David Serota In These Times...How Tax Cuts Cost Us All

Hurricanes Rain on Bush's Tax Cut Parade
How the Katrina catastrophe proves that conservatives' tax cut zealotry has left america vulnerable to disaster.
By David Sirota September 27, 2005


When President Bush kicked off his bid for re-election in the spring of 2004, he launched what was another in a long line of cookie-cutter conservative campaigns. There was the predictable pander to cultural conservatives with his high-profile introduction of a constitutional amendment banning gay marriage. Then, there was the well-worn chest-thumping on national security and the War on Terror (sans any mention of the still-at-large Osama bin Laden).

And then, finally, there was the most familiar theme of all: right-wing economics.

Bush proudly promoted the trillions in tax cuts he had passed as supposedly helping the economy, and then went on the attack. "The tired, old policies of tax and spend," Bush said, referring to Democrats, "are a proven recipe for economic disaster."

The implication in Bush's statement is one America has been hearing for years from the right: namely, that conservatives' agenda of tax and spending cuts is not tired, but rather somehow "new," and is, most importantly, a path to success.

But with New Orleans residents still bailing water from their streets, that seemingly impenetrable axiom of American politics has crumbled almost as quickly as the infrastructure supposedly protecting our Gulf Coast during Hurricane Katrina. "Tax and spend" was not the recipe for economic disaster--tax and spending cuts were.

This is a reality visible in the numbers. Year after year, the Bush administration insisted on massive tax cuts for the wealthy. And year after year, the White House refused to provide the funding government experts said was needed to strengthen levees, beef up hurricane preparedness and get federal emergency response ready for an onslaught from Mother Nature. America's budget surplus, built in the '90s to serve as a rainy day fund, was robbed to provide more and more giveaways to the rich. When the rainiest day of them all came, our country was left totally--and unnecessarily--vulnerable.

2001 and 2002: Denial
Casual observers wouldn't expect Mike Parker to serve as a de facto spokesman for how the Republicans' tax-cuts-at-all-cost agenda has weakened America. As a conservative GOP Congressman from Mississippi in the '90s, Parker was an outspoken advocate for giving tax breaks to the wealthy.He served as one of Newt Gingrich's lead grassroots advocates for reducing the estate tax--a levy that falls almost exclusively on the wealthiest 1.2 percent of Americans. In his 1999 run as Republican nominee for Mississippi governor, Parker made tax cuts the centerpiece of his campaign. His signature television advertisement featured him shooting pool, saying "When I say I'll fight to cut your taxes, well friend, that's something that you can bank on."

After narrowly losing that race, Parker was rewarded for his Republican service by President Bush, who appointed him to head the Army Corps of Engineers on June 7, 2001. That was the very same day Bush signed his massive $1.3 trillion income tax cut into law--a tax cut that severely depleted the government of revenues it needed to address critical priorities. As Parker soon learned, one of the priorities that would be sacrificed was flood and hurricane protection.

Overall, Bush's first budget introduced in February 2001 proposed more than half a billion dollars worth of cuts to the Army Corps of Engineers for the 2002 fiscal year. To be sure, these budget cuts were one in a number of cuts to public priorities like health care, human services, infrastructure and job training.

And it is true that the cuts to the corps came as the agency was being legitimately criticized: Some of its projects in recent years had run roughshod over environmental concerns, and others had been unnecessarily expensive products of congressional pork. However, instead of reforming the corps and getting it back on track, the White House used the criticism as a cover to gut the entire agency. The cuts were so deep, Rep. Jo Ann Emerson (R-Mo.) broke ranks with her party and penned a nationally-syndicated op-ed in April 2001 saying that "lives very likely will be lost."

Consider just a few of the specific examples: In the same budget that provided more than a trillion dollars in tax cuts, Bush proposed providing only half of what his own administration officials said was necessary to sustain the critical Southeast Louisiana Flood Control Project (SELA)--a project started after a 1995 rainstorm flooded 25,000 homes and caused a half billion dollars in damage. This 2001 budget proposal came in the same year that, according to the Houston Chronicle, federal officials publicly ranked the potential damage to New Orleans by a major hurricane "among the three likeliest, most catastrophic disasters facing this country."

Similarly, less than two weeks after Bush signed his tax cut on June 7, the New Orleans Times-Picayune reported that "despite warnings that it could slow emergency response to future flood and hurricane victims, House Republicans stripped $389 million in disaster relief money from the budget."

