Jonathan Chait

Don't Worry, Cut Taxes

Cecille Isidro — Mon, 27 Dec 1999 00:00:00 -0500

When George W. Bush's campaign leaked his economic plan to the press last week, the lucky recipients were forced to accept a special condition: any reporter who wanted to see it had to agree not to share the details with other campaigns or, more importantly, outside analysts. "This is between you, me, and your typewriter," a Bush aide told one reporter.

The result of this clever leak strategy was an initial wave of reviews that dovetailed with Bush's efforts to cast himself as compassionate. The plan, according to The Washington Post, would "focus its deepest reductions on the working poor and middle class" and "mark a clear departure from more traditional conservative GOP tax policy." Even the most skeptical story, courtesy of The Wall Street Journal, reported that Bush was "seeking to steer more benefits to working-poor taxpayers."

In truth, Bush's tax cut would do nothing of the sort. More than three- fifths of the cut would accrue to the upper ten percent of the income spectrum, with barely more than one-tenth for the lowest 60 percent. Bush's proposal, in this respect, resembles the tax cut passed by Congress last summer.

This unflattering little detail did eventually come to light--once reporters were able to show the plan to economists--but it was reported in small follow-up stories that ran only after the favorable impression had hardened. Moreover, the Bush campaign's masterful sales job has shoved aside other questions about the plan. Take, for instance, how the campaign accounts for revenue losses. Bush promised that his tax cut would be paid for entirely out of budget surpluses--and that it would not use any of the surplus that derives from Social Security. But Bush assumes that future Congresses will adhere to spending caps that, while still on the books, would require a 20 percent cut in domestic spending and, as a result, have been all but abandoned by even the staunchest conservatives.

That is a common fiction that candidates employ by assuming that the economy (and, hence, tax revenues) will grow considerably faster than the budget scorekeeping agencies predict. By presupposing a rosier scenario than everybody else, Bush is giving himself more money to dole out in tax cuts than any other candidate. In other words, Bush's fiscal style is to assume a bright future, commit every cent to tax cuts, and hope that we don't plunge into the red.

If this sounds familiar, it should; it was the fiscal policy of Ronald Reagan. This is still more evidence of the ingenious marketing of Bush's tax cut--Bush has defined himself to the broader public as a dissident from the conservative wing of his own party while still hewing firmly to the supply- side orthodoxy of the Republican right. Consider the following juxtaposition of events. As the Bush staff leaked the tax plan to the mainstream press, the candidate himself invited four staunchly conservative members of The Wall Street Journal's editorial page to the governor's mansion for quesadillas and a briefing on the tax cut. And so, on the same day that the Post's front page stated that Bush's plan "would mark a clear departure from more traditional conservative GOP tax policy," a Journal editorial reassured the faithful that Bush's tax cut "moves in the Reagan direction."

Bush, of course, has no intention of campaigning openly as a supply-sider. In fact, he relegated the only macroeconomic argument for his tax cut to the tail end of his speech, and he framed it in classic Keynesian terms: tax cuts, he claimed, "provide insurance against economic recession." But this is nonsensical. If you advocate tax cuts during a recession in order to get out of the recession (as Keynesians do), and if you advocate tax cuts during an economic boom in order to prevent a recession, then what you really mean is that you advocate tax cuts all the time. So, while Bush's rationale may seem to resemble mainstream economics, it is really a disguised argument for supply-side economics--the defining characteristic of which is the belief in tax cuts as the proper response to any conceivable set of conditions.

Finding justification for that belief is another matter. Supply-side economics holds that current tax rates massively discourage work and investment. That's a hard case to make in today's economy.

The desperation of the supply-siders is most apparent in the columns of the Journal's editorial page, which harbors the most fervent apostles of the Laffer curve. This essential tenet of supply-side theory holds that tax hikes cannot raise government revenue because tax increases will slow down the economy, leaving the government larger chunks of a smaller pie. The Journal has frequently illustrated the point with a chart purporting to show that federal tax revenues have never risen above 20 percent of GDP and, therefore, never will. According to the Journal's logic, the upper-bracket rate hikes of 1990 and 1993 should have so devastated the economy that by now people would be selling off their tooth fillings and clubbing rats for food.

It hasn't quite worked out that way, of course. So the Journal has taken to arguing for rolling back the Clinton tax hike--not on the traditional grounds that it failed to raise revenue but because it raised too much revenue, thereby fueling big government. It has a new chart showing how tax revenues as a percentage of the economy have grown in recent years. "The bad news," argued a recent editorial, is that, in the absence of tax cuts, federal revenues will "continue to rise as prosperity pushes more and more Americans into higher tax brackets." Such a scenario--a rising tide resulting in bulging government coffers--is precisely the utopia that the right once promised would arise from massive tax cuts. Now it is a nightmarish vision from which only tax cuts can save us.

Having lost the mantle of economic growth, tax cutters have fallen back on non-economic arguments. Over the summer, congressional Republicans sought to put forth the case that the government's black ink represents an "overcharge" that "belongs to the taxpayers." Running a budget surplus, by this formulation, is inherently immoral. Bush has taken this even further, linking his tax cuts to "prosperity with a purpose" and "a country rich not only in goods but in goodness."

Behind these airy generalities lies a very specific intent. Bush's constant invocations of "Latino communities" and "waitresses, store clerks, and janitors" are meant to imply that the status quo is immoral because of its impact on the middle and lower classes. But the substantive thrust of his proposal acts upon an altogether different moral indictment: a belief that taxing the rich, whatever its practical effects on the economy, is simply wrong. It's no accident that Bush's tax cut would exactly repeal the upper- bracket tax hike enacted by President Clinton. Repealing that increase has been a goal of supply-siders for years, but Bush makes no mention of the fact that his plan would do so. That's no accident, either.

Race to the Bottom

Cecille Isidