Text of President Bush's address to the Economic Club of Chicago

The following is a transcript of remarks by President Bush to the Economic Club of Chicago, as provided by the White House:

"...Today in Washington, a new Congress convenes -- and I will ask members of both parties to work with me to secure our economic future. We cannot be satisfied until every part of our economy is healthy and vigorous. We will not rest until every business has a chance to grow, and every person who wants to find work can find a job. So today, I'm announcing a growth and jobs plan to strengthen America's economy -- specific proposals to increase the momentum of our economic recovery." READ

An Irrelevant Proposal By PAUL KRUGMAN

Right now a sensible plan would rush help to the long-term unemployed, whose benefits — in an act of incredible callousness — were allowed to lapse last month. It would provide immediate, large-scale aid to beleaguered state governments, which have been burdened with expensive homeland security mandates even as their revenues have plunged. Given our long-run budget problems, any tax relief would be temporary, and go largely to low- and middle-income families.
So instead of a temporary measure, we get a permanent tax cut. The price tag of the overall plan is a whopping $600 billion, yet less than $100 billion will arrive in the first year. The Democratic plan, with an overall price tag of only $136 billion, actually provides more short-run stimulus.
And instead of helping the needy, the Bush plan is almost ludicrously tilted toward the very, very well off. If you have stocks in a 401(k), your dividends are already tax-sheltered; this proposal gives big breaks only to people who have lots of stock outside their retirement accounts. More than half the benefits would go to people making more than $200,000 per year, a quarter to people making more than $1 million per year. ("Class warfare!" shouted the claque.) READ

Tax cuts for rich? A time-honored Bush tradition

For those who ever believed in it, "compassionate conservatism" just took off its mask. Federal deficits are soaring. State finances are sinking into their biggest crisis
since the Great Depression. So, what does the Bush White House propose? No serious help for the states. Nor is there relief from payroll taxes to encourage job creation.
Sen. John McCain, R-Ariz., has rightly remarked on the lack of compassion in the Bush administration's economic stimulus package. Its centerpiece, costing $364 billion of the $674 billion to be spent over 10 years, is to reduce or end taxation of dividends, some 40 percent of which annually goes to the top 1 percent of wealthy Americans. What this complicated proposal would stimulate is not the workaday economy but the already huge gap between the wealthiest Americans and everyone else. READ

Bush Proves He's an Upper-Class Act (Under his tax plan, the only winners are the economic elite.)

At the top is a regal class with more wealth and income than any aristocracy has ever had. They're also receiving a bigger slice of America's total income now than at any time in the last 60 years. In the middle is a big, anxious class that's just a bit better off than a decade ago but still having trouble making ends meet. At the bottom is a large underclass whose income and sparse wealth declined through the 1980s and mid-1990s, then picked up in the late '90s when the national rate of unemployment dipped to 4% and employers had to scrounge to find workers. Now that the official rate of unemployment is back at 6%, the underclass is falling backward again.
But here's the rub. All the goods and services that can now be produced have to be bought by someone. Individual consumers account for two-thirds of what's purchased in the nation. And because of the productivity revolution, a lot of items can be made cheaper. But they're not so cheap that consumers can afford to buy all of them on paychecks that haven't gone anywhere.
The only people whose pay has skyrocketed are at the very top. They're spending princely sums on exotic vacations, mansions in the Hamptons and cashmere sweaters. But they spend only a fraction of the money they have. The much-larger anxious class doesn't have a lot of discretionary income after paying for utilities, food and housing. The underclass has virtually none. READ

Fool's Gold

Here, in one nugget, is what you need to know about President Bush's plan to scrap taxes on dividends: Almost half of the projected benefits from President Bush's plan to scrap taxes on dividends would go to the one percent of the population whose incomes top $1 million. The scheme has been promoted as beneficial to the elderly, but in fact, only six percent of the elderly with incomes under $50,000 get nything out of it. These figures come from a briefing Monday by the Center for Budget and Policy Priorities, a Washington think tank. Further, taxpayers who earn $35,000 or less come away with $27 more a year.
The impact on individuals is just the start of the matter. State governments are already reeling under fiscal pressures. Instead of following the right-wing mantra of helping the states out, Bush's proposal would drain more money away from them, worsening their situation by at least $4 billion a year.
Are right-wing Republicans playing class war? Don Nickles, the self-made businessman and senator from Oklahoma, had this to say on Sunday's Meet the Press, and he wasn't kidding: "Well, the wealthy are paying most of the taxes. You ought to have tax cuts for taxpayers." READ