By the beginning of the 2002 congressional session, Parker had enough of sitting in silence while these tax and budget decisions were being made. In a meeting with White House budget director Mitch Daniels, Parker demanded the Bush administration restore the critical money for flood and hurricane protection.

"I took two pieces of steel into Mitch Daniels' office," Parker recalled. "They were exactly the same pieces of steel, except one had been under water in a Mississippi lock for 30 years, and the other was new. The first piece was completely corroded and falling apart because of a lack of funding. I said, 'Mitch, it doesn't matter if a terrorist blows the lock up or if it falls down because it disintegrates--either way it's the same effect, and if we let it fall down, we have only ourselves to blame.' "

But as Parker noted, "It made no impact on [the White House] whatsoever." In February 2002, the president unveiled his new budget, this one with a $390 million cut to the Army Corps. The cuts came during the same year the richest 5 percent (those who make an average of $300,000 or more) were slated to receive $24 billion in new tax cuts.

The cuts were devastating. The administration provided just $5 million for maintaining and upgrading critical hurricane protection levees in New Orleans--one fifth of what government experts and Republican elected officials in Louisiana told the administration was needed. Likewise, the administration had been informed that SELA needed $80 million to keep its work moving at full speed, but the White House only proposed providing a quarter of that. These cuts came even though the potential cost of not improving infrastructure was known to be astronomical. A widely-circulated 1998 report on Louisiana's insurance risks said a serious storm could inflict $27 billion worth of damage just to homes and cars--and that didn't include industrial or commercial property. Local insurance executives estimated in 2002 that the total damage would be closer to $100 billion to $150 billion--estimates that now look frighteningly accurate.

When Parker headed to Capitol Hill for annual budget hearings in February 2002, he couldn't hide the truth. Under questioning, he admitted that "there will be a negative impact" if the President's budget cuts were allowed to go forward. The White House fired Parker within a matter of days.

Some Republicans came to Parker's defense after he was removed. Then-Senate Minority Leader Trent Lott (R-Miss.) said, "Mike Parker told the truth that the Corps of Engineers budget, as proposed, is insufficient." Rep. David Vitter (R-La.) said the administration was "in denial" about the cuts. "There's no two ways about it that [the corps] are very underfunded," he said, noting that "southeast Louisiana flood control [is] our most obvious example."

Vitter was right--but he was also "in denial" about his own culpability: Just weeks before, he and his Republican colleagues voted for a brand new business tax cut package, costing the federal government $43 billion in revenues that could have gone to fill the budget gaps Parker identified. And those tax cuts were targeted specifically to the GOP's biggest financial backers. According to the Houston Chronicle, the White House-backed legislation was a windfall for Big Business, "reducing total corporate tax collections by 21 percent."

Inadvertently foreshadowing just how closely tied the tax cuts and budget infrastructure negligence really would be, Bush signed this new tax cut two days after firing Parker.

2003: A new flood of cuts
In October 2002, politicians and emergency planners from 10 Louisiana parishes convened a critical meeting with the Bush administration's Army Corps of Engineers to discuss the increasingly precarious position the region found itself in. A month before, a surge from Tropical Storm Isidore--a storm far tamer than even the weakest hurricane--came dangerously close to breaching levees in New Orleans. That wasn't necessarily surprising to local residents--the Times-Picayune had recently completed a five-part series about how budget cuts were allowing the region's hurricane and flood control infrastructure to crumble.

At the meeting, the chairman of Louisiana's Levee Board made things clear to the Bush administration: "If [a hurricane] hit us today, we'd see more water in more places and more lives lost." If there wasn't a serious investment of new resources, he said, "then we're losing our past and our future."

The Army Corps told the levee board that the necessary improvements could cost up to $2 billion--a large figure, indeed. But not compared to the new tax cut package that President Bush unveiled just three months later.

On January 7, 2003, Bush gave a speech in Chicago outlining a $600 billion tax cut proposal. It was a plan that centered around eliminating taxes on stock dividends. "Nearly two-thirds of the tax benefits would flow to the most affluent 5 percent of households," noted the Christian Science Monitor. "The top 1 percent--with incomes averaging $1 million--would get 42 percent of the tax-free-dividend goodies [while] only 13 percent of this tax cut would go to people with incomes below $50,000."

For the Gulf Coast in particular, the plan was a disaster. According to the nonpartisan Citizens for Tax Justice, three out of the five states that would receive the least from the new tax cuts were Louisiana, Mississippi and Alabama. Perhaps more importantly, the package would cost cash-strapped states tens of millions of dollars in lost revenues, because many state tax rates were tied to the federal tax code. The Baton Rouge Advocate soon reported that the proposal "could cost the Louisiana state treasury up to $30 million in tax revenues"--money needed to address the state's infrastructure problems.

