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Reply to "Affirmative Action For Whites, Part CLVII"

As long as we are illuminating how the Bush cabal is minting the hard coin of the public trust into the debased currency of their personal ambition. . .
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GET RICH OR GET OUT
Attempted robbery with a loaded federal budget

By Thomas Frank
Harper's Magazine
Jun2003, Vol. 306, Issue 1837

The Bush Administration's proposed budget for 2004 fills five phone
book--size volumes; it is 2,866 pages long. The list of authors alone runs
to hundreds of names, arranged alphabetically, occupying four pages of
four columns each. The UPS man who delivered my copy had to carry it on
his shoulder, puffing as he climbed three flights of stairs. When he
plunked it down on the floor of my apartment, the dishes rattled in the
cupboard.

The five-volume budget set includes a book of precise details in
microscopic type, a book of tables showing how much was spent on the
various programs over the years, a book of hints for unlucky staffers who
have been assigned to think about matters budgetary, and a main volume--a
reader-friendly book featuring a continuous prose narrative, full-color
pictures of your government in action, items of interest set off in
attractively typeset boxes, and a reassuring abundance of the familiar
phrases of bureaucracy: "homeland," "stewardship," "caregiver."
"Transition" gets used a lot as a verb.

I don't have too much of a problem with the budget's desk-crushing backup
volumes. I find it kind of interesting to read seven pages of tables
detailing highway expenditures from 1940 to the present. It's the part of
the budget I'm supposed to like that I really can't stand.

Let me upgrade that remark: The 2004 budget is toxic. It is an epic of
distortion and evasion and contradiction and misleading rhetorical ploys.
The object of this malodorous epic is to outline the Bush Administration's
plan for plunging the nation from surplus into deficit and to cast the
blame for the ensuing disaster on the very people--the retired, the sick,
the poor--who will feel the brunt of its effects. Whether Congress alters
this budget, reduces its tax cuts, or rejects it altogether is beside the
point. This document we will have always with us, an indelible reminder of
what the Bush team would do if they possibly could.

There is nothing inherently wrong with deficits, even massive ones, as a
tool of state policy. In wars and recessions it is right and even proper
for the federal government to spend more than it takes in, so as to ensure
that resources continue to flow to consumers and to those hardest hit, and
thus stimulate the economy. The 2004 budget is not concerned with any of
that. Here war and recession are merely pretexts for getting the crudest
social trends of the last twenty years moving again. This deficit is
designed to enrich those at the very top of the social pyramid while
cutting services for those lower down. This is not cyclical Keynesianism.
This is not a helpful or even a merely benign program of deficit spending.
It is a blueprint for sabotage. It is an instruction manual for how to
power up a complicated machine and dash it headlong into a stone wall.

After which the president will turn to us and say, See? I told you big
government doesn't work."

We know he will say this, because his budget pretty much says it now. In
the early days of his administration, George Bush was hailed as the "CEO
president," an M.B.A.-bearing true believer who would put management
theory into practice. This was thought to mean that he was a practical man
who would make things work smoothly, just like they supposedly do in a
corporation. What such interpretations overlooked was that management
theory holds government to be a uniquely depraved social actor.

M.B.A.-speak is intertwined with contempt for government throughout the
2004 budget. A preliminary chapter called "Governing with Accountability,"
for example, simply heaps blame on federal shoulders. When corporate
scoundrels are accused of wrongdoing, of course, they try to defend
themselves, or at least take the Fifth; here the White House can be seen
confessing, on behalf of previous administrations and, indeed, the entire
federal workforce, to just about anything you care to think of. "Federal
agencies," for example, are said to be so out of touch that they have "not
managed themselves well enough to know whether they had the right people
with the right skills to do their work." Among federal workers "pay and
performance are generally unrelated," which is apparently not a problem in
the private sector. Another chapter spreads the blame to federal efforts
generally, lamenting that "in most cases, we do not know what we are
getting for our money." This in turn is said to be a failing of "the
Washington mentality," which "has wasted untold billions of dollars..."
The books tell of gaping loopholes in the Social Security system,
credit-card abuse by federal employees, and preposterous agricultural
price supports, all of these problems flowing together to give the overall
impression that government is simply a gigantic boondoggle.

