Bushonomics: Religious, cultural issues replace conservative economics

Taxes are too high because government is too large and inefficient. Tax cuts are politically popular, but few politicians possess the courage to cut government spending.

Ronald Reagan was the first president to use supply-side economics as intellectual justification for cutting taxes while increasing government pork. The supply-side theory contends that deficits will be eliminated with revenue growth from new economic activity caused by the tax cuts. During the Reagan years, government spending increased to 23 percent from 20 percent of the gross national product while deficits as a percent of GNP more than doubled.

President George H.W. Bush dismissed the supply-side theory as voodoo economics. Disliked by cultural conservatives, the first President Bush adhered to the traditional Republican view that fiscal restraint calmed financial markets and fostered economic stability. His tax increase partially reversed the Reagan deficits, laying the groundwork for the longest economic expansion of the 20th century. But it would cost him his job.

The second President Bush was determined not to repeat the political sins of the father. Unlike the father, the son cultivated conservative icons like Bob Jones and Tom DeLay. He also embraced the supply-side theory and presided over the largest fiscal deterioration in U.S. budget history.

During his first term, the President targeted more than 50 percent of his tax cut to the richest 1 percent of the population and failed to veto a single spending bill while increasing the federal budget by 33 percent.

As they say in Texas, it's time to pay the fiddler.

Last month's increase in core inflation caused the Federal Reserve to increase interest rates for the eighth time since June. The Commerce Department reported that construction of new homes and apartments dropped 17 percent in March, the largest decrease in 14 years. A large spike in mortgage rates and a wide-spread decline in home prices could pose serious problems for a housing finance industry fueled by home-equity lending and the greater use of creative interest-only financing.

Rising interest rates could also spell trouble for small business and producers of large-ticket durable goods. Recent downgrading of GM and Ford bonds to junk status is indicative of the problems in the U.S. auto industry. Bankruptcy at UAL Corp. and other airlines could eliminate all of the reserves of the Pension Guaranty Corporation, the FDIC-like agency charged with insuring defined-benefit pension programs, forcing a taxpayer bailout reminiscent of the 1980s savings and loan debacle.

Consumer confidence in April declined for the third month in a row, and the Dow Jones Industrial Average is below its May 2001 level despite cuts in the tax rates on investment income, hardly a recommendation for private Social Security accounts.

If inflation and interest rates are up, economic growth for the first quarter of 2005 was the lowest in two years. Federal Reserve chairman Alan Greenspan was asked in congressional hearings if the U.S. economy is embarking on a period of stagflation, a word used to describe the economy resulting from the profligate spending of former President Lyndon Johnson.

The floundering economy and Bush's failure to sell Social Security reform reflect his lack of credibility on economic issues. The president spent six months pitching private accounts only to propose the addition of a need-based welfare component to Social Security in his recent press conference. The advantage of partial privatization is that it would reduce the future liability of government, but so would a balanced budget or the repeal of the multitrillion -dollar Bush Medicare bill.

During his barnstorming tour to educate the public on the impending Social Security crisis, the president would never admit that the savings from a return to the balanced budget he inherited from President Bill Clinton would largely offset the funding shortfall in Social Security.

A cynical electorate was not the only ones who turned a deaf ear to Bush's disingenuous appeal for reform. At February's Forum on Social Security, the College of Business at Southeast Missouri State University was unable to find a Republican politician in Southeast Missouri willing to defend the president's Social Security package. Surveys indicate that only 31 percent of voters support Bush's proposed cut in government funding of Social Security benefits, suggesting why politicians obsessed with re-election would rather cut taxes than government services.

Despite evidence indicating that a second economic slowdown on the Bush watch is imminent, the president will likely spend his remaining political capital courting cultural conservatives if he wants to position brother, Florida Gov. Jeb Bush, for a presidential run in 2008.

Many on the religious right believe that while the president's moralizing is welcome, it is time Bush and a Republican Congress reward their support with tangible results.

As the economy weakens and support for the Iraq War continues to erode, Republicans will need a cultural-values victory as midterm elections near if they are to energize their conservative base and maintain their congressional advantage.

The Terry Sciavo affair backfired, and judicial filibuster is too arcane an issue to excite voters.

Bush's foreign-policy legacy will depend on circumstances in the Middle East many years from now.

On the domestic front, it increasingly appears that the president's legacy will be the transformation of the GOP into a party defined by religious and cultural issues rather than conservative economic principle.

Mike Devaney is a professor of finance at Southeast Missouri State University.