Those concerned about Louisiana's safety may have seen the new tax proposal as a reason for optimism. If the White House believed it could afford hundreds of billions of dollars of new tax cuts for the very wealthy, surely it would not plead poverty when it came to spending a few million to plug infrastructure deficiencies its own experts said were critical.

But four weeks after the dividend tax cut plan came Bush's new budget, and another half billion proposed cut to the Army Corps of Engineers. That included a proposal to slice about two thirds of SELA's budget--such a massive cut that it would effectively halt projects that were reinforcing flood control infrastructure.

By the late spring, the tax and budget cut contrast came into full relief. On May 28, President Bush signed his tax cut into law. Though the overall package had been pared back, the dividend tax break alone would cost $125 billion.

Two days later, the Times-Picayune reported that the administration's own officials announced "that they don't have enough cash to pay for major drainage and hurricane protection projects under way in at least five local parishes" in the New Orleans area. Additionally, the paper noted that "four other major construction projects also will run out of money within the next month," including the Lake Pontchartrain hurricane protection project and two other major levee reinforcement projects. Though Congress ultimately restored some of the money, the message from the White House was clear: Tax cuts would supersede everything.

2004: Tempting fate
The Washington Times headline on January 20, 2004, told it all: "Bush Wants Tax Cuts to Stay." The article reported that even with a war, record budget deficits and dangerously crumbling infrastructure, the president would make a new, $1 trillion tax cut plan the centerpiece of his State of the Union address.

And once again, just days after the speech, the White House on February 2 released a budget with another massive cut to infrastructure and public works projects--this time to the tune of $460 million. As the Denver Post later reported, "the Southeast Louisiana Flood Control project sought $100 million in U.S. aid to strengthen the levees holding back the Mississippi River and Lake Pontchartrain, but the Bush administration offered a paltry $16.5 million." The Chicago Tribune noted that the Army Corps of Engineers had also requested $27 million to pay for hurricane protection upgrades around Lake Pontchartrain--but the White House pared that back to $3.9 million. Meanwhile, budget cuts forced the corps to delay seven projects that included enlarging critical levees.

These latest cuts came just as the previous ones were starting to wreak havoc. Five days after Bush's budget was released, the Times-Picayune reported that "the Army Corps of Engineers doesn't have money to keep its dozen major flood-protection projects going" simultaneously.

More bad news arrived in the spring. Gaps in levees around Lake Pontchartrain, which were supposed to be filled by 2004, would not be filled because of budget shortfalls. Corps officials told the Times-Picayune in April "that the lack of money will leave gaps in the structure, weakening its effectiveness and pushing back its completion date." Worse, because budget cuts had been compounding for three years straight, "even after all the gaps are closed, the levee must settle for several more years until it reaches its final height." By June, the newspaper reported that "for the first time in 37 years, federal budget cuts have all but stopped major work on the New Orleans area's east bank hurricane levees."

"We are doing everything we can to make the case that this is a security issue for us," Jefferson Parish emergency manager Walter Maestri said at the time, desperately begging the Bush administration to reevaluate its budget decisions. As he noted, the budget cuts meant that levee gaps would accumulate and "we'll end up so far behind that we can't catch up. ... And the further behind we get, the more critical the safety of the city becomes."

But almost no one in Washington was listening. Ten days after the Times-Picayune story, the U.S. House passed a $155 billion White House-backed bill to cut corporate taxes. The Senate had passed a similar bill the month before. Republican lawmakers from the Gulf Coast--who purported to be concerned about infrastructure budget cuts--all supported the new tax cut.

In September, as congressional negotiators were ironing out the final details of the corporate tax cut, Hurricane Ivan came within a hair of directly hitting New Orleans. The near miss was a bright red flag warning Washington to get its priorities straight, fast. Knight Ridder newspapers reported that Ivan was a very real reminder that "a direct hit by a very powerful hurricane could swamp [the region's] levees and leave as much as 20 feet of chemical-laden, snake-infested water" in its wake. The city's director of emergency preparedness said "it's only a matter of time" unless infrastructure was quickly improved.

