May 24, 2001

Bush's Tax Cut Skates Past Shifting Senate
Bush vs. Davis: The Thrilla' in California
Ashcroft Revives the Second Amendment

Bush's Tax Cut Skates Past Shifting Senate

The Senate voted 62-38 for the bill that cuts income tax rates across the board, bringing the top 39.6 percent rate to 36 percent and creating a new 10 percent bracket out of the bottom of the current 15 percent bracket retroactive to the beginning of this year. Twelve Democrats joined all 50 Republicans to back the measure.

The legislation now goes to a Senate-House conference where the two bodies will try to work out their different versions of the bill. Bush urged lawmakers to reach agreement quickly.

"Moderate lawmakers want to dilute the tax rate cuts at the heart of President Bush’s tax proposal," writes Chris Edwards, Cato director of fiscal policy studies in "Cut Tax Rates, Cut Government Waste,". "These efforts should be resisted because rate cuts can reduce the economic waste created by federal income taxes."

While the resulting deal is a victory for Bush, the size of the tax cut is ultimately underwhelming. In "Bush's Tiny Tax Cut," Cato Vice President David Boaz argues that "the federal government is proposing to collect $28,600,000,000,000 from us over the next 10 years. That's $5.6 trillion more than the biggest-spending Congress in history proposes to spend. We're overtaxed. It's the people's money. Congress should give it back. President Bush's tiny tax cut is a down payment on the tax cut we need."

Bush vs. Davis: The Thrilla' in California

Davis, who requested the meeting after accusing Bush of ignoring the state's energy woes and letting power companies "get away with murder," will renew his request that Bush enact federal price caps on electricity.

Jerry Taylor, director of natural resource studies at the Cato Institute, has said: "The call for price caps suggests that politicians are genetically incapable of learning from past regulatory mistakes.

"Wholesale electricity prices in the West are sky-high for a reason. Wholesale natural gas prices have risen sharply, and since 90 percent of the cost of gas-fired electricity is fuel cost, massive run-ups in electricity prices were sure to follow. A two-year drought has simultaneously reduced hydroelectric generation in the West by 20 percent compared to 1998 levels, further restricting the availability of power and increasing demand for gas-fired electricity. Finally, demand is up because of a hot summer followed by a very cold winter. Combine those supply and demand shocks and a wholesale electricity price explosion is inevitable.

"Imposing price controls would reduce incentives to add new generation. Moreover, it would falsely signal to consumers that electricity is more plentiful than it actually is. In essence, it would repeat the economic calamity caused by oil price controls in the 1970s. Politicians cannot simply 'regulate away' a supply shock, and attempts to do so always have and always will result in further shortages."

A special Web site about the Western electricity crisis is available at www.cato.org/electricity.

Ashcroft Revives the Second Amendment

Advocates on both sides of the gun control issue said Ashcroft's two-page letter marks a dramatic turnaround in the federal government's stance on firearms. Gun control advocates said they feared it would open the door to broad challenges of federal gun regulations, including the Brady Law.

In "Trust the People: The Case Against Gun Control," David Kopel writes that the gun control debate comes down to the basic question: "Who is more trustworthy, the government or the people?" In "Gun Policy in the Aftermath of Littleton," Cato Fellow Doug Bandow writes that gun control is misguided and that studies show that guns are used five times as often to prevent as to commit crimes.

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