When government is relieved of its duties by the private sector, though,
the narrative turns chirpy and upbeat. Indeed, the highlight of the budget
is meant to be the administration's proposal that every single federal
operation embrace a little M.B.A. magic: outsourcing, merit pay, the
setting up of websites. Congratulation is due whenever a department
manages to toss a bone to the private sector, such as the construction of
housing on Army bases or even the taking of bids on the printing of the
budget itself, which is such a big deal that it receives its own brag box
on page 39. It is surely not a coincidence that the Department of Defense,
one of the only departments Dubya likes enough to increase its funding, is
flattered on the very first page of its chapter by being compared to a
"large corporation." Call it Regime Change, Inc.

That there might also be waste and inefficiency and even fraud in the
private sector is a topic the budget chooses to ignore, just as the
National Energy Policy, developed by Vice President Dick Cheney in
consultation with a cabal of energy executives, refused to acknowledge
that electricity problems in California were caused by corporations gaming
the system. In the case of the Department of Defense, that organization so
like a "large corporation," the problem of private pork is known to be
particularly severe. But although the budget tells proudly of a Navy base
that has found a way to save on heating bills, the epidemic of
mismanagement at defense contractors and the enormous divide between pay
and performance all across the private sector are neither described nor
criticized, Nor is market manipulation by electricity traders, though it
cost the government immense sums. Nor is cherry-picking by the HMOs, into
which this budget wants to push even more Medicare recipients. Nor are the
disastrous conflicts of interest on Wall Street, even though one of the
supplementary budget volumes suggests that Wall Street is a good place for
our Social Security savings. Nor are the practices of the oil companies
that the budget proposes to turn loose on the Arctic National Wildlife
Refuge and, soon enough, on Iraq. That waste and inefficiency is just not
up for debate.

Much of the press commentary on this budget has focused on the deficits
into which it proposes to plunge us. The budget's authors have, of course,
anticipated this reaction. That surplus for which everyone pines was, we
are helpfully informed, nothing more than a "revenue bubble" propelled by
a bull market that was "already in the process of popping" when the
businessman president took office. Although it is obviously true that the
booming stock market pumped up tax receipts, and although it was foolish
for anyone to count on those inflated tax receipts continuing into the
future, to call the surplus a "bubble" is to confuse the issue. In
ordinary usage, a "bubble" is a pitfall of the private sector, a situation
in which prices are driven to unsustainable heights by collective
fantasies of stupendous future profits. A bubble is a swindle--you know,
like the NASDAQ. Here the term is simply used to imply that the surplus
was doomed all along and that the current administration, unlike its
predecessor, is in no way to blame for its disappearance. Those tax cuts
enacted two years ago? They did not cause the deficit. The budget would
have been in deficit anyway because of falling revenues after the
stock-market crash. Tax cuts, therefore, aren't important. Slam door, walk
away.

What this fails to consider is that the deficit is worse, is more bad,
than it otherwise would have been had those tax cuts not been enacted.(A)
What this further fails to consider are the deficits going forward, which
the budget expects to get bigger as we begin to feel the effects of the
mammoth new tax cuts that are proposed only four pages earlier in this
selfsame document.

But no. "The Real Fiscal Danger," the budget tells us in a chapter of that
title, is Social Security and Medicare. When you cut rich people's taxes,
no harm can possibly come. When you offer insurance for the average per
son's health care and retirement, however, you're playing with fire. The
Bush Administration has already distinguished itself by the lengths to
which it will go to libel Social Security--its handpicked commission on
privatizing the program actually implied that it was somehow racist--but
here the administration outdoes itself in cynical innuendo. The budget
implies that these programs are in such staggering ill repair that they
may in fact be responsible for the overall deficit. Here is a sentence
that actually occurs on page 31 of the main volume of the 2004 federal
budget:

But in 2002 the combined shortfall in Social Security and Medicare of
nearly $18 trillion was about five times as large as today's publicly held
national debt.

An eighteen trillion dollar shortfall! Frightening, is it not? Until you
read further and realize that, in fact, both programs are today in
surplus, that Social Security will remain in surplus for fourteen years to
come (it will be able to function on the money in its Trust Fund until
2042),(B) and that the $18 trillion figure is a cumulative
seventy-five-year estimate based on extreme long-term projections that
will probably turn out to bear as much resemblance to reality then as the
Futurama exhibit at the 1939 World's Fair does to our reality today. None
of this is admitted, however, until the chapter is nearly over, even
though the mind-bending $18 trillion number has already been unleashed to
do its terrifying work on the very first page. The chapter also includes a
boxed heart attack headed "What Does $18 Trillion Mean To You?" which
invites the reader to believe that in order to pay for Social Security and
Medicare "the federal government would have to confiscate almost half of
all household wealth..."

This is irresponsible even on the budget's own terms. In the preceding
chapter, the one about deficits, the authors had insisted that federal
budgets need only look ahead five years (rather than ten, which had been
the previous standard), on the grounds that longer-term forecasts vary so
much they are largely worthless. But not if those forecasts might help to
impugn Social Security and Medicare! When that is the object, it seems, no
technique, however inconsistent or speculative or fanciful or simply
wrong, is out of bounds.

By the terms of normal human interaction, this stuff is so dishonest it's
well-nigh Enronian. According to one economist I talked to, the $18
trillion number is so groundless that it can have been introduced here
only in order to panic and deceive. It is a transparent effort to redirect
the blame for the massive cuts in government spending that Bush's tax cut
will necessitate. And, one might add, to come up with some figure that
might rival the actual, present-day, real-world destruction of more than
$7 trillion of household wealth by the collapse of the stock market--the
very place, as it happens, that this administration would rather we put
our Social Security money.

Medicare's share of the imaginary $18 trillion is $13 trillion. No one
denies that the system is in trouble; health-care costs in America have
been out of control for years, soaring above what they are in every other
industrialized country, even those that are healthier than we are, even
those with socialized medicine. To arrive at its frightening number, the
administration projects that this situation will continue and even worsen,
with health-care costs ascending at such a rate that they will eventually
wreck the entire economy, private sector and all. For normal readers, this
prediction is as shattering an indictment of the free-market way as
anything ever dreamed up by Eugene Debs. But in keeping with their general
belief in the infallibility of markets, the authors of the budget offer no
plan for restraining health-care costs, as is done in so many other
countries. They take it for granted that all we will care about as the
world goes to managed-care hell is this one shocking number, the tab the
taxpayer might have to pay, fished up from who knows where and manipulated
to imply that the basic idea of social insurance is somehow to blame.

For Social Security that one shocking number is given as $4.6 trillion.
The budget asks the reader to imagine this A-bomb of a number, piled up
over the next seventy-five years, as though some cosmic collection agency
were phoning us night and day demanding we cough it up right now. This is
like those pro-abstinence posters that tried to convince us that since the
total amount a parent spends on a child over the course of the child's
life is something like $100,000, we shouldn't even contemplate having a
kid until we'd saved the hundred grand. Consider also that seventy-five
years from now the United States will be a much richer country than it
currently is; asking us to pay off a debt today from that bigger,
wealthier nation of 2078 is sort of like asking Haiti to pay off France's
debt.

In truth the only way to understand projected future public debt is as a
percentage of projected future economic output. Economist Dean Baker of
the Center for Economic Policy Research points out that over the same
seventy-five-year horizon gross domestic product is also expected to grow,
keeping the Social Security shortfall at less than one percent of future
GDP. Measured this way, Baker continues, the $75 billion that President
Bush requested from Congress in April to pay for the war in Iraq is
"bigger, relative to GDP, than the amount of money needed to make Social
Security fully solvent for the next seventy-five years."

Even if you accept the administration's wildly pessimistic view of Social
Security's future, the problem is dwarfed by the size of the
administration's tax cuts. The Center for Budget and Policy Priorities
estimates that this budget's proposed tax cuts, added to those of 2001,
will, over the course of seventy-five years, outweigh Social Security's
estimated long-term shortfall by a factor of three. Take into
consideration who will benefit from each policy choice--fund Social
Security, help out the average American; go ahead with the tax cuts, help
out the very wealthiest stratum of society--and it is clear that what is
being proposed here is an historic reconfiguration of the machinery of
government to serve the rich rather than the poor or even the middle
class.

The real problem with Social Security, of course, is that it is a popular
and successful program. Its existence confirms that there are economic
functions better served by government than by business, and as such it
provides a foundation for the activist government that pro-business
conservatives like the current president have dedicated their lives to
destroying.

The title that the budget's authors chose to put on the chapter
introducing the administration's proposed tax cuts is "For Everyone
Willing to Work, a Job." Willingness to work has nothing to do with it,
though. To receive the stock dividends that the chapter proposes to make
tax-free you don't even have to get out of bed in the morning. Dividends
merely require that you have excess money lying around. This budget is the
administration's way of showing its support for a population of
unproductive freeloaders, as long as they're rich freeloaders.

The rest of us have to work, of course. And as recent headlines confirm,
work is becoming scarcer by the day. Hence, I suppose, the chapter's oddly
socialist-sounding title. But there is, of course, no full-employment
program offered here. In fact, jobs also have nothing to do with what the
chapter proposes, except as a hoped-for by-product of the torrential
economic activity meant to flow from the dividend windfall for the idle
rich. A more accurate title would have been "For Everyone Who Has a
Million Dollars, Some More."

For all the media attention that has been paid to the administration's tax
package, the budget itself gives the subject surprisingly short shrift.
The tax-cut chapter is only four pages long, the figures that it presents
are apparently unrelated to those being used by the media, and the
breakdown of who will benefit from the tax cuts is as predictably
misleading as everything else in this feculent document, proceeding by age
group and marital status rather than by the more obvious and useful
category of income.

This is unfortunate, at least from a literary standpoint. The tax cut is
by far the most daring and controversial and hence interesting aspect of
the 2004 budget; if passed by Congress, it would surely be the golden
cross on which federal budgets for years to come were crucified. And yet
these five volumes and countless words of text give us almost no idea of
what the tax cut actually looks like.

So let's put a face on it. The genius of the administration's new tax-cut
plan is that it balloons over time as different tax cuts kick in. Passing
it now would take only $40 billion or so out of the federal revenues, but
by the year 2013 it will have rolled up a total cost, according to the
Citizens for Tax Justice, of nearly $2 trillion, including interest. Add
to that the $1.6 trillion in lost revenue that will eventually result from
the 2001 tax cut, and you can see the vague outlines of the vise in which
legislators ten years from now will find themselves squeezed.

Who will benefit from this? According to the administration, we all will;
people in the highest income brackets are only the immediate
beneficiaries. In fact, 77 percent of this year's tax cuts will go to
society's richest 20 percent. Fully 32 percent of the total tax cuts this
year will go to society's richest 1 percent. While the average person will
get a tax cut of $289 in 2003, people who take in more than a million
dollars a year will get tax cuts of more than $30,000 each. Ironically,
these are the same people who benefited from the great bull market of the
1990s, as well as from the great bull market of the 1980s. The bull may
have exhausted himself now, but with George W. Bush taking up the slack
these same folks are going to get their third up-decade in a row.

Just imagine how the president's writers might have illustrated this
aspect of the budget. Rather than photos of impoverished children getting
school lunches and handicapped people working in a garden, the documents
might have included pictures of high-income Americans posing proudly on
their new sailboat, or pointing to the gleaming copper gutters they've had
installed on their suburban manse, or sharing a laugh with the eager young
staff of the rule-breaking libertarian magazine they've endowed. We could
gawk at their titanium tree house designed by Frank Gehry, their Turnbull
& Asser ties, their friend the congressman, their trip through Indochina
on a sedan chair.

