As 2002 winds down and the U.S. economy languishes, the GOP is poised to cut taxes for rich people. Presumably, this will spur economic growth and boost business investment. Then, firms will buy new equipment and hire more workers.

In the third quarter, the U.S. economy grew at a four percent annual rate, adjusted for inflation. Growth for the fourth quarter may well be lower. Rising joblessness and weak retail sales for the 2002 holiday shopping season suggest this outcome.

Against that backdrop, the Bush White House and GOP insiders are indicating that cuts to the tax rate on corporate dividends for shareholders are on tap. The potential payday is substantial for rich people.

"The tax cut on dividends would only benefit the minority of stockholders who own stock outside of 401(k)-type retirement accounts," noted economist Dean Baker, co-director of the Center for Economic and Policy Research.

"Workers who hold stock in 401(k) plans would get no tax break whatsoever from a change in the tax treatment of dividends."

The GOP calls this economic stimulus. In 10 years, the Treasury could lose up to $100 billion. The top pitch man for the president's tax policy in 2003 is new Treasury head John Snow.

Snow replaced Paul O'Neill. His clear contempt for the non-wealthy was a bit of a PR problem for the White House. Snow will try to no doubt steer clear of such talk as the Bush administration tries to use tax policy to jump start the stock market.

It is in doldrums. The stock market's hearty party has turned into one hell of a hangover. Sooner or later the stock market bubble of the late 1990s that was driven mainly by the lack of profitable investments in production had to end.

And what an ending it was. Surplus investment that had pushed up stock prices relative to corporate earnings fled the market like rats leaving a sinking ship.

Concerning changes in the tax code to spur industrial production, GOP ideology is being questioned by some unlikely folks as the prospect of slow/no economic growth becomes more apparent. "There is substantial overcapacity in the economy, so we don't need more capacity right now," noted John J. Castellani, the president of the Business Roundtable, in the Nov. 29 New York Times. Case in point is car companies, which have been offering zero-percent financing to lure buyers.

True, cars are selling. But the companies' profit margins are also being pummeled, which means more layoffs for auto workers. Supply exceeds demand in the car industry.

In fact, overcapacity is the rule in the U.S. economy. Another example is surplus U.S. agricultural production being dumped in nations such as Chile and Mexico. Meanwhile in 2002, the demand for emergency food requests rose in the 25 cities assessed by the U.S. Conference of Mayors.

Castellani's group wants future federal tax cuts to also put more cash in the hands of consumers. His view is that of rational capitalists who see past the short-term of lining the pockets of their class. Rational, that is, under an irrational system!

Lawrence Lindsey, the former director of the president's National Economic Council, also pushed for tax cuts that helped consumers. He was recently purged from the White House, replaced by Stephen Friedman. Apparently, backing tax policies that support consumption as the fuel that floats the economy's boat can harm one's career in Washington.

Other business lobbying groups see future tax cuts differently. For them, now is the time to grab the most while the getting is good. Take the National Association of Manufacturers, which is "pressing for big new write-offs on investments," the Nov. 27 New York Times reported.

The NAM's stance is the "supply-side" view of tax cuts, GOP-style. It claims that with benefits from tax cuts flowing to the well-heeled, they will use their capital for new investments that create jobs. But is the lack of investment in factories and machinery what ails the nation's economy, or is weak purchasing power the pressing problem?

In the 1980s, President Reagan pursued a "supply-side" tax policy. He slashed taxes for rich people while increasing the military budget. Both moves were undertaken in the names of the U.S. public, which in turn was hammered with policies that made union organizing in the private sector more difficult.

It is worth noting that a tax cut to the U.S. military-industrial complex is completely off the table since the terrorist attacks of Sept. 11, 2001.

That criminal act has given new life to the MIC. Yet how U.S. workers generally and the 8.5 million of them officially out of a job will benefit from an attack on Iraq remains unclear, a question being mainly ignored by corporate journalism.

Currently, the nation's payrolls are floundering, and the lowest interest rates in 41 years are not improving the climate for business. Not surprisingly, indebted consumers are wary. Thus they are slowing their buying based on borrowing.

At the same time, the Center on Budget and Policy Priorities has noted that state governments are staring at their worst fiscal crisis since the Great Depression. Will Uncle Sam's tax policy next year ride to the states' rescue? Consider a recent Associated Press report on the 43 percent of the freshmen members of Congress who are millionaires.

Any guess whose bread they'll be buttering when it comes to the GOP's tax policy in 2003? Two guesses. Toss the first one.

Seth Sandronsky is an editor with Because People Matter, Sacramento's progressive newspaper. Email: ssandron@hotmail.com

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