Yet, a month later, Bush signed the corporate tax measure into law, draining more revenue from the federal treasury that could have gone to infrastructure upgrades. The tax cut measure, of course, could have included additional provisions to provide money for infrastructure improvements, if that was a priority. But it did not. Instead, Congress attached language written by corporate lobbyists to shower taxpayer cash on special interests. As the Washington Post reported, the bill was larded up with 170 smaller measures that benefit "restaurant owners, filmmakers, brewers, distillers, bow-and-arrow manufacturers, tackle-box companies, native Alaskan whalers, NASCAR track owners, and importers of Chinese ceiling fans." It was about as responsible as buying a home near a forest fire zone and refusing to spend the hundreds needed for fireproofing, but shelling out thousands to install a jacuzzi and add a skylight.

2005: Catastrophe strikes
The weeks and months leading up to Hurricane Katrina were more of the same. The White House focused on a multi-trillion dollar plan to privatize Social Security, and a plan to repeal the federal estate tax.

Meanwhile, as the Financial Times reported, the president proposed a budget that "called for a $71.2 million reduction in federal funding for hurricane and flood prevention projects in the New Orleans district, the largest such cut ever proposed." In addition, "the administration wanted to shelve a study aimed at determining ways to protect New Orleans from a Category 5 hurricane." This, in the face of a March 2005 report by the American Society of Civil Engineers that warned 3,500 dams were at risk of failing unless the government spent $10 billion to fix them.

By the time Katrina struck on August 29, the disaster was already a fait accompli. Though politicians feigned shock and outrage at the federal government's hurricane preparations, there was nothing to be surprised about. The disaster was the consequence of years of putting tax cuts above everything else--even above a catastrophe we knew was coming.

The aftermath
In the wake of Katrina, the D.C. political establishment has tried desperately to prevent any discussion of tax cuts and budget priorities as the culprits in the disaster.

At first, President Bush claimed, "I don't think anybody anticipated the breach of the levees"--an insult to the experts in his own administration and elsewhere who had been warning about exactly that for years. When that line fell flat, White House Press Secretary Scott McClellan did his best impression of Saddam Hussein's information minister during the Iraq War, insisting, "Flood control has been a priority of this administration from day one."

On Capitol Hill, Republicans simultaneously criticized those who were "playing politics" with the disaster, while pointing fingers at Democratic state and local officials.

Democrats--many of whom had voted for some of the Bush tax cuts--attacked the pathetic government response to the catastrophe, but largely refused to hammer the underlying tax and budget decisions that created the conditions for disaster. And the media ate it up, without putting any of it into the context of tax and budget decisions.

To be sure, even if the Bush administration had fully funded basic infrastructure improvements on the Gulf Coast, Hurricane Katrina would have caused serious damage. And most agree that the Army Corps of Engineers has in recent years made some very poor spending decisions, and that the agency is in need of reform.

However, it is downright criminal for Congress and the media to pretend that the Bush administration's tax cut binge and subsequent budget cuts had nothing to do with the catastrophe. The fact is, experts roundly agree that had the administration made different budget decisions, the impact of the hurricane could have been reduced.

For instance, take Joseph Suhayda, an emeritus engineering professor at Louisiana State University who has worked for the Army Corps of Engineers. He told the Chicago Tribune that the reason levees weren't as high as they were designed to be "was a result of lack of funding."

"I think they could have significantly reduced the impact [of Katrina] if they had those projects funded," Suhayda told the Tribune. "If you need to spend $20 million and you spend $4 or $5 million, something's got to give."

Similarly, Mike Parker told the Washington Post, "You have watched during a period of 72 hours a modern city of New Orleans [become] a Third World country, and it is all because of the disintegration of infrastructure." He told the Tribune that "had [the infrastructure] been totally funded, there would be less flooding than you have."

Sour grapes from a disgruntled ex-employee? It is echoed by the president's current Army Corps chief. The Associated Press reported that Lt. Gen. Carl Strock "acknowledge[s] that more funding for the Southeast Louisiana Flood Control Project would allow the Corps to more quickly pump out the floodwaters inundating New Orleans."

Some may try to argue that because of New Orleans' sub-sea-level geography, there was no amount of funding or infrastructure improvements that could have protected the city. House Speaker Dennis Hastert foreshadowed this inane assertion when he callously questioned whether New Orleans should even be rebuilt. But that argument asks us to simply forget places like the Netherlands--one of the oldest industrialized countries in the world that has thrived right on the banks of the tempestuous North Sea, even though half of the country sits below sea level. After a powerful storm breached dikes there in 1953, the Dutch launched a massive project to upgrade its infrastructure. The Associated Press reported that the most critical piece of the project cost today's equivalent of $3.1 billion--one half of one percent of the tax cuts the Bush administration delivered to the richest 1 percent of America.

