Less is not more

Anthony Lewis

December 03, 1991|By Anthony Lewis

Dallas SUDDENLY politicians of every stripe are demanding a tax cut to "fight the recession." President Bush turned from opponent to enthusiast overnight. Democratic congressional leaders called hearings for this week to explore their ideas and the president's.

The stampede tells us something about this country. It shows how addicted we are to fulfilling immediate desires, how unable to focus on long-term needs. It shows that we are still gripped by the faith of the Reagan years, though its ruinous effects are all about us: we believe that somewhere there is a free lunch.

Cutting taxes now is a bad idea on every count. Because the federal deficit is so high, everyone proposing a cut promises that his plan will produce no net loss to the Treasury. If that is so, there will be no stimulus to the economy. Some other interest may be served -- undoing the Reagan tax law's tilt toward the rich, for example -- but not fighting the recession.

Some of the tax-cut plans would in fact have a contrary effect. One would pay for the cuts by a big reduction in defense spending, for example. But those paying lower taxes would save at least a little of the money, and spend some of it on imported goods. Result: Less spending in the United States.

The idea of a tax cut is naturally enticing to Americans as a way of making up for what they have lost economically in recent years. Real wages have fallen in this country over the last two decades. Recession aside, middle-class people feel increasingly that their dream of a rising standard of living is gone.

But what is causing the economic pain -- what is impoverishing the United States in comparison with its international competitors -- is not high taxes. Our taxes are lower that those of any other major industrial country.

The reason for the deteriorating American position is lack of human and material investment. Over many years we have saved less and invested less than our competitors, and the problem is getting worse.

Reaganomics was supposed to cure all that -- induce Americans to save more from higher after-tax incomes. But it didn't work. We saved less. The Reagan economic shamans produced speculation, vast indebtedness, boom -- and now, inevitably, bust.

It is hardly surprising today if banks, burned by all those inflated real estate loans, are reluctant to lend -- whatever interest rates may be. So that hangover of the Reagan era deepens the recession. And so do the massive cuts that state and local governments are now making in their expenditure, in good part because they have lost so much federal aid under Reagan-Bush policies.

There is a striking consensus among serious analysts that more than anything the United States needs to think of its long-term needs. Failure to do that means falling further behind Japan and Germany and the rest in technology and education.

Herbert Stein, the conservative economist, wrote recently in the Wall Street Journal that his answer to recession "would not be to increase the consumption of Middle America, which would be the main consequence of cutting taxes. I would rather fund Head Start fully, make sure that states have the money to provide the training, social services and jobs called for by the new welfare program, beef up the struggle against crime and keep the libraries and schools open."

Felix Rohatyn, the New York financial expert, called in the New York Review of Books for "a vast national public investment program." He pointed to what other countries are doing -- France, for instance, investing $100 billion in a new national high-speed rail system.

To say these things is to recognize that what the United States lacks is not resources. It is leadership.

For 10 years now we have had presidents who told us that less would be more -- that the answer to our economic problems was to reduce taxes. We have had presidents who through ignorance or political calculation would not talk economic sense to the American people.

Talking sense will not be easy for any leader. We are used to fantasy, and we do not want to hear hard truths about sacrificing and investing for the future. But someday someone will make us understand that there really is no such thing as a free lunch.

Anthony Lewis is a columnist for the New York Times.

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