The logic of tax cuts in a good economy

SAN DIEGO — SAN DIEGO -- Dispirited Republicans, their fates linked with Bob Dole's, have of late experienced life as all Lent and no Easter. Resurrection, they hope, began Monday with Mr. Dole's deployment of his economic plan, built around a 15 percent across-the-board tax cut, which he hopes will, at last, draw a sharp distinction between himself and his rival.

Will flaming hope replace dull despair in Republican ranks? Time will tell, but recent events have already told Republicans that trying to draw sharp distinctions between conservatism and Clintonism these days is like trying to carve fog with a trowel. Mr. Clinton, too, favors a tax cut, but smaller and more targeted. This reflects the reversal of roles in contemporary American politics.


During the liberal era, from the New Deal to the Great Society, the Republican Party's doctrine often seemed to be an unenthusiastic echo of the Democratic Party's. Republicans were for approximately what Democrats were for, only less of it, and slower. Echo politics worked well enough for Eisenhower and Nixon. In this conservative era, it may work as well for President Clinton.

Stranglers' alley


For months the Dole campaign has resembled the description of committee as an alley down which ideas are led and then strangled. However, last summer, before a Republican audience, Dole guilelessly blurted out the thought that if they wanted him to be Rea- gan, he would be. This summer he is trying to capture some of Ronald Reagan's lightning in a bottle with a Reaganesque tax proposal designed to give the Republican Party the ideological clarity the Bush presidency blurred.

Just as birds are called by sounds like their own, voters are summoned by thoughts like their own. Today they think the government gets more of their money than is good for it or them. They also are afflicted by cognitive dissonance -- holding contradictory views with equal intensity. They want tax reduction and a balanced budget and most of the current menu of government benefits.

When Mr. Reagan proposed his tax reductions, the nation was reeling from years of oil shocks and stagflation. The "misery index" -- the sum of the unemployment and inflation rates -- had topped 20. Hence the potency of the question he posed to the country in his debate with President Carter: Are you better off today than you were four years ago?

Today no one bothers to compute the misery index. The San Diego Union-Tribune reports a poll of the Republican delegates who are about to convene here -- a cross section of the country's hard-core anti-Clintonites -- showing that 64 percent say they are as well off or better off than they were four years ago.

And the Los Angeles Times reports that the economy of this state, where one-eighth of the electorate lives, is percolating briskly enough to have generated $2.6 billion in unanticipated revenues -- partly from hefty bonuses paid to executives of profitable corporations. Wages are rising faster than inflation, partly because of rapid job creation in high-wage fields like computers and entertainment.

Because the economy is not obviously broken, Senator Dole must make an argument that Mr. Reagan did not make concerning what new tax cuts are supposed to fix. The argument is that funding the existing welfare state requires a bold dash for a higher rate of economic growth. Demography is destiny for a welfare state, and the great demographic fact of our time is the aging of the population, with the elderly being the principal recipients of welfare-state transfer payments, for pensions and medical care.

In asserting the "supply side" faith that the tax measures he proposes will be sufficiently stimulative to be partially self-financing, Senator Dole is committing the unspeakable faux pas of partially changing his mind. It was said that when Czar Nicholas II uttered the word "intelligentsia" he did so with the same facial expression he wore when uttering the word "syphilis." A dozen years ago Mr. Dole seemed to feel that way about the most brassily optimistic "supply-siders."

However, just as hunger is the best sauce for unappetizing food, political peril is the best argument for Mr. Dole to swallow his skepticism and embrace the argument President Kennedy correctly made for his tax cut: "It is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now."


George F. Will is a syndicated columnist.

Pub Date: 8/07/96