Near-Term Benefits of Fiscal Plan Are Debated

A White House estimate shows that administration officials are expecting President Bush's tax plan to generate only 190,000 jobs in 2003, a small number when compared to the 1.5 million jobs that have disappeared over the past two years. The document, prepared by the White House Council of Economic Advisers, makes it clear that the main purpose of the president's 10-year, $670 billion tax-cut proposal is not to fix the economy's current weakness but rather to advance a longer-term agenda of reducing taxes and increasing future growth.
When President Bush announced his program on Tuesday, administration officials predicted it would create 2.1 million jobs and said the tax cuts had been "front-loaded" to have as much effect in the first year as possible.
But the White House's estimate says the real economic stimulus would not begin until 2004, by which time many economists predict that growth will already have increased. The document, released today, gave ammunition to Democratic critics of the president's plan who argue that the tax plan is too expensive and would do little to relieve the pain of the current slowdown. READ

Bush Says Tax Proposal Will Be Fair for All Incomes

President Bush promoted his tax cut proposal today as fair to all Americans and accused opponents of the package of engaging in class warfare.
With even some Republicans saying that Mr. Bush would have to compromise to get a plan through Congress, Democrats broadened their critique today, saying that the president's proposal does not offer any substantial financial assistance to cash-strapped states and could force states to raise taxes, cut services or both.
Because state income taxes are typically tied to federal income taxes, states will almost certainly lose revenue under the White House plan, lawmakers said. The plan could also make it more expensive for states and municipalities to issue their own bonds. The White House considered including assistance to states, reportedly as much as $10 billion, but the provision was cut.
Saying her state could lose up to $1.1 billion under the Bush plan, Senator Barbara Boxer, a California Democrat, said, "It's taking a nightmare problem that we already have with our states and making it even worse, more chilling." READ

White House Aides Launch a Defense of Bush Tax Plan

Calculations by the Tax Policy Center, a nonprofit research group run by the Urban Institute and the Brookings Institution, indicate that the wealthiest 1 percent of all taxpayers would receive 42 percent of the savings from making dividends to shareholders tax-free. READ

Plan Gives Most Benefits to Wealthy and Families

The rich would make out the best, but President Bush's mammoth tax plan would give something to almost everybody.Citizens for Tax Justice, a liberal research group in Washington that uses government tax data and a respected computer model to analyze tax changes, calculated today that nearly half of the tax benefits in Mr. Bush's program would flow to the wealthiest 10 percent of taxpayers. The wealthiest one percent, who earn an average of $1 million a year, would see their taxes decline about $32,000, the research group said.
Mr. Bush's tax plan to eliminate dividend taxes overlooks a huge population of taxpayers: more than 40 million people who put money into tax-deferred individual retirement plans like the 401(k) plan. Neither the money set aside in a 401(k) plan nor the dividends that accumulate are subject to any tax until a person withdraws the money after reaching retirement age.
But when a person does withdraw money, the government taxes all of it as ordinary income — regardless of whether the money came from dividends, stock market profits or the person's original contributions.
In effect, that means that people who buy stocks and accumulate dividends in a tax-deferred retirement plan will eventually be taxed on those dividends. But the much smaller number of people who currently pay big taxes on dividends will get a big new break. READ

Bush Tax Cut Unfair, Won't Help Economy

George Bush's tax cut plan is unfair and ineffective. Its centerpiece, the elimination of the tax on stock dividends, is targeted almost exclusively to the well-off. This tax cut will generate lots of tax breaks for the top 1% and lots of fees for Wall Street, but it won't help anyone get a job. The only thing this plan "stimulates" is more economic inequality in the U.S.Eliminating the tax on dividends will primarily help the wealthy. Two-thirds of the dividend tax cut benefit will go to the top 5%. More than four dollars out of ten will go to the top 1%, people making more than $330,000 a year.
One quarter of the benefit will go to the top 0.2%, people making more than $1 million a year. That’s as much as the bottom 90% combined will get from the dividend tax cut. READ

Drifting Toward Economic Apartheid

In this time of war and recession, state budgets across the country are plunging into a sea of red ink. Who will be making the greatest sacrifice? Many state legislatures have already begun to answer that question, by reflexively cutting health, education, and other social programs aimed at those in need.
That leaves states with two ways to balance their budgets: cut programs or raise taxes. In almost every state in the land, major budget cuts are looming. Many states have immediately turned to cuts in spending for Medicaid services that are not federally mandated, such as dental benefits and health care for immigrant mothers. Others are slowing or cutting education spending and beginning to cut human services programs for the most disadvantaged, including poor children, new immigrants, and people with mental and physical disabilities.
Of course, as unemployment rises, this is exactly the moment when these safety nets are needed most. Yet many states would rather trim their nets than reevaluate some of the tax cuts and giveaways of the last decade. In this pervasive anti-tax climate, discussions of raising revenue are usually the last consideration – and many politicians facing reelection will be wary of raising taxes in an election year. READ

