HISTORY LESSONS from Prof./Sen. Daniel Patrick Moynihan, D-N.Y. (On "Face the Nation):
Question: Senator, the president laid out . . . [a] proposal for $60 billion in tax cuts. It's a question still whether it's good politics, but do you think it's good economics?
Answer: Could I give a moment's history here? Because I think we're giving them the idea that the deficit is something that's written into the Constitution, it's the character of a democracy and so forth.
Uh-uh. I came to Washington in the [John F.] Kennedy administration, and it's hard to remember, but it's necessary, that the economists of that administration, and they reflected general opinion, were of the view that our problem was that we had too much money in Washington.
At a certain point in the business cycle as you were growing, revenues would grow, but Congress wouldn't spend them. And you had this dread affliction called "fiscal drag" and you never got to full employment. And what to do, what to do?
The chairman of the Council of Economic Advisers under Presidents Kennedy and [Lyndon B.] Johnson thought of
revenue sharing. "We'll give it to the governors; they'll think of something to spend it on."
President [Richard M.] Nixon under the exact same theory dropped revenue sharing. We would devise budgets which were called full employment budgets, which meant they had a deficit, but they -- but the actual outlays would be what the federal government would have in revenues at full employment.
All that changed in 1981 when a great bidding war over cutting taxes took place which was partly political in the administration at that time, which said, if you cut revenues, you will starve the beast, and that means cut down the size of government.
Well, indeed, we cut revenues, but didn't cut the size of government. In fact, [the government] grew a little bit. Now, if we do that again, we deserve damnation, and that will be our fate.
Q. [On another topic], given longevity, life spans the way they are, [does] it make sense to raise the retirement age more quickly than we are doing?
A. Remember how we picked 65? A very scientific process. In 1935, [we recalled that German Chancellor Otto von] Bismarck picked 70 in 1880, whatever. [Francis] Townsend from California was talking about 60 [in the 1930s] , and we said 65.
Now in the 1983 amendments we raised it slowly, and any system like this needs to be done slowly. We think 40 years first to 66, then to 67. But if I can make a point -- very important in a sense of how we live today -- the majority of Americans retire at 62 and will do so whether you raise it to 75.
So keep that in mind. At a reduced rate of benefit, but which is actuarially --
Q. Does that mean "no"? You don't want to see it raised?
A. I'm happy to see it raised.