Think also of the drama lurking on the other side of the ledger. One of
the reasons the Bush people love tax cuts is that tax cuts defund
government--but gradually and indirectly, allowing plenty of time for
blame evasion later. Although it may not look like much now, this tax cut
is a time bomb planted in the heart of activist government: as it grows,
the whopping giveaway to the rich will compel massive cuts in government
spending somewhere down the road. Imagine as all the deficit-reduction
battles of the early nineties are fought all over again, only with much
greater stakes. Imagine the look of dawning desperation on those
politicians' faces as they begin to understand Bush's masterful fait
accompli. Like the U.N. delegates Bush has similarly outmaneuvered, they
will vote and speechify in vain. The public will laugh at their impotence.
And then will come the moment of hard truth. On whom will death set his
fateful hand? Who will be defunded? Maybe it will be Head Start. Or
Medicaid. Or Food Stamps. Or perhaps the windbags in D.C. will accede at
long last to the administration's desires and do the only thing that will
rescue them from this elegant trap--gut Social Security.

Cutting the taxes of the wealthy while heaping calumny on Social Security
and Medicare for not having enough money in the bank might seem to many
readers like a perverse way of doing things, but through the prism of
management thought it makes perfect sense. After all, the Bush plan
certainly does "build shareholder value," doesn't it? And it rewards top
management in the manner to which they are most decidedly accustomed.
Everyone knows that to attract and retain top talent you have to offer top
compensation packages.

Consider also how the 2004 budget deals with labor, the chronic buzz-kill
of the M.B.A. world. In the spirit of such classic market-model solutions
as medical savings accounts and school vouchers, it unveils what it calls
"Personal Re-employment Accounts" (PRAs), a bold new program that may
someday supplant traditional unemployment insurance altogether. The budget
describes our existing unemployment system as "an unwieldy relic," mainly
because it relies on taxes levied on the worker's former employer, and
because "employers complain that their federal unemployment taxes are too
high." Awww. PRAs, on the other hand, will provide the unemployed worker
with a fixed sum of money (up to $3,000, apparently regardless of the
worker's expenses or previous state of employment), doled out to her in
installments while she remains unemployed, the balance deliverable as soon
as she finds work. The PRA is thus supposed to give the worker--get
this--an incentive to find a job. Evidently that's what's lacking in these
recessionary times: the will of workers to get off their ass and stop
being poor.

Imagine how an observer who is utterly innocent of American ways might
respond to this. "Won't this incentive business simply be negated by the
above-described dividend business?" they might ask. "Won't those
unemployed workers simply fall back on their newly tax-free dividends and
continue their lazy ways?" Imagine how the room would fall silent and
everyone would blush at the stranger's naïveté, how some thoughtful
Bushite would take him aside and explain to him that we have, in America,
something called social class. The policies aren't contradictory, since
the people who receive unemployment and the people who receive dividends
come from very, very different groups. Handouts are okay for the rich, who
own most of the stock, but workers--well, workers need to learn
discipline.

The groups that claim to represent workers need to be taught a lesson,
too. Just as Secretary of Labor Elaine Chao recently took the opportunity
of addressing the AFL-CIO's annual meeting to read aloud from a list of
union-related crimes, the budget for the Department of Labor proposes,
under the heading "Standing Up for the Rights of Union Members," to
increase the budget for investigating and prosecuting unions. "Cracking
Down on Labor Racketeering," as the budget puts it, might be of some
benefit, but it is by no means a burning requirement of the moment. (Did
unions destroy the NASDAQ?) The notion's prominent place in the budget is
yet another blame-dispersal device, this one lifted from the playbook of
the auto industry: whatever goes wrong, blame the unions. In the meantime,
the initiative will impose costs on innocent unions as well as villainous
ones, and is thus a clear signal of where the administration's sympathies
lie. The Labor Department budget is getting smaller, remember, not bigger,
and while the dollars flow for down-cracking, other programs from the days
when unions had a say in how the country was run are simply being
defunded.

