Tax Cut Games Again


With the likelihood of renewed hostilities against Iraq somewhat diminished, at least for the duration of the Republican National Convention in Houston, GOP delegates are pining for new initiatives from President Bush to jump-start a sputtering economy. Officials close to the president have been hinting for days he might make dramatic tax-cut proposals in his acceptance speech Thursday night. But on this, as on so many things, there is deep-seated indecision within a demoralized party.

The economic experiments of the Reagan-Bush era started with the Laffer Curve, a diagram on a paper napkin that purported to show if you cut taxes you increase revenues. It is the political equivalent of the perpetual motion machine.

It didn't work. The Laffer Curve turned into a laugh -- a bitter laugh reflected in the nation's dizzying descent into indebtedness that shrinks living standards and diminishes U.S. clout worldwide.

The government's inability to deal with the longest recession since the 1930s is, in part, the result of the hobbling debts created by supply-side economics. The resources are just not there for massive pump-priming, and even a Democratic Congress with co-responsibility for the country's economic plight knows it.

Consequently, as Mr. Bush ponders new tax reductions, he has to realize they are far from a political panacea. To pay for them, he would have to place some needed limits on government entitlement programs whose costs have constantly soared far higher than the rate of inflation. Medicare, Medicaid, veterans benefits, farm subsidies -- Social Security is untouchable -- have powerful constituencies that can be counted upon to rebel.

The tax cut issue finds Republicans again badly split between supply siders who have never given up their faith in the Laffer Curve and traditional economic conservatives wedded to the old-time religion of keeping the account books balanced.

A supply-sider in the 1980s in loyalty to President Reagan, Mr. Bush veered back to the traditionalists when he raised taxes in the 1990 budget agreement. This move, shattering his "no new taxes" pledge, cost him popular support. The president now describes it as a "mistake."

With defeat threatening, Mr. Bush seems to be swinging again toward the tax cutters -- even if the national debt continues to pile up on future generations. He has pledged to "reduce the burden of government on our people and on their pocketbook," a stand that contrasts with Senate minority leader Bob Dole's traditionalist warning that a tax cut might not be "the right medicine" at this time.

If this is the president's choice, the nation should realize the motivations are strictly political. The Democratic Congress will not adopt a Bush program in the midst of an election. It cannot be assumed the next Congress would respond either.

Mr. Bush should learn from the decline in popular prestige of Ronald Reagan since he left the White House, a decline not due to Mr. Reagan's recognized achievements in ending the Cold War but to the economic anemia his policies induced.

And Mr. Bush should learn from Paul Tsongas, who had the courage to advocate harsh remedies that expose the Clinton economic proposals as political pap. Instead of offering tax reductions, Mr. Bush should focus on demanding cuts in entitlement spending -- the only step that can start bringing the budget into balance. It would respond to frequent demands for honesty on the hustings.

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