for me, Fat City.

Owning stocks outright puts me in yet another top-percentage minority, but the majority of the Bush plan is targeted precisely at guys like me with personal dividend income. The wealthiest five percent of taxpayers will corral about two-thirds of this money, over half of the entire deal. My dividend income becomes tax-free, “a gift that keeps on giving” from George W. Bush.

The Bush “stimulus” plan couldn’t be better designed to assist Sam Coppersmith unless it provided subsidies for cigars and bicycling accessories. Of the $674 billion in the plan, 92 percent goes to the stuff I’ve described that benefits me.

Oh, the President will spend about half of his time talking about moving low-income taxpayers to the 10 percent bracket and the $3,000 accounts for unemployed workers, but those two items comprise less than 8 percent of the deal. Apparently, having to “tip” our economic lessers 8 percent to grab 92 percent of the goodies is what George W. considers the “decent” thing to do.

Under Bush’s plan, I’ll pay a lot less in taxes. Here’s the kicker: Bush calls it a “stimulus” plan, but the Coppersmiths probably won’t spend that money. Instead, we’ll try to save it.

Meanwhile, plenty of folks are worried about their jobs and mortgages, wondering when business investment and consumer demand will increase. They even believe Bush when he says his plan will get the economy moving again.

I have but one word for those suckers who swallow Bush’s hokum: Ha!

Bush’s plan is a winner for me personally, but a huge loser for the country, so I oppose it. You should, too.

To a conservative, a “sacrifice” is supporting policies that oh-so-conveniently happen to benefit you (or your patrons) personally. I’m a liberal, so I’m opposing something that would benefit me greatly -- merely because it’s bad for the country.

But if you’re gullible enough to give me that much money in tax cuts, you bet I’m taking it. I’ll pay my fair share like everybody else, but I’ll be darned if I’ll pay your share, too.

There's No Problem We Face That Can't Be Fixed By (a) Cutting Taxes On The Rich, (b) Invading Iraq, Or (c) Both

One interesting sidelight in the recent climb-down by the Bush administration on North Korea ("We will never negotiate with evil; however, we oh-so-sincerely want to talk with evil") is this Michael Kelly column in the Washington Post. You might miss it, but he cites, with apparent approval, a KGB report that North Korea had a nuclear weapon as early as 1990. Hey--that was during the first Bush administration.

So who's "feckless" now (or, more accurately, then)?

"Just Cut Spending" Is As Sincere As "The Check Is In The Mail"

My libertarian editor at the East Valley Tribune obviously has a different perspective than I do on this issue, which is why the headline really makes a different point than the article. But that's the op-ed business for you.

In case you're really interested, the Kaus article that triggered this piece is available here. It really is quaintly anachronistic to read it now, even though it's less than 2 years old, because G.W. Bush clearly is no better at actually cutting spending (instead of just talking about it) than his predecessors -- not that cutting spending actually makes sense, but it really is like civil rights in that Republicans so earnestly believe in the principle but just won't do anything about it in reality. (Not that there's anything wrong with that.) Also, it's quaint because Kaus has stopped writing about universal healthcare and job training and big ideas, and these days spends his time more concerned about whether The New York Times has published too many stories about the Augusta National Golf Club as part of some partisan liberal conspiracy.

Also, a call-out buried deep in the column to Dustin Nolte, whom I don't know, but who is the left-side Arizona correspondent for Political State Report, which is a collection of "bloggers" reporting on state politics collected on one website. I can't vouch for the quality of the commentary, but it's a good idea if it works and you might want to check it out to see if it's working.


Wielding the Ax
TAX CUTS? TRY TO TRIM SPENDING
Presidents raised taxes and were re-elected, but no one has limited government's growth
East Valley Tribune, Jan. 5, 2003

In May of 2001, journalist Mickey Kaus disputed that Bush’s budget represented a long-term victory for anti-government conservatives and a nearly-irreversible defeat for liberals. Kaus argued that liberals should love Bush’s budget, because every dollar "saved" today is available for spending tomorrow.

Kaus based his argument on the fact that at the federal level, it’s hard to raise taxes, but cutting spending is harder. Taxes have been hiked without automatic political death. Reagan raised taxes in 1983, G.H.W. Bush in 1990, and Clinton in 1993. Bush lost, but the others won reelection easily. (As Kaus noted, when we weren’t looking, did somebody repeal "tax and tax, spend and spend, elect and elect"?)

But the history on cutting spending is pretty bleak. Neither Reagan or Gingrich could do it. Nobody has done it.

Democrats are dreadfully bad, but Republicans aren’t better. Both freely devote hundreds of billions to farm subsidies, socialized healthcare for veterans, and tax loopholes for specific businesses.

Kaus theorized that "budget bloat" for existing programs would swallow the resources needed for ambitious future priorities, like health care reform. Routine spending would eliminate any chance at robust, systemic changes like Medicare expansion, job training on demand, and comprehensive health care. But if Bush actually cut spending to pay for his tax cuts, then liberals would have four years to argue that such major programs are really more valuable.

If by 2006 Democrats couldn’t convince voters that health care and Social Security for everyone (which will cost plenty) are more valuable than those tax cuts for the rich (which are just as expensive), then clearly voters don’t want more affirmative government, and shouldn’t get it.

Kaus’s article is quaintly anachronistic now, because the war on terrorism and the forthcoming war in Iraq mean that the Bush administration isn’t cutting spending, either. Instead, we’re now funding new stuff somehow connected to “homeland” security (like bailing out airlines and insurance companies), spending the Social Security surplus and borrowing billions more. The administration is as serious about cutting spending as they are about civil rights: Devout believers, just don’t make them actually do anything.

But here in Arizona, we may see whether Kaus’s theory works. The state’s budget problems can’t be evaded by using trust funds or by running a deficit like the federal government. This year’s and next’s fiscal realities are extraordinarily grim, with a yawning $1 billion deficit in a $6.5 billion general fund budget looming -- and that after several previous rounds of spending cuts.

Gov.-elect Napolitano announced that she will not recommend tax increases in her budget plan due later this month. As noted by Dustin Nolte in Political State Report, that’s probably realistic; the new GOP-controlled Legislature was unlikely to raise taxes, which requires a supermajority vote anyway. But that means those same “no new taxes” legislators actually will have to cut spending by about 15 percent.

Eventually, the national economy will turn around and bring Arizona's along. Given our cyclically erratic tax system, which is adequate during good times and terrible during bad ones, heading into the 2006 election Gov. Napolitano probably won’t need any tax increases to have budget surpluses and revenues for bold new initiatives. There even might be enough money to overhaul our antiquated and highly-variable tax system.

Kaus was clearly wrong on the federal level, where we’re getting the worst of both worlds, wrongheaded and increasing spending and wrongheaded and increasingly regressive taxation. But the incoming Arizona Legislature has no choice but to cut spending, and they’re so conservative that they just might actually enjoy the job. Then, when the economic cycle turns, they will have unwittingly set the table for new Napolitano initiatives in 2005 and 2006.

That would be sweet irony indeed.