The Big Idea

Claude Allen’s Mentor

Shoplifting and Bushonomics.

George Bush speaks with Claude Allen at the White House in 2005

Last week, Slate broke the news that Claude Allen, until recently the White House chief domestic-policy adviser, was arrested for theft in suburban Maryland. The president has expressed his shock and disappointment. How could one of his top appointees, a devout Christian who passed a series of FBI background checks, have been a common thief? But the more we hear about what Allen is accused of, the less it sounds like kleptomania and the more it sounds like an application of Bush economic policy.

Allen’s alleged scam was something called “refund fraud.” According to the police in Montgomery County, he would purchase a home-theater system or a computer printer from a department store and put it in the trunk of his car. Then he would come back to the same store with his receipt, pull an identical item off the shelf, and take it to the return desk for a refund. Using this technique, a brazen perpetrator pays for the item once but derives value from it two times—he gets his money back and keeps the merch. Allen is alleged to have stolen more than $5,000 worth of merchandise over the past year in this way.

Just as a point of comparison, consider Bush’s Social Security proposal, which died on the vine in Congress last year. Bush wanted to create a system of private retirement accounts for future retirees. To create these accounts would have required him to divert $1 trillion or so from the Social Security Trust Fund, which pays for benefits for current and future retirees. Since Bush did not propose to reduce benefits, how was he going to make up the difference? By sauntering to the customer service desk and asking for his money back. In this case, the receipt was a bogus projection that the retirement funds invested in the stock market would grow so quickly that everyone would come out ahead. The main difference between Allen’s alleged scam and Bush’s attempted one is scale. The goods Bush tried to slip under his coat at the Social Security Administration were worth around 200 million times as much as the ones Allen is said to have lifted at Target and Hecht’s.

Allen’s appliance-rustling days are surely over, but his former colleagues in the West Wing are still running all their favorite cons. At the moment, they’re trying to slip more tax cuts out the door without stopping at the cash register. Their trick is to claim that with the manager’s special, tax cuts are on sale—for nothing. “You cut taxes and the tax revenues increase,” Bush said last month, in a typical statement on the subject. In other words, tax cuts will mean more money for the Treasury, not less.

There is, of course, no economic support for the concept that tax cuts are cost-free, just as there are no shops where customers are encouraged to walk past the checkout line without paying. Bush’s tax-avoidance scam is based on the truism that government revenues almost always rise in nominal terms because of inflation, population growth, and GDP growth. Even if Congress cuts taxes, government is likely to take in more in 2007 than in 2006—it just won’t take in as much more as it would have otherwise. According to a recent paper by the Center on Budget and Policy Priorities, after Bush’s 2003 tax cuts, federal revenues were $316 billion below the administration’s own previous forecast.

Another con the president pulls not at Wal-Mart but at the Office of Management and Budget is price-tag swapping. In this scam, the presidential perp picks out a high-priced item like a package of lamb chops or the Iraq war. When the security camera is pointed elsewhere, he peels off the $200 billion price tag and attaches a lower one. Should a subordinate threaten to squeal to security, the ringleader deals with the problem Tony Soprano-style. For instance, when the government’s chief Medicare actuary came up with a too-high price tag of $551 billion for Bush’s Medicare prescription drug bill, members of the president’s gang paid a visit and made him an offer he couldn’t refuse: Keep quiet and keep your job. The official price tag was dropped to $400 billion—even though subsequent estimates have ranged as high as $700 billion.

Presidents set a moral example, and given the message Bush has been sending, it’s no surprise that the problem of inventory shrinkage has spread to Congress as well. For example, Republicans in the Senate recently proposed a novel way to “pay” for extending Bush’s tax cut on investment income, which will otherwise expire in 2009. They want to allow millionaires—and not just those making less than $100,000 a year—to convert their conventional IRAs to Roth IRAs, which allow people to deduct money tax-free upon retirement. This change would produce a temporary revenue boost, because taxes are due on the initial conversion to a Roth IRA. But the change would be a big money-loser in the long run. With this swindle—paying for one tax cut for the rich with another tax cut for the rich—Bushonomics has finally reached its larcenous apogee.

So, where might Claude Allen have learned you can get the things you want without having to pay for them? Let’s just say it wasn’t at church.

Correction, March 15, 2006: In the “Related in Slate” module of this story, we originally mistakenly referred to Claude Allen as “George Allen.”