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President Bush can't settle on a reason why his latest round of tax cuts is necessary. Depending on the audience, Bush has pushed his plan, including an elimination of taxes on stock dividends, to create jobs, provide a short-term stimulus to the economy or set the stage for long-term growth.
Yet strong public support for the tax cuts has failed to materialize. Perhaps Americans are listening to wiser heads, such as Federal Reserve chairman Alan Greenspan and Berkshire Hathaway CEO Warren Buffett.
Despite political pressure and the inducement of being appointed to another term, Greenspan will not give unconditional support to the president's tax plan. According to Greenspan, any effort to energize the economy quickly should be left to monetary policy, which is to say let the Fed cut interest rates again, if necessary. "We already have a lot of stimulus in place."
Reducing certain taxes, such as those on dividend income, could improve the outlook for economic growth down the road, Greenspan said. "If, however, in the process you get significant increases in deficits which induce a rise in long-term interest rates, you will be significantly undercutting the benefits."
Finally, Greenspan said, he could support some tax cuts, but only if Congress cut spending or increased other taxes so that the deficit is kept under control. Americans know there is little chance of such responsible behavior coming out of Washington.
Buffett was even less circumspect about the dividend tax cut. "The idea that it creates all kinds of jobs and everything else, that's what sort of turns me off," he said. "They don't have the faintest idea, in my view, of how many jobs this is going to create."
Charlie Munger, Berkshire's vice chairman, was even more blunt. "I don't think you can make it so unfair that a man living entirely on dividends will pay zero tax while a cab driver has to work 16 hours a day to barely feed a family," Munger said.
That should end the debate over massive, ill-considered tax cuts, but it probably won't.