When Bigger Isn't Better
Table of Contents:
Saving Social Security First
Bush's main arguments on behalf of his tax cut plan were that Americans were paying a historically high proportion of their earnings in taxes, that high marginal rates made it more difficult for the working poor to join the middle class, and that tax cuts would stimulate more entrepreneurship and job creation. Thus, the key provisions of his plan: lower marginal rates for all taxpayers, doubling the child credit to $1,000 and elimination of the federal inheritance tax.14
McCain's plan called for 62 percent of the non-Social Security surplus to be shifted to Social Security, a decision he said would preserve the solvency of the system for an additional 11 years; a net tax cut of $86 billion over five years, or 23 percent of the surplus; $118 billion diverted to Medicare, to extend that program's solvency until 2018; and $59 billion in debt reduction over the next ten years.15 "The reality is that Governor Bush wants to take all of the surplus and use it for tax cuts," McCain said on January 4. "I want the surplus put into Social Security."16
For his part, Bush refused to accept McCain's arithmetic: "There's enough money to take care of Social Security. There's enough money to meet the basic needs of our government. And there is enough money to give the American people a substantial tax cut, and that's exactly what I'm going to do," he said on January 7.17
As it was shown on the evening news, the debate seemed to be about whether Bush's plan cut federal revenues too much, creating the possibility of future deficits. According to this framework, McCain's approach seemed prudent, and Bush's seemed risky. The fact that reporters themselves often echoed the same concern's about Bush's plan gave McCain an advantage in that debate.
For example, no network correspondent asked whether McCain was being overly pessimistic in his estimations, even after the Congressional Budget Office (CBO) dramatically revised its estimation of future surpluses. On January 25, just one week before the primary, CBO analysts predicted that the federal government would receive an additional $1 trillion over the next ten years, essentially doubling the amount of money available for either tax cuts or increased government spending.18
Nor did any network reporter acknowledge that the revised CBO forecast meant that Bush's assertion that there was enough money for both "a substantial tax cut" and to "take care of Social Security" had been bolstered, and that McCain's insistence that Bush-sized tax cuts would jeopardize Social Security had been undermined.
Empower America's Chief Economist, Lawrence Hunter, notes that the CBO has been forced to increase its revenue projections for each of the last several years. "CBO's projections are usually biased against tax cuts," Hunter argues, "in part, because the economic model from which they derive is biased against economic growth above 2.3 percent a year."19 Since federal revenues grow as the economy grows, and since the economy grows as tax rates are cut, this would indicate that a tax cut even larger than that advocated by Bush would be both feasible and desirable.
Economist Bruce Bartlett, a fellow with the National Center for Policy Analysis, made this point soon after Bush unveiled his tax package in December. "Lowballing growth may be justified when making spending projections, but it is very inappropriate when making revenue estimates," Bartlett wrote in the Washington Times. "Assuming no change in growth from a tax cut or tax increase makes it appear the government will lose more revenue than it actually will from the former and raise more from the latter. This creates a bias against tax cuts and in favor of tax increases."20
None of these conservative arguments made it onto the networks as the Republican candidates debated tax policy in New Hampshire. Thus, McCain's assertion that Bush's tax cuts were a threat to the future of Social Security went essentially unchallenged on the evening news, and voters went to the polls without hearing the whole story from network reporters.