Reckless Disregard: The Bush Administration's Policy of Cutting Taxes in the Face of an Enormous Fiscal Gap

Abstract:     
Shaviro believes that the Bush administration's policy of sharply cutting taxes while increasing government spending is both misguided and harmful. He presumes that the policy is rationalized in private as a way of shrinking government by starving the beast, but the administration is in fact increasing the government's distributional intervention by handing money to current voters at the expense of younger and future generations. The Bush policies have increased the future distortionary tax increases that are likely to be necessary, and will lead to future Social Security and Medicare cuts that are hard to distinguish from tax increases, according to Shaviro. Finally, he opines, the Bush policies may lead to an Argentina-style meltdown in the United States government's position as a borrower in world capital markets, potentially yielding chronic inflation, unemployment, and bank and currency crises that affect our economic productivity for an indefinite period.

JEL Classification: H2O, H55, H60, H62

Accepted Paper Series