Every kid growing up in Kansas in the seventies knew, as I did, that the
Republicans were the party of sound government. Whereas Democrats
practiced a degraded politics of tax and tax, spend and spend, elect and
elect, Republicans were upright men who stood for balanced budgets and
deplored the dalliance with deficits in which the country had engaged
since the 1930s. Republicans were insiders, responsible businessmen,
people with a personal stake in the fiscal probity of our public
institutions.

Now all that stuff sounds like the quaint idealism of youth, something
akin to my Boy Scout faith that the United States would never strike first
in a war. To believe either today you'd have to have spent a long time on
another planet.

There still are honorable, balanced-budget Republicans, of course. But the
dominant, conservative strain of the party's thought and rhetoric has gone
way beyond probity. Today the GOP is not the responsible government party;
it is the antigovernment party.

"Government is not the solution to our problem," Ronald Reagan famously
said in his first inaugural address. "Government is the problem." Today
the phrase reverberates across the years, echoed by a mighty chorus:
Limbaugh, Coulter, Liddy, North, O'Reilly, Hannity; Fox News, Conrad
Black, FreeRepublic.com; Gingrich, Barr, DeLay; Hayworth, Gramm, Santorum.
Yesterday's far right is today's mainstream, and the belief that
government is merely misguided has given way to the belief that government
is unredeemable; that the liberals who staff it are elitist, un-American,
treasonable. Talk to the average Kansan about politics today and you will
find that he despises the federal government the way one would despise a
colonial tyrant. He believes it has nothing to offer him, despite the fact
that it paid for his college education and has subsidized his way of life
with agricultural price supports. He imagines that by writing
government-hating emails on some listserv, he is participating in a noble
brotherhood of revolutionary patriots not unlike the Founding Fathers.

Much of the GOP's most spectacular initiatives over the last ten years
seem to have been designed less to accomplish some overt object than to
throw a wrench into the works of this despised institution. Conservatives
turn a budget debate into a crusade to shut the government down. They
paralyze the executive branch with harassing investigations and
impeachment proceedings. They joke about assassinating a Democratic
president. They fantasize about abolishing entire departments. They cut
the wages of federal workers. They dream up ways to make the tax code bear
more heavily on the poor, in order to turn the poor against government and
"get [their] blood boiling with tax rage," as the Wall Street Journal
recently put it.(C) They suggest that they might default on government
bonds. They "strengthen" Social Security by making it appear weaker. Even
Republican blunders such as Watergate wind up reinforcing their message:
You just can't trust government!

Reckless, massive deficits have become, since Reagan, the signature
gesture of Republican administrations. The goal is not so much to prime
the economic pump, as in the liberals' beloved Keynesian theory, but to
break it. And along the way, to do unto the despised liberals as the
conservatives believe the liberals have done unto them for decades.
Traditional deficit spending, according to conservative dogma,
redistributes the hard-earned wealth of real Americans down into the
pockets of liberalism's contemptible constituents. Republican deficit
spending, by contrast, reverses this flow and redistributes wealth upward,
into the bank accounts of their people.

That's the goal it you believe this has all been thought through. It seems
equally likely that this budget document, in both its juvenile rhetorical
tricks and its idiotic plans for the nation, is merely supposed to teach
us a lesson in how badly government can misbehave. Conservatives know that
what will be discredited as we slide toward the inevitable reckoning is
not the Republican Party but deficit spending, the whole hated concept of
an interventionist government.

Historians often describe the New Deal of the 1930s as an effort to save
capitalism from itself. Maybe that's what the policies of the Bush
Administration are, too, coming as they do after a systemic crisis that in
many ways resembles that of 1929-33. The technique, however, is different.
The Bush team seems bent on so battering and stigmatizing the only
institution capable of policing capitalism that we will be left with no
practical alternative. They will fritter away the surplus. They will
squander the goodwill of the world. They will jam the locomotive into
reverse, toss something heavy on the throttle, and jump for it.

