October 14, 1996
AMERICAN VOTERS, for very good reasons, are wary of all the tax-cut yak-yak coming out of the Dole and Clinton campaign camps. Four years ago President Clinton was promising the electorate "a middle-class tax cut." Instead the Democratic incumbent raised taxes. No wonder there is skepticism about his latest call for "targeted" tax cuts. Republican challenger Bob Dole is telling the nation that he can cut income taxes by more than half a trillion dollars and still balance the budget. After the experience of the Reagan years, the citizenry doesn't believe it.
The fact is the country would be better off if both of these campaign promises were jettisoned. The other fact is they probably will be.
Americans have learned the hard lesson that deficit reduction is more important than cutting taxes -- by a ratio of 57 percent to 34 percent in a September poll. And the 104th Congress, for all its anti-tax rhetoric, came face-to-face with budget realities that will also confront the 105th in the next two years.
Thanks to the efforts of deficit hawks, Congress in 1990 made it a requirement that any tax cuts have to be paid for by cuts in discretionary spending, which has already been heavily slashed, or by accounting gimmicks, which are increasingly in short supply. So when lawmakers discovered that major income tax cuts would eventually affect those semi-sacred, middle class entitlement programs -- Medicare and Social Security -- they prudently passed only a couple of election-year baubles.
At present, the U.S. economy is perking along at a steady, moderate growth rate that has cooled down the inflation threat and reduced unemployment to its lowest level in seven years. Not only is there no need at present for massive tax cuts, but there is no clamor for them except from partisans whose only criterion is winning elections. Should a recession come -- and so far as we know the business cycle has not been repealed -- that is the only time when a tax-cut stimulus could be somewhat justified. And even then, there would be little pay-as-you-go money to pay for it; the only resource would be more Treasury borrowing.
In the vice-presidential debate the other night, Al Gore said the Dole tax cut would "blow a hole in the deficit" and Jack Kemp held that the Clinton counter-proposals were an egregious example of "social engineering." Both candidates were right. Where they were wrong was in touting the nostrums coming from the top of their tickets.
Pub Date: 10/14/96
