What if Congress and the Bush administration wrapped up a deficit-reduction package and financial markets all over the world responded with indifference? That seemed to be the initial reaction as the measure moved toward final passage this weekend, and it tells volumes about the phony assumptions, the hypocrisy, the horse-trading, the sleight-of-hand and the tawdry politicking that dogged this issue from the beginning.
As the Nov. 6 elections approach, the nation will hear a lot of oratory about how brave our elected representatives were to enact a $140 billion tax hike (over five years) just before voters go to the polls. Don't believe it. Not the administration, not the Democrats in the House, not the Democrats and Republicans in the Senate would have dared to face the folks back home had they just confirmed a total breakdown in government.
As for House Republicans who boycotted the whole event (this includes Maryland's Helen Delich Bentley), they merely proved they could mouth the "no new taxes" pledge long after reality had caught up with George Bush. As it happened, they outdumbed themselves. The final tax bill was more progressive, and thus more unpalatable to conservatives, than it would have been had they stuck by their president. The result: an unwitting pre-election bonanza for the Democrats.
In comparison with the irresponsible over-borrowing and over-spending of the Reagan era, the new budget represents a hesitant step toward prudence in the fiscal management of government. The revenue base pulverized by the 1981 tax slash is somewhat restored. Entitlement programs for the elderly are nudged ever so slightly away from a straight course toward bankruptcy. Some of the very rich who cashed in during the go-go Eighties will have to send more of their winnings to the Treasury.
Yet these putative gains hardly offset the damage done to this country's self-esteem and world reputation by the ten-month circus over the budget. Even as the country lurched into recession and the dollar plunged and deficits soared and foreign investors looked elsewhere rather than finance the U.S. debt, Washington dithered. We would guess the damage to the economy will be greater than whatever paper progress was made toward a balanced budget.
The final package departed from 1986 tax principles upheld by the rebuffed summit agreement put together by President Bush and congressional leaders. Namely: taxing all kinds of income the same, giving no preference to capital gains on the sale of assets and reducing opportunities for tax shelters. The Wall Street Journal lists 11 specific new tax preferences plus goodies for the oil and gas and insurance industries. We can't help but notice, too, that the new tax package must be the first that actually penalizes some taxpayers (upper-income folks) for having children.
What is most dismaying is the prospect that the whole exercise will solve nothing. Although this purports to be the largest deficit-reduction plan in history, the deficit this fiscal year is hurtling toward a record $300 billion and may go higher with recession. Future restraints on spending remain dubious and Medicare's date with empty coffers is merely put off from 2005 to 2008. While the fashioning of the 1990 budget has been a fiasco, we just have to hope that the trend lines are right and the economy, in the end, will be put right.