In 1981 the conservative thinker George Gilder published Wealth and
Poverty, a fire-breathing damnation of government's interference with
capitalism that inspired the Reagan Administration's own strategy of
deficit-inducing tax cuts. Twenty-two years later, Gilder is still
hammering away at the villainy of government, though the particulars of
the indictment have changed a little. Today it's all about "trust," a
property the private sector is said to possess in great abundance but that
government lacks. In a free market, Gilder asserts in the December issue
of Forbes magazine, "the truth will out in a relatively short time," and
the laws of nature will see to it that those who have abused our trust
will face the consequences. Weaselly, unaccountable government, however,
screws up everything that it touches--naturally, Gilder finds malevolent
significance in the term "antitrust"--and the moral gulf between
government and the pursuit of private profit strikes Gilder as so vast
that he "trust[s] Kenneth Lay of Enron and Bernard Ebbers of WorldCom"
even more than he trusts Justices Rehnquist and Scalia.

Gilder apparently has much to teach us about the ways in which trust and
accountability work in America circa 2003. After writing speeches for
Reagan, he became a freelance prophet of Silicon Valley, discovering that
the microchip agreed with Reagan in many important respects. He was a
one-man Wired magazine, with heavy religious overtones: constructing a
virtual theology of what he called the "telecosm," worshiping at the
shrine of the entrepreneur, becoming a superstar stock picker. And he bore
as much responsibility for puffing the "New Economy" bubble as anyone in
America.

Today the telecoms have imploded, and Gilder's portfolio of tech-stock
picks, the subject of journalistic awe three years ago, has lost more than
90 percent of its peak value. If you trusted Gilder, you would be sorry
now. Yet here he is, like those CEOs who walk away with millions while
their companies die, still at it, inveighing against government in the
pages of Forbes, proclaiming that the only way to react to the economic
downturn he insists capitalism didn't cause is by doing absolutely
nothing, by letting the market enforce its trust laws in its own
mysterious way. Were one not struck speechless by the self-serving
audacity of Gilder's arguments, one might respond that his own continuing
prominence rather neatly disproves the whole accountability myth.

Gilder is able to soldier on because the fantasy world he imagines in such
vivid colors--that perfect libertarian universe in which markets work
flawlessly and the blame for anything that goes wrong can be neatly
outsourced to government--is one in which the very, very wealthy dearly
like to believe. In March, I attended one of Gilder's high-tech business
conferences, this one having to do with what he calls "Storewidth." The
high point of the gathering was not the technical presentations, even with
their projections of amazing entrepreneurship to come; it was a political
stem-winder delivered by Gilder's friend and patron Steve Forbes, the
publisher and onetime presidential candidate.

Naturally the Bush tax plan was prominent in Forbes's thoughts. In fact,
he was ecstatic about the prospects, calling the elimination of the
dividends tax a "step forward to the flat tax," his own pet idea for
enriching the rich. With those who complain about the return of deficits
Forbes had no patience at all, since obviously the federal shortfalls
would quickly be made good by the economic growth that the tax cuts would
surely unleash. The doubters, he went on, were motivated by a congenital
hatred of the very idea of tax cuts; besides, Washington used accounting
that would "make Enron look honest." And this was an odd thing to say:
Wasn't Forbes's own magazine one of the many business publications that
literally did make Enron look honest? And not just Enron, but electricity
deregulation itself, the billions to be made in bandwidth, the whole New
Economy swindle?

Maybe so, but Forbes was showing no contrition. The business class had led
us into disaster, but now they thought they deserved some help from Uncle
Sam. They wanted what Forbes called "the dead weight of Washington" off
their backs. They wanted the entire world to embrace their deregulatory
agenda. They wanted a tax cut.

