Democrats between Iraq...and a hard place

Robert Kuttner

September 24, 1990|By Robert Kuttner

IN THE OTHER martial standoff -- the budget war at Andrews Air Force Base -- the Bush administration has been playing hardball and the Democrats have been played for suckers. Bush and his chief negotiator, John Sununu, have apparently calculated that in a national mood of wartime crisis, the Democrats will have everything to lose if the talks break down without a budget deal.

You can just imagine the president going on national television in late September, five or six weeks before a national mid-term election, and declaring, "I have been able to reach agreement with every world leader from Margaret Thatcher to Mikhail Gorbachev. The only people I've been unable to deal reasonably with are Saddam Hussein and Dick Gephardt."

The Democrats, seemingly, are between Iraq and a hard place. The sense of national crisis demands that they rally loyally behind their commander in chief, as they surely have. But this loyalty is not being reciprocated in the budget talks. On the contrary, Bush, John Sununu and Richard Darman are determined to take full political advantage of the situation and resist any budget compromise domestically.

The only thing that can rescue the Democrats from a total rout is a firm loyalty to their principles. But in the talks at Andrews, the Democrats thus far have been saved from their own worst impulses of capitulation only by the administration's intransigence on the issue of capital gains. The issue has turned the Democrats into seeming populists almost in spite of themselves.

By the time the budget summit temporarily broke down on Monday, Democrats had already given away most of the store. As always, appeasement doesn't satisfy the party with the stronger bargaining position and the clearer goals. It only whets the appetite.

For example, the Democrats had agreed that the Medicare program would take massive cuts. Medicare is one of the few remaining reasons why people vote for Democrats.

But being good soldiers, the Democrats agreed that Medicare must be cut by at least $50 billion over five years. The Republicans proposed even steeper cuts totaling $64 billion. But by this point, the quibbling is over details. The administration has succeeded in defining the agenda and neutralizing the Democrats' main political advantage as defender of popular social programs. Either approach would increase out-of-pocket costs to the elderly by several hundred dollars a year each.

The Republicans also succeeded in demanding that Democrats

agree to other massive cuts in domestic programs. The Democratic budget negotiators had agreed in principle to some $85 billion of additional domestic spending cuts in farm price supports, federal retirement benefits and elsewhere.

These were to be partially offset by $35 billion of new domestic spending in priority areas that everybody, including the administration, considers worthy candidates for additional funding -- education, housing, child care, the environment, public infrastructure, the effort to overcome drug addiction and AIDS. So the net five-year cut in domestic spending would be about $100 billion.

But as the budget talks have progressed, virtually all concessions on the tentative package have been made by the Democrats. By last Monday night (Sept. 17), when the talks broke down over capital gains, the hapless Democrats had agreed in principle (or rather in lack of principle) to throw overboard nearly all new domestic initiatives for the sake of a budget deal.

Likewise, despite the recent House vote to cut back SDI and to stop B-2 production, the war fever over the Persian Gulf crisis has emboldened Sununu and Darman in the talks to rescue military budget plans rooted in Cold War assumptions which have nothing to do with actual military needs in the Middle East. If the administration gets its preferred defense formula, locking in a five-year spending plan, the elusive peace dividend will not materialize until 1995, and perhaps never. Here, too, all the JTC concessions have been on the Democratic side.

The third big realm of budget revision -- taxes -- is the one where Democrats, for the moment at least, have hung tough. After a decade of supply-side economics making the rich richer, the middle class more squeezed and the country as a whole deeper in debt, the administration incredibly is proposing another dose of the same.

Under the administration plan to cut capital gains to 15 percent, families earning under $50,000 will wind up paying higher taxes and families with incomes over $100,000 will pay a lot less. Roughly two-thirds of the benefit will go to households with incomes in excess of $200,000.

Here, at last, the Democrats drew the line. But there is already talk of yet another "compromise" that gives the administration most of what it wants on capital gains, too.

The only way Democrats can avoid a complete debacle is by remembering their principles. If President Bush gives that speech blaming deadlock on the Democrats, they can fire back that the administration was insisting on a disgraceful tax giveaway at the expense of the middle class and a gutting of Medicare on the backs of the elderly. Principles, for once, would make for good politics.

Otherwise, if they continue being whipsawed between the bipartisan appeals of the president and the low, salami tactics of Darman and Sununu, the Democrats will hardly win the thanks of either the White House or the voters. They will simply be serving as handmaidens in their own partisan execution.

Robert Kuttner writes regularly on economic matters.

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