Opinion Editorial | |
| Tuesday, September 1, 1998 | |
What's The Matter With Republican Tax Policy?Pete du PontFormer Governor of Delaware, is Policy Chairman of the National Center for Policy Analysis |
Most Americans celebrate New Year's Day on January 1. But for the federal
government, New Year's Day falls on October 1, because that is the beginning
of the fiscal year. September, therefore, is the last month of fiscal year
1998 and it very likely will be the first since 1969 when the federal budget
will be in surplus. According to the Congressional Budget Office, revenues
will exceed spending by about $63 billion in fiscal year 1998, with large
surpluses projected for future years as well. Unfortunately, Republicans in Congress have yet to develop a strategy
for dealing with an era of surpluses. For decades they have been railing
against deficits, blaming them on the Democrats' profligacy. In short,
attacking deficits was a convenient way of attacking the Democrats' economic
policy. Deficits symbolized a government that spent too much, was too big
and too intrusive. But if deficits mean that the government is spending too much, then don't
surpluses necessarily mean that the government is taxing too much? Apparently
not, in the minds of many Republicans, who are adamant about using the budget
surplus to pay off the national debt or at least pay off all the IOU's in
the Social Security Trust Fund. No doubt, there are many Republicans who sincerely believe that it is
wrong to cut taxes as long as there is a penny of national debt outstanding.
But for many who publicly oppose tax cuts, it is really just a rationalization.
They are afraid to cut taxes because they do not want to be attacked by
Democrats for tax give-aways to the rich, undermining Social Security or
any of the other charges that always follow Republican tax cut efforts. In this sense, the failure of Republicans to unite around tax cuts is
a consequence of their failure to remember or understand the economic debates
of the 1980s. At that time, under the leadership of Ronald Reagan, tax
rates were slashed even though the government was still running deficits.
Reagan justified this action on the grounds that the money really belonged
to the people. The government was justified in taking it only for legitimate
purposes, such as the national defense. Simply taking money from one person
to give to another was not a legitimate purpose, in Reagan's view. Yet
the vast bulk of federal spending is exactly that, known euphemistically
as "entitlements." (Reagan also questioned whether anyone was
ever "entitled" to a government check.) Cutting taxes, therefore, was not only morally justified even in the
presence of deficits, but a necessary component of a larger strategy of
reducing the size of government. Cutting taxes forced the Congress to cut
spending that it otherwise would not have cut. It showed taxpayers that
there was a tangible benefit to downsizing government. And it returned
resources to the private sector that could be used to fill gaps left by
government cutbacks. Predictably, Democrats attacked Reagan and the Republicans for cutting
taxes precisely because they were successful. During the 1980s the private
sector grew more rapidly than the government for the first time in decades.
Government was being scaled back, albeit far more slowly than it should
have been. Nevertheless, genuine progress was made. Today, the goal of reducing government seems to have been completely
lost as a goal of Republican policy. Thus it is no surprise that many Republicans
are squeamish about tax cuts. What purpose do they serve except to bring
forth liberal criticism, they think. Why not just leave government on automatic
pilot and pay off the debt? Those who favor this approach, however, ought to wonder why Democrats
don't attack this idea as well. The reason is because they view the national
debt the way a spendthrift views a credit line. They see payments to the
credit line as just increasing the amount that can be borrowed and spent
in the future. In short, paying off the national debt is fine for Democrats
because it simply makes more resources available to them to spend in the
future when they regain control of Congress. It is as if the Republican
Congress is putting away money in a savings account for a Democratic Congress
to spend at a later date. For this year, at least, it appears that the debt hawks have won the
day. There is not time to enact a significant tax cut before the end of
the fiscal year and Bill Clinton would veto it anyway. But at some point
congressional Republicans need to address the rising tax burden on the American
people and rediscover the Reaganesque justification for tax cuts. Until
then, they are unwittingly playing into the Democrats' hands. # # # # # The National Center for Policy Analysis is a public policy
research institute founded in 1983 and internationally known for its studies
on public policy issues. The NCPA is headquartered in Dallas, Texas, with
an office in Washington, D.C. For more information: Jil Hicks, Dallas, TX 972/386-6272 Home | Support Us | All Issues | Social Security Debate Central | Contact Us |