The difference between the Netherlands' prudent investments and our government's tax-cuts-before-everything policies can be seen in the most basic comparisons. USA Today reported that "few levees anywhere in the [United States] are built to more than a 100-year standard--capable of withstanding a flood so bad that its probability of occurring is once in a 100 years." Better-funded Dutch levees, by contrast, are built to a 1,250-year standard. And while the Netherlands' infrastructure is built to withstand some of the strongest storms, the New York Times reported in September 2005 that "Congress authorized a flood control system to handle only a Category 3 storm"--most likely to save on cost. Additionally, "as a result of federal budget constraints" (that came as the Bush administration was handing out ever-increasing numbers of tax breaks) the flood walls that broke during Katrina "were never tested" and never built to the strength experts made clear was necessary.

Still, even after Hurricane Katrina, none of these facts has shocked conservatives into reevaluating their tax cut zealotry. Instead, they continue to push forward with the insanity, as if nothing happened. In his first interview just days after the disaster, President Bush made sure to tell ABC's Diane Sawyer that he will not consider rolling back his tax cuts to deal with the disaster or beef up infrastructure.

The next week, Rep. Tom DeLay (R-Texas) reassured reporters that GOP plans to repeal the estate tax and pass a new $70 billion series of tax cuts were only being postponed temporarily. "There's plenty of time to do everything that we want to do," he said--not a surprise coming from the same man who, just before the Iraq invasion said "Nothing is more important in the face of a war than cutting taxes."

Make no mistake: This tax-cut-at-all-cost orthodoxy is not supported by the public. Polls have consistently shown that a majority of Americans support rolling back tax cuts to deal with pressing national priorities. And yet, the political establishment now regularly makes passing tax cuts its sole objective.

If you think that is hyperbole, think again. New Orleans provides only one example of how tax cuts are routinely put ahead of the most pressing public priorities. For proof, just look at the Detroit News' special report before the most recent presidential election. The newspaper reported that in 2004 alone, the richest 10 percent of Americans received tax cuts that were "twice as much as the government will spend on job training, $6.2 billion; college Pell grants, $12 billion; public housing, $6.3 billion; low-income rental subsidies, $19 billion; child care, $4.8 billion; insurance for low-income children, $5.2 billion; low-income energy assistance, $1.8 billion; meals for shut-ins, $180 million; and welfare, $16.9 billion."

And that prompts a critical question: When will this madness end? If a city submerged under water can't shock the insulated political establishment into reevaluating its tax and budget priorities, what can?

The answer is patently clear: The only thing that can prompt a serious debate about taxes is a political opposition that is willing to step forward and draw the tax cut contrast--an opposition that has not yet coalesced. As In These Times goes to press, most high-profile Democrats have refused to explicitly connect the dots. Instead of explaining how Bush's tax cuts contributed to the Katrina disaster, Democrats have proposed a blue-ribbon commission to investigate the government's (albeit pathetic) response--a position that buries the broader debate about priorities.

True, John Kerry did talk about repealing some of the Bush tax cuts during the 2004 campaign. And true, some Democratic voices, including Bill Clinton and even the conservative Democratic Leadership Council, have now started talking about repealing tax cuts to pay for reconstruction and upgrades to America's infrastructure. But as yet there has been no coordinated campaign by the Democratic Party to intensely focus on tax cuts. Instead of calls for repealing the $336 billion in additional tax cuts that will go to the richest 5 percent of Americans in the next five years, most Democrats have mustered only a call for a delay in new tax cuts--something the GOP agreed to temporarily, but will ignore in a matter of weeks.

These split-the-difference tactics--which have marked the party's electoral decline over the last decade--are once again preventing the party from explaining how Democratic leadership would lead to vastly different results for America.

Politicians love to put signs up next to the projects they created saying "your tax dollars at work." The only way for the United States to have the desperately needed debate over budget priorities is if Democrats find the courage to plant a figurative sign in New Orleans' flood-drenched streets that says "your tax cuts at work." Then, and only then, will America's tax debate transform from a theoretical one that features terrific-sounding promises into a concrete one that highlights the very real consequences of a political system that seeks only to enrich the already rich, no matter what the cost to society.



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David Sirota is a progressive political strategist who is currently writing a book on the middle-class economic squeeze for Crown Publishers. He was formerly the chief spokesman for Democrats on the House Appropriations Committee and, before that, the press secretary for U.S. Rep. Bernard Sanders (I-VT).