Gordon Smith’s $1.9-Billion-a-Week Problem

Chuck Sheketoff

US Senator Gordon Smith has a problem. He appears to be hooked on fiscally irresponsible tax cuts, in general, and repeal of the estate tax, in particular. This addiction is undermining his sincere concern for the health of low-income families.

A fiscally- and morally-driven Senator Smith recently worked hard to minimize planned cuts to Medicaid and other safety net programs. He’s expected to turn around soon, however, and vote for approximately $60 billion more in tax cuts over the next five years, including a sizeable tax break for wealthy investors with capital gains and dividend income.

In addition, Senator Smith wants to repeal the estate tax, which would cost $1 trillion in the decade after it takes effect when you include the $255 million of interest that will need to be paid to cover the cost of the increase in the nation’s debt because of the repeal.

What’s a trillion dollar price tag mean? That means Gordon Smith is willing to spend $1.9 billion a week to improve the lives of the Paris Hiltons of the country. Contrary to the wildly exaggerated claims of repeal supporters, repealing the estate tax would affect just two out of every 100 deaths each year. The beneficiaries of these estates are not ordinary working people or business owners, but some extremely rich heirs.

Six weeks of estate tax repeal will cost taxpayers more than the five years of cuts to Medicaid that the junior Senator from Oregon is trying to save. If that’s not proof positive that the tax cut is irresponsible, then what is?

Senator Smith’s spokesman waives off such concerns by claiming that tax cuts are good for the economy and that there's more revenue coming in now because the tax cuts have worked and brought the economy back.

The trouble is, according to the chairman of the President’s Council of Economic Advisers during President Bush’s first term, there is “no credible evidence” that tax cuts pay for themselves. Bush’s former key advisor said that an economist who makes such a claim is a “snake oil salesman who is trying to sell a miracle cure.” I don’t know what he’d call Senator Smith or his spokesperson.

I do know that the notion that tax cuts do not pay for themselves is entirely consistent with the consensus position of economists and financial analysts and the empirical data. Look at the 1980s and 1990s. The average economic growth rates for those two decades were virtually identical. But the rates of revenue growth diverged sharply. Revenue collections grew much more robustly in the 1990s, when taxes were increased, than in the 1980s, when taxes were cut sharply. The nation’s fiscal position improved substantially in the 1990s, ending the decade in a surplus.

Then came the Bush tax cuts and now record deficits.

It is time for Senator Smith to face the fact that his tax cut addiction is incompatible with his care for the sick and disadvantaged. Such an epiphany is not out of the question. Just recently Oregon’s US Senator Ron Wyden and US Representative Darlene Hooley, both Democrats, snapped out of their long-held positions and declared that repealing the estate tax -- or masking a repeal in a pseudo-reform bill -- would be fiscally irresponsible.

I remain the eternal optimist. I look forward to Senator Smith kicking the tax cut habit, and voting against the fiscally irresponsible repeal of the estate tax and other tax cuts for the well off. It will be great day when Gordon Smith no longer suffers from his $1.9-billion-a-week problem and recognizes that he can’t help the poor and reduce the deficit by voting for tax cuts that primarily benefit the nation’s wealthiest households.
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Chuck Sheketoff is the executive director of the Oregon Center for Public Policy.

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By Chuck Sheketoff Nov. 13, 2005