Taxes, Budgets and Politics

May 24, 1991

Just when it looks like the new federal budget-control agreement is working better than expected, Democratic leaders in the House and Senate begin talking of tax cuts that would blow it to smithereens. Fortunately, neither Sen. George Mitchell nor Rep. Richard Gephardt really means it -- they are just playing politics. Even more fortunately, responsible Democratic lawmakers won't let it happen even if Republicans would cynically go along.

The Mitchell-Gephardt ploy is little more than a sign of Democratic frustration over GOP success in working the tax issue. That these leaders should be hinting at tax cuts just days after House Democrats rallied to preserve leeway to raise taxes under the budget agreement is, of course, an exercise in contradiction. However, the object of the game is not logic but partisan advantage.

Right now that advantage rests with President Bush, who was pilloried by conservatives last fall for signing onto a budget agreement that reneged on his "no-new-taxes" pledge. But it also set up a new mechanism to limit government spending. What few Democrats anticipated was that the spending limitation mechanism would put them in a budget straitjacket that allows White House priorities to prevail. The loyal opposition can deal only at the margins in trying to promote education, health care and other Democratic programs.

Here's why: The 1990 budget agreement not only required that any spending increases be offset by other spending cuts or revenue boosts; it also divided spending into three self-contained categories -- defense, foreign aid and domestic -- with no transfers allowed from category to category.

The result is a palpable holddown in domestic spending even in the face of the current recession. If the slump persists, emergency action could be taken to loosen the purse strings -- especially on unemployment compensation. But even there, the outlays would be relatively marginal.

All this does not mean deficit figures will be any less forbidding this year than in previous years. But it does mean that greater discipline on spending will be imposed through the 1992 election than was the case during the era of failed Gramm-Rudman attempts to stop the deficit explosion.

Given this situation, Mitchell-Gephardt efforts to turn the Democrats into a party of tax-cutters are ludicrous. The gimmick is to pretend that higher taxes on the very wealthy will offset tax cuts for the middle class. But the numbers are no more convincing than Senator Mitchell's earlier toying with reductions in Social Security payroll taxes. He was rebuffed. Now further rebuffs are in order.

Imperfect as it may be, the current budget-control agreement is worth preserving.

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