The Politics of Rich and Poor

October 15, 1990

If "budget is policy," as the Nixon era's Roy Ash used to say, then taxes are raw, rough politics. There is plenty of the latter in the continuing struggle for a deficit-cutting package before the Nov. 6 general election. Incumbents are fearful of a voter backlash that could terminate their careers and harm their respective parties.

Because there are more Democrats than Republicans in Congress, Democrats have long been worried they have the most to lose in wide-scale public revulsion to government gridlock. That may explain why the Democratic leadership was willing to hammer out a summit budget agreement with President Bush.

When lawmakers rebelled, a populist fervor swept through Democratic ranks. Influenced by Republican analyst Kevin Phillips' new book, "The Politics of Rich and Poor," which contends that the political pendulum will swing left in the 1990s to correct the enrichment of the super-wealthy in the 1980s, many Democrats on Capitol Hill clamored for a budget package more favorable to middle and lower income citizens.

There is little doubt they are making headway. Republicans are also reading the Phillips book. GOP lawmakers are hearing increasingly louder complaints on visits to their home districts that they are the party of the rich. And so, sentiment is growing in GOP ranks for a final package that tilts toward "fairness" -- the new political buzzword.

The intra-party situation is far more complicated for the Republicans than the Democrats. In the House, an early revolt against the summit agreement led by GOP whip Newt Gingrich was strictly in the tradition of right-wing Reaganism -- no new taxes and cuts in capital gains tax rates. The Gingrich crowd figured the Bush White House was jeopardizing their best trump card this year to enhance the president's re-election chances in 1992. In the Senate, where comparatively fewer incumbents are facing the voters, there was more inclination to go along with the president -- indeed to hold him to his summit commitments.

We hope neither income tax rate increases nor capital gain rate cuts make it into the law books, thus preserving 1986 tax reforms. Instead, the summit agreement should be worked over to eliminate an ill-advised $12 billion tax break for investors in small start-up businesses, increase the minimum tax imposed on the wealthy, make the payroll tax for Medicare more progressive and redistribute wealth downward.

President Bush will accept such a package, we predict, even if it is covered with the fingerprints of Senate Finance Committee chairman Lloyd Bentsen. He is a potential Democratic presidential nominee in a 1992 square-off of Texans. That's politics -- raw, rough tax politics.

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