What’s the evidence that Rove is the mastermind? President Bush’s economic-stimulus plan is pure politics. In calling for the elimination of “double taxation” on dividends, which affects relatively few people, most of whom are wealthy, Bush sent his right-wing base into a double swoon. But he put forward virtually nothing to boost the ailing economy.
This is supply-side ecstasy, a replay of the “voodoo economics” that President Reagan practiced. But even Reagan didn’t propose eliminating the estate tax, another pillar of Bush’s plan. It’s a testament to Republican marketers that millions of people get outraged about paying the “death tax” when only a handful are affected. Bush is playing the same shell game on the taxation of dividends. He gets people riled up about how unfair it is to pay taxes twice when the average person’s holdings are in pension funds or 401(k)s and not subject to taxes anyway. “He’s counting on the stupidity of the taxpayers,” says a Republican strategist.
Bush is also counting on voters trusting him to do what’s right. In the extraordinary bonding that took place after September 11, voters placed their confidence in Bush as commander in chief, and they’re not yet ready to question that relationship. The results of the November election emboldened Bush, and he is testing his new-found strength on Capitol Hill not only with this tax giveaway, but by renominating Mississippi Judge Charles Pickering, whose shaky record on civil rights led to his rejection in the last Congress. Sending Pickering’s name back up to Capitol Hill sticks it to both Democrats and African-Americans, who were led to believe by Bush and others that the GOP had turned a corner on race. “It’s classic Rove,” says a Senate Republican. “You stun the opposition by your audacity, and that’s what they’re doing. At the end of the day, they’ll make deals.”
Rove loves to defy conventional wisdom. When Washington pundits predicted that Bush would call for a 50 percent cut in dividend taxes, Bush came out for eliminating the entire tax. When liberal groups assumed the Pickering nomination was dead since his chief patron was the disgraced Lott, Bush reveled in proving them wrong. Taken together, the two actions have the imprint of Rove, who always has two tracks going in this White House. One caters to the right; the other reaches out to suburban soccer moms. While the conservative base rejoices over Pickering, the widespread expectation in Washington is that the White House will not enter the Michigan case on affirmative action that is before the Supreme Court. Even before Lott’s downfall, Rove was wary of advocating against affirmative action because of the racial implications. “They give something to the base, and then they pull back,” says a Senate Republican aide. “And they can always drop Pickering.”
Democrats say they will filibuster the Pickering nomination on the Senate floor, and it’s doubtful the administration can muster 60 votes to confirm him. Pickering probably won’t survive, but the administration will score points with conservatives for trying, and Democrats will use up a lot of energy battling the doomed nomination.
And the Democrats won’t roll over on taxes this time the way they did in 2001. Deficits loom; war is on the horizon; spending for homeland security is soaring, and Democrats are bitter over the way Bush personally campaigned against senators who backed his first tax cut. Louisiana Democrat Sen. John Breaux estimates dividend-tax relief would benefit only 8 percent of the people in his state who hold stocks; 92 percent would be unaffected. Breaux loves being at the center of a deal and has begun meeting with centrist Democrats and moderate Republicans. The danger is that Democrats will answer the siren call of compromise and, in exchange for modest temporary relief for workers, yield ground to Bush. Any reduction in the taxation of dividends is a bonus for Bush.
From a public-relations standpoint, the boldness of Bush’s tax-cut package diverted media attention from the standoff with North Korea, and the administration’s cave-in. After weeks of insisting direct talks would reward North Korea’s bad behavior, the State Department issued a press release offering to engage in talks. “His father never would have gotten away with that,” says a disappointed hard-liner. “All this bellicose rhetoric and then nothing.” Conservatives preoccupied by Bush’s stand on taxes barely took notice of Bush’s backing down on North Korea.
The base is giddy, and whatever Bush ends up with on taxes will be enough for him to declare victory. Even so, he enters a rough period. Even those who support war against Iraq concede that Bush has not put forth a compelling rationale, other than political expediency. “Bush can’t run for reelection with Saddam still in Baghdad,” says a Republican strategist. More to the point, he can’t win reelection if the economy is still hemorrhaging jobs, and the stock market is down.
The White House has calculated it can’t do much to improve the immediate economic forecast, and so they’re going for what Breaux calls “the whole enchilada,” a growth package that is supply-side redux–all gain, no pain. Bush doesn’t care about ballooning deficits; it’s an excuse for Republicans to drain discretionary spending on social programs, which they never liked anyway. Wartime is supposed to require sacrifice, but Bush is running up the tab without breaking a sweat.