States Fear Double Whammy From Tax Plan

The states fear they will lose in two ways. Because state income tax laws are tied to the federal law, the states will also stop taxing dividends. In addition, the removal of taxes on dividends makes stocks a more attractive investment vehicle than the traditionally tax-free municipal bonds.
Over all, the officials said the potential losses far exceed the $10 billion in state aid included in Mr. Bush's 10-year plan, much of which is earmarked to help the unemployed.
...Data compiled by the National Conference of State Legislatures shows that 43 states are operating in the red, led by California, which is facing a $34 billion budget gap for the next 18 months. Over all for 2004, the states are facing their largest shortfall in half a century, as much as $85 billion, a study by the Center on Budget and Policy Priorities shows.
...But under the Bush plan, bonds would have to compete with tax-free stocks, a race that probably would force state and local governments to increase interest rates, driving up pressures on budgets to service the debt. READ

Understanding Bush Stimulus (In light of Bush's announced new tax cuts for the rich, here's some links about the 2001 tax cuts and other economic trends)

Six Months Later, Audit Board Holds First Talk

Six months after it was created by Congress, the new board overseeing the accounting profession — the centerpiece of reform legislation after a year of corporate scandal — held its first formal meeting today without a permanent chairman, a senior staff or a final budget.
During the meeting, the new board members voted themselves annual salaries of $452,000, or $52,000 more than the pay of the president. (Once it has a chairman, the board said, it plans to pay that official $560,000.) They also ratified a lease to put their Washington headquarters in the K Street space that was vacated by the accounting firm Arthur Andersen after it collapsed last year.
The board has been assigned the job of inspecting the auditors of the nation's publicly traded companies, in effect serving as the auditors of the auditors, as one member put it. It is supposed to write and enforce ethics rules and set standards for the profession.
After approving their annual pay of $452,000, or more than double the $171,900 pay of cabinet members like the secretaries of state and defense, and the attorney general, the new board ratified a request to borrow $1.9 million from the government to meet its expenses for this month. READ

Archives Calls Mount for Bush, Cheney, to Come Clean: House GOP Shelters Offshore Shelters: House GOP Kills Effort to Plug Offshore Loopholes

The discovery that Enron had maintained nearly 1000 offshore "entities" in the Caribbean to hide assets and avoid taxes shocked many Americans. But, the real shocker is how common the practice has become. Hundreds of large American corporations have either reincorporated offshore or maintain offshore subsidiaries solely for the purpose of avoiding US corporate taxes.
The IRS estimates these corporate offshore tax shelters cost the US Treasury over $70 billion a year in lost revenues - twice the annual cost of the war on terrorism. Democrats in Congress have tried to pass legislation to close these loopholes only to see their measures blocked by House Republicans. Republicans claim the problem is not with the offshore tax havens, but with US corporate taxes, which they say, are too high.
Again last week, House Republicans successfully killed a measure that would have punished companies that moved offshore to avoid US taxes by denying those companies federal contracts. READ

Archives (2001) House GOP “Stimulus” Bill Offers 16 Large, Low-Tax Corporations $7.4 Billion in Instant Tax Rebates

The “stimulus” tax-cut bill just approved by the House Ways and Means Committee calls for some $25 billion in immediate tax rebates to large profitable corporations that paid the low-rate “alternative minimum tax” over the past decade and a half because loopholes cut their regular income tax bills to little or nothing.
Some $7.4 billion of these corporate rebate checks would made out to just 16 tax-avoiding Fortune 500 companies—each of whcih would get more than $100 million in rebates. (These companies reported a total of more than $42 billion in pretax U.S. profits last year.)
The 16 low-tax companies that would get more than $100 million each under the GOP-backed bill include five in the energy business, along with the three largest U.S. automakers. Two companies are in the airline industry, which is receiving $15 billion in grants and loans under already passed legislation.
The bill’s proposed total of $25 billion in instant rebates for profitable tax-avoiding corporations is almost twice as big as the $13.7 billion in added individual rebates that the tax committee decided to provide to 37 million, mostly low-income families and singles whose 2000 earnings were too low to qualify for the previous round of personal tax rebates. READ

Archives Less Than Zero: Enron's Income Tax Payments, 1996-2000

A January 17 analysis of Enron's financial documents by Citizens for Tax Justice finds that Enron paid no corporate income taxes in four of the last five years-- although the company was profitable in each of those years.
Over the five-year period from 1996 to 2000, Enron received a net tax rebate of $381 million. This includes a $278 million tax rebate in 2000 alone. Over the same period, the company’s profit before federal income taxes totaled $1.785 billion. In none of these years was the company’s pretax profit less than $87 million.
At the 35 percent tax rate, Enron's tax on profits in the past five years would have been $625 million, but the company was able to use tax benefits from stock options and other loopholes to reduce its five-year tax total to substantially less than zero.
Among the loopholes used to reduce the company’s tax liability was the creation of more than 800 subsidiaries in “tax havens” such as the Cayman Islands. READ

Archives The reported profits in tax havens grew far faster than elsewhere.

