In his pursuit of dramatic changes in tax policy, President Bush is putting an unprecedented emphasis on private sector growth as the primary tool for lifting the downtrodden out of poverty and, in effect, casting aside decades of efforts to close the gap between rich and poor.
Tax changes in Bush's 2004 budget would cost the Treasury $1.46 trillion over 10 years, a number that dwarfs all of the changes he is seeking in social spending.
The net effect of those changes would all but eliminate taxes on dividends, capital gains, interest and inheritances -- the kinds of taxes that conservatives have long believed to be impediments to savings, investment and economic growth. Yes, conservatives admit, the direct beneficiaries of those tax cuts would tend to be the most affluent because they have the means to save and invest.
But, they add, the real beneficiary would be the economy writ large, and economic growth is what lifts people from poverty. In that sense, tax and economic policies should no longer be seen as separate from social policy, the White House argues.
"That is very much pro-poor," said R. Glenn Hubbard, chairman of the White House Council of Economic Advisers. "I know that's not a good bumper sticker, but that's what the president is all about."
To conservatives, the administration's approach stems from conclusions that became obvious in the late 1990s, when an economic boom led to rapid economic advances even among the nation's poorest and most disadvantaged citizens.
"The president learned that the only way to really, really help the people at the bottom is to have a few years of really great growth," said Kevin A. Hassett, an economist at the American Enterprise Institute with ties to the administration.
Advocates for the poor and liberal economists are not buying it. They question whether the president's tax cuts really would stimulate the economy, mainly because the short-term economic boost would be swamped by the negative effects of surging budget deficits.
Besides, they say, economic growth without complementary social policies would only widen the gap between rich and poor. Isabel V. Sawhill, a poverty expert at the Brookings Institution, said the 1990s boom did lift all income levels. But, she said, that was because the robust economy came with welfare reform that pushed the poor into the workforce, new federal support for child care and after-school programs, and a major expansion of the earned-income tax credit, which supplemented low wages and made it economically viable to leave welfare.
In contrast, Bush's economic and budget policies are coming at a time of stubborn economic stagnation; proposed cuts to child-care and after-school programs, vocational education and job training; and a tightening of requirements for earned-income tax credit applicants. The Congressional Budget Office has already reported that the president's proposed toughening of the work requirements under an expanded welfare reform law would require $8 billion to $11 billion in new child-care funding.
"Even if I accepted the [administration's] argument about growth, I would say we need some good microeconomic policies to go along with it," Sawhill said.
Both sides point to the experience of the 1990s to bolster their positions.
Unemployment rates plunged and incomes increased at all economic levels in the boom years, especially in the late 1990s. Income inequality also soared. From 1989 and 2001, the poorest 20 percent of Americans saw incomes rise at an annual rate of 0.39 percent. The next 20 percent saw incomes rise by 0.5 percent. At the same time, the top 20 percent saw incomes rise by 1.79 percent a year. The top 5 percent saw its income rise 2.64 percent each year, according to Census Bureau statistics.
The administration and its advocates say the lesson of that period is that focusing on the income gap is counterproductive. As long as the poor are growing richer, it is of no consequence that the rich are growing richer at a faster clip, said Daniel J. Mitchell, an economist at the Heritage Foundation.
"The question comes down to this: Would you be willing to deny poor people the chance to improve their lives in order to make the gap between rich and poor smaller?" Mitchell said.
Besides, economic growth speeds income mobility. The Economic Report of the President, released Friday by the White House Council of Economic Advisers, emphasized repeatedly that many of the people populating that bottom 20 percent one year are very different from the ones at the bottom a few years later. Therefore, tailoring social policy to help that group is fruitless, since many of them, if not most, will rise from the ranks of the poor on their own.
But critics say the White House would be wise to compare the experience of the poor during the late-1990s boom to their experience in the 1980s expansion. In the 1980s, real wages for the working poor fell and unemployment remained stubbornly high, while the rich got richer, said Lawrence F. Katz, a labor economist at Harvard University.
"Poverty made no great progress despite seven really great years," he said.
Contrast that to the 1990s, when the Clinton administration launched a bevy of small initiatives, like job training, welfare-to-work efforts and school-to-work mentoring projects , that failed to make headlines but meshed well with businesses' needs to pull everyone into the workforce, Katz said.
Some of these are precisely the programs the Bush administration has deemed repetitious, redundant and ineffective, and targeted for consolidation and elimination, Katz said.
Hubbard argues that anti-poverty programs tend to divide society into separate income levels rather than approaching social well-being as a whole.
"We should never compartmentalize people into small businesses, large businesses, rich and poor," Hubbard said. "We all stand to gain handsomely" from the president's tax plan.
That is not how Bush's opponents see it.
"We seem to be a country that is growing apart," lamented Claudia Goldin, an economic historian at Harvard who studies the evolution of anti-poverty policies. "Those above the median now look across to those below the median and say, 'You know what? You really aren't like me. We're not all in this together.' "