Tax Talk at Yuletide

December 10, 1991

One would have to believe in Santa Claus to believe the Bush administration and Congress will agree on a tax-cut package aimed at stimulating economic growth before Christmas. Both the prospects and the intentions of the various squabbling factions in Washington are strictly negative. Their interest is in politics, not policy.

So the nation will get politics in heavy dosages from Capitol Hill hearings the Democrats arranged to put the administration on the defensive. Their goal is eminently attainable: President Bush has neither his own mind nor his own troops in order. Dithering is the message from the White House -- and the surprising thing is that it seems to be deliberate. Despite subversive agitation from House Republicans and a revolt led by Housing Secretary Jack Kemp within his own Cabinet, Mr. Bush is playing for time. He wants to make an anti-recession program the centerpiece of his State of the Union message still six weeks in the future.

"When the economy goes down, a president takes the hits," Mr. Bush told the press last Thursday. That, however, is only part of the story. From the standpoint of Republican professionals, his plunge in the opinion polls not only hurts himself but GOP candidates across the landscape. Hence, the president finds himself under mounting pressure not only from Democrats who suddenly smell blood but from his own Republicans.

GOP rebels under the command of House minority whip Newt Gingrich are beating the drums for a cut in capital gains taxes along with rollbacks in the 1986 and 1990 tax bills in order to reinvigorate the real estate market and the reeling financial sector. Mr. Bush professes to be "enthusiastic" about this approach but his economics advisers are leery of its particulars and Republicans with tax expertise on the Hill are downright hostile.

In the end, elements of the Gingrich package will have to be meshed with Democratic-sponsored tax cuts for the middle class at the expense of the rich if anything substantive is to happen in an election year. This could require some dismantling of last year's ill-fated budget agreement, which has been overtaken by events. Estimates now forecast a deficit as high as $375 billion in this fiscal year. Both politics and economics converge in a consensus that the operative word is growth, even at the risk of soaring long-term interest rates.

So long as voters consider current debate over taxes on a par with canned Yuletide music at the neighborhood mall, it will do no harm. Action time will be next year, with control of the White House hanging in the balance.

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