Playing tax-cut games at the future's expense

August 19, 1999|By Jim Wright

TWO THINGS are fundamentally wrong with the massive $792 billion tax cut that GOP leaders have rammed through Congress.

This is absolutely the wrong time to reduce our national revenues. And this particular proposal would be the worst and least economically productive kind of tax cut.

So big and costly a slash in taxes right now would wreck the debt reduction plan we've finally gotten on track after so many false starts. It might raise interest rates. And it would give the glutton's share of the money that it siphons from the Treasury to people who need it the least.

The bill is an election-year ploy, pure and simple. Its sponsors know that it will be vetoed. The president has said so plainly.

Sponsors, wanting to blame President Clinton for being a killjoy, are advertising their bill as containing something for everybody. A tiny bit, maybe. But 60 percent of the total tax relief is earmarked for the wealthiest 10 percent. This leaves only 40 percent for the middle and bottom 90 percent of American taxpayers.

Under this measure as drafted, the people who need help the most -- those struggling to get by on jobs with inadequate salaries -- would get virtually nothing -- except a draining away of public money that could otherwise help improve public education or help fix Medicare and Social Security.

It's Robin Hood in reverse. It takes from the poor and gives to the rich. But the worst thing about this bill may be its timing.

In the past, tax cuts have been employed during times of recession as a stimulus to economic activity -- to get things rolling again for everyone. This ill-timed gimmickry is pushed forth at a moment of robust economic growth and general national prosperity. Senate leaders slipped their bill through by only a one-vote margin after Federal Reserve Board Chairman Alan Greenspan warned that heating up an already hot economy with such a huge tax cut would almost certainly require an increase in interest rates.

Who'd get hurt by that? Almost everybody; most of all, the young parents struggling with car and mortgage payments. What they'd have to pay in extra interest charges, in most cases, would more than wipe out the meager reduction in their tax obligations.

What could be dumber?

Current polls show that most voters are not asking for a tax cut now. They strongly prefer to use our anticipated surpluses to pay down the debt and build up a cushion to ensure future solvency for Social Security and Medicare. Isn't it ironic? Most folks don't want the money given back now; yet everyone recognizes it as an election-year gambit.

Clearly, it wouldn't seem a very effective bid for voters. So what is it? A bid for campaign contributions? A lure for "Team $1 Million," the GOP's newly announced search for 100 elite contributors who'll give the party $1 million each?

It isn't as if the biggest moneymakers in the corporate world were needing a break just now. The World Bank issued a stunning report this summer, stating that 22 percent of all the world's wealth is now controlled by the 300 biggest corporations.

Weath gap

The gap between richest and poorest in our own country is widening dangerously. The middle-income sector is shrinking, while the nether ranks continue to grow in number. This doesn't represent what we all grew up thinking of as the American Dream.

If anyone needs a break, it's the working folks on the middle and the lower end of the economic ladder who are feeling the pinch. Wages, held down by corporate downsizing and out-sourcing and by increasing competition from low-wage countries, have not kept pace with either profits or productivity. To tilt the balance further away from the middle-American's grasp, and then to tantalize him with an illusory tax cut like this, is just plain wrong.

There are a few good features in this bill. Redressing the marriage penalty, so that a married couple wouldn't be better off for tax purposes with a divorce, is clearly overdue. But that's just a tiny slice of this pie. That certainly wouldn't cost the government $792 billion.

The saddest thing, however, is what this bill would do to deficits, debt and discipline. Some supporters are boasting that it would be the biggest tax cut since Ronald Reagan's 1981 reduction in upper income taxes.

Recall the outfall of that. It brought on history's biggest deficits and was a major contributing factor in tripling the national debt.

Clearly it makes sense to stick to the course of paying down that debt, freeing ourselves from the burden of interest charges that take about $280 billion a year from the treasury, and to building up reserves for Social Security and Medicare solvency for future generations. That's the right, fiscally prudent thing to do.

Jim Wright of Texas is a former speaker of the U.S. House of Representatives. He wrote this article for the Fort Worth Star-Telegram.

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