President Bush and the congressional leadership have finally produced a solid, responsible budget package that deserves prompt legislative approval. Unless a positive response comes from Capitol Hill within the next three weeks, the nation once again will be threatened with fiscal chaos, governmental breakdown and a worldwide perception that U.S. economic policy is paralyzed.
Despite needless delays and fundamental differences between a Republican emphasis on "growth" and Democratic appeals for "fairness," there is now bipartisan agreement on the largest deficit-cutting formula in the nation's history -- a $500 billion retrenchment over five years.
Especially heartening in light of the Persian Gulf crisis was the proposal to more than double gasoline taxes over two years. Mr. Bush rightly said this will "help reduce America's vulnerability to the interruption of supplies of foreign oil."
Also reassuring was the decision to rebuff moves within both parties to undermine the landmark 1986 tax reform act. The president's stubborn insistence on a cut in the capital gains tax would have marked a retreat from the concept that all kinds of income should be taxed alike. He deserved a defeat on this issue, and got it. Democrats responded to the Bush capital gains tax gambit by trying to raise marginal income tax rates on the wealthy, the other part of the 1986 tradeoff. This maneuver also got a well-warranted rejection.
Negotiators came up with proposed increases in beer, wine, liquor and tobacco taxes that are long overdue. Any kind of flat excise tax on items widely purchased by consumers is regressive. But such Joe Six-Pack "sin taxes" were balanced by proposed federal levies on high-priced cars, furs and other luxury items. The affluent will also be hit by limitations on itemized deductions that can be claimed by taxpayers in the $100,000-plus range.
Probably the most difficult proposal, politically, would increase monthly premium costs for Medicare. Less controversial would be a reduction in fees paid to doctors and the imposition of payroll taxes to support Medicare on income up to $73,000. Washington could not get up its collective gumption to increase the amount of Social Security benefits taxed as regular income.
If Congress accepts the bipartisan compromise, the projected deficit will be cut $40 billion in fiscal 1991 but will still be the largest in history ($250 billion plus.) So the new package really should be judged not as a quick fix but as a genuine attempt to impose and maintain deficit-reduction enforcement. This will depend on the endurance of its limits on spending as much as on its tax provisions. If expenditures can be held at or below the inflation rate, the nation might be pointing at last in the direction of fiscal sanity.