Tax haven profits rose 735 percent, to $92 billion, from 1983 to 1999, while profits in countries that are not tax havens grew only 130 percent, to $114.2 billion.
Bermuda and the other tax havens accounted for 45 percent of the total offshore profits in 1999, but only a fourth of those assets.
Actual taxes paid to the havens ranged from a fraction of 1 percent to 12.5 percent of profits, compared with an effective rate of 35.4 percent in the other countries, the Commerce Department data show.
In all, the 10,000 biggest American companies reported $758 billion in profits worldwide in 1999 and paid taxes to the United States of $154 billion, or 20 percent. READ

Archives PATHBREAKING CBO STUDY SHOWS DRAMATIC INCREASES IN BOTH 1980s AND 1990s IN INCOME GAPS BETWEEN THE VERY WEALTHY AND OTHER AMERICANS

A new pathbreaking Congressional Budget Office study(1), which includes the best data that any agency or institution has compiled on income and tax trends in recent decades, shows that the average after-tax income of the richest one percent of Americans grew by $414,000 between 1979 and 1997, after adjusting for inflation, while average after-tax income fell $100 for the poorest 20 percent of Americans and grew a modest $3,400 for those exactly in the middle of the income spectrum. In percentage terms, after-tax income grew an average of 157 percent over this period for the top one percent of the population, rose a modest 10 percent — about one-half of one percent per year — for the 20 percent of Americans in the middle of the income spectrum and was effectively unchanged for those in the bottom fifth.
The CBO data show that the share of the national income after taxes that the top one percent of the population received nearly doubled between 1979 and 1997. The CBO data indicate that by 1997, the 2.6 million Americans with the highest incomes — the top one percent — had as much after-tax income as close to 100 million Americans with the lowest incomes. Similarly, the 20 percent of Americans with the highest incomes received as much as the other 80 percent of the population.
Center on Budget and Policy Priorities analysts noted that the tax-cut legislation President Bush is about to sign will further widen the income gaps between the wealthiest Americans and the rest of the population. The top one percent will receive an average tax cut of more than $46,000 from the legislation when the tax cuts are fully in effect, compared to an average tax cut of $600 for the middle fifth of the population and less than $70 for the bottom fifth. The average percentage gain in after-tax income that households be about three times greater for those in the top one percent of the population than for those in the middle fifth and more than seven times greater for those at the top than for those in the bottom fifth. READ

Archives Income gap of richest and poorest widens for U.S. families

The income gap between the poorest and richest U.S families grew wider during the 1990s, according to a report released Tuesday by two Washington think tanks.
1988-1998
• Earnings for the poorest 20 percent of American families rose less than 1 percent during the 10-year period but jumped 15 percent for the richest fifth.
• Income for the poorest families rose $110 to $12,990. For the richest families it increased by $17,870, to $137,480, more than 10 times that of the poorest sector.READ

Archives Year-by-Year Analysis of the Bush 2001 Tax Cuts Shows Growing Tilt to the Very Rich

Over the ten-year period, the richest Americans—the best-off one percent—are slated to receive tax cuts totaling almost half a trillion dollars. The $477 billion in tax breaks the Bush administration has targeted to this elite group will average $342,000 each over the decade. By 2010, when (and if) the Bush tax reductions are fully in place, an astonishing 52 percent of the total tax cuts will go to the richest one percent—whose average 2010 income will be $1.5 million. Their tax-cut windfall in that year alone will average $85,000 each. Put another way, of the estimated $234 billion in tax cuts scheduled for the year 2010, $121 billion will go just 1.4 million taxpayers.
For the four out of five families and individuals making less than $73,000 this year, three-quarters of the tax cuts—averaging about $350 this year—are already in place. READ
http://www.ctj.org/html/gwb0602.htm

Archives Although our nation is currently prospering under a healthy economy, many Americans still struggle to get by.

The dark secret of the 1990s expansion is that almost half of all American families have not seen their incomes return to the same purchasing power as they had before the 1990 recession.
The income gap in America has widened substantially over the past two decades. Since the late 1970s, the average income of the bottom fifth of American families dropped by $2,500 (21%), while the average income of the wealthiest fifth increased by $26,770 (30%). Now the richest 20% of households earn as much as everyone else in America put together. READ