Packwood is right

April 03, 1995|By Myriam Marquez

SEN. BOB PACKWOOD may not know how to control himself in the presence of some women, but when it comes to the nation's finances, the Republican senator from Oregon has an excellent grasp of what not to do: cut taxes willy-nilly just to gain votes.

Tax credits for middle-income families with children, as proposed by House Republicans and the Democratic president, amount to chump change if those tax breaks are achieved without first substantially reducing the federal budget deficit, Mr. Packwood maintains.

The Senate Finance Committee chairman is right. For middle-income families, the choice should be clear. A long-range deficit-reduction plan that balances the federal budget within, say, seven years would result in more money in all Americans' pockets than would a $500-per-child annual tax credit, as proposed in the Republicans' Contract with America and by President Clinton.

That is because the federal government's constant borrowing to finance ongoing programs takes money from the economy that otherwise would be available for average Americans to borrow, at much lower interest rates than what we have now.

Mr. Packwood said in a television interview, "This feeling on the Finance Committee -- Republican and Democrat [alike] -- is that the best thing we can do for the taxpayers of this country is just try to move toward deficit reduction. And if that gets their mortgage interest rates down a point or two, that is more important than anything else we can do."

Certainly polls have been showing for several months now that a majority of Americans prefer that Congress first tackle deficit reduction before lowering taxes.

About 100 House Republicans seem to have heard that message. They aren't giving up on tax breaks altogether, but the so-called "dissenters" in the House want to scale back the tax credits that first were offered in their Contract with America.

The contract proposed to grant tax credits to families earning as much as $200,000, which would amount to a $107 billion bite out of the federal budget in five years' time. The group of 100 now wants to limit those tax credits to families that earn no more than $95,000 a year.

President Clinton also is offering a $500 tax credit for families with incomes of as much as $75,000, if they have children younger than 13, or tax breaks for families with kids in college.

Some tax breaks -- such as those that would apply for certain types of capital gains or to college tuition -- make sense. Reducing the capital-gains taxes for companies that expand their plants is worth doing because such expansion would lead to more jobs for Americans. Tax breaks for college tuition also could help families at the lower end of the middle-income bracket and lead to a better-educated work force.

The bottom line is that the federal government's debt is fast approaching $5 trillion, with annual deficits averaging another $200 billion more. Without offering one penny in tax breaks, Congress still would have to cut more than $1 trillion in the next seven years to reach a balanced budget by 2002.

Mr. Packwood and many other Republicans have done the math and know the score. It's deficit reduction first -- or bust.

Myriam Marquez is an editorial page columnist for the Orlando Sentinel.

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