Taxpayers should not be fooled by President Clinton's proposal to set up a "trust fund" to guarantee that revenues from new taxes are used strictly for deficit reduction. As long as the government is running a deficit, any revenues coming into the Treasury from any source will be spent promptly. Then the government will borrow the rest.
So why did Mr. Clinton launch such an enterprise on the same day he was saying he couldn't blame Americans for being "distrustful" about anything concerning the deficit? Because he and his fellow Democrats are worried the administration's initial blunder in pushing a stimulus bill will hang the old "tax and spend" tag on them. They are casting about for some means to reassure voters as Congress braces to enact one of the biggest tax boosts in history.
Unfortunately, the Clinton trust fund is nothing but the "display device" deputy budget director Alice Rivlin says it is. "I don't think it affects anything," she adds. Revenues, expenditures and the size of the deficit will not be changed one iota if accountants put income from new taxes into a separate category. The administration's only purpose is to show that Mr. Clinton's proposed new tax revenues and his cuts in existing spending programs are greater than the cost of his new spending proposals -- with pricey health care reforms a significant exception.
If this is deficit reduction, let Democrats eager to give the administration a more frugal cast make the most of it. But it does not obviate the fact that the deficit would be that much lower if the government abstained from the new "investments" in
infrastructure and whatsuch that Mr. Clinton wants to make. Nor does it do much more than codify the obvious: namely, that any increase in revenues -- from new or old taxes -- will reduce the amount the government will have to add to the debt.
Republicans have been quick to decry the Clinton initiative as a "gimmick" and a "hoax" and, get this, "smoke and mirrors." But such criticism comes unconvincingly from the crew that gave us supply-side Reaganomics and Gramm-Rudman. The GOP's insistence on spending cuts only, with no new taxes to restore the revenue base it destroyed, is just another example of budget legerdemain. The deficit has to be attacked from both ends -- from income and outgo, with caps on entitlement programs that both parties studiously avoid.
In lofting his new balloon, the president said "credibility is difficult to come by in Washington today." Indeed it is. But credibility will not be easily restored if Mr. Clinton's basic economic program has to be sold by a "display device" like the deficit trust fund. Instead, it could increase the public's feeling of being deceived that he lamented and create the very backlash he wants to avoid.