Walking around the luxurious hotel in which the conference was being held,
it wasn't hard to see why. The St. Regis Monarch Beach Resort & Spa was
built two years ago, at the tail end of the bull market, in the southern
California city of Dana Point, just a little inland from the even posher
Ritz-Carlton. It's the kind of place that sifts people like me out even
before we get inside: arriving by car, you either pay the valet and come
sweeping in the grand, chandeliered main entrance or you park it yourself
and enter via an unmarked door tucked away behind the registration
counter. The hotel has its own high-end antiques store; it has its own
bakery/coffee shop with old-style wood trimmings; it has a fine restaurant
with the requisite jeroboams of champagne posted by the door; it has a
Versailles-size fountain and a golf course overlooking the Pacific;
hanging over the bar it has an enormous reproduction of Maxfield Parrish's
Garden of Allah, one of those idyllic dream-scenes in which everything
shimmers in a golden haze. And aside from the conference attendees, the
hotel was almost deserted.

I sat by myself on the hotel's vast, sweeping veranda and looked out past
the empty balconies of the hotel rooms, the empty deck chairs by the empty
swimming pool, the empty terrace with the oversize planters, out to the
brand new empty suburb erupting from a nearby hillside, all the
ocher-colored homes ready to be occupied. The instant civilization of
upper-class America was all here, antiques to zabaglione, but no one had
come to consume it.

They call this "excess capacity." Just like in Gilder's beloved telecom
industry, which so overbuilt during the bubble years that only 5 percent
of all fiber-optic lines worldwide are currently in use, someone had made
a huge miscalculation here. They had plunked down an enormous bet on good
times for the rich carrying on forever, just when the free money from
Silicon Valley was starting to dry up.

But now comes George W. Bush, savior of his class, to get the good times
rolling again, to give us a tax cut of such magnitude that it may well
replace the NASDAQ and keep the people of southern California relaxing in
style. Social Security will be steered deliberately into the ground, but
excess capacity in the luxury industry is one problem that the federal
budget for 2004 will undoubtedly solve. Their coffers swelled with
tax-free dividends and inheritances, the Republicans will soon be back in
Monarch Beach. Tan men dressed in business casual will pull up to the
grand entrance in Boxsters and Ferraris. Cosmopolitans will clink under
the Maxfield Parrish. Hungover heiresses will chew biscotti in the
European-style coffee shop. And the venture capitalists will return at
last, toasting their clients out on the veranda, opening that jeroboam,
celebrating as though none of it had ever happened.


---------
(A) A study by the Center on Budget and Policy Priorities shows that the
2001 and 2002 tax cuts caused roughly 30 percent of the decline into
deficit and that if they had not been enacted the budget would soon be
back in surplus.

(B) The Social Security Trust Fund is not mentioned in the main budget
document. This date is given in the 2003 report of the Social Security
trustees. It is a revealing number in and of itself. We have been hearing
catastrophic predictions about Social Security for almost ten years now,
and yet during this time the date when economists expect the Social
Security Trust Fund to run dry keeps getting pushed further and further
into the future. The Social Security Trustees' report for 2000 gave the
expiration date for the Trust Fund as 2037; this year's report gives it as
2042, yielding a gain of five future years per every three actual years.
If that rate holds, by 2017, the year the budget names as the beginning of
the end, economist will be gravely warning us that the Trust Fund will
expire in 2064.

(C) In my home state of Kansas, which is currently caught in a budget
crisis of its own thanks to rabid tax cutting in the 1990s, the
Republican-dominated state legislature proposed to deal with the problem
by delaying state tax refunds. This will, of course, infuriate voters,
but, as Mike Hendricks of the Kansas City Star recently pointed out, their
fury will likely fall not on the stridently anti-tax Republicans who did
this to them but on the usual targets--the state revenue department and
the machinery of state government, which happens to have a Democratic
governor at its head.

----------------------------

Thomas Frank is the editor of The Baffler and the author, most recently,
of One Market Under God. His last essay for Harper's Magazine, "The
Trillon-Dollar Hustle," appeared in the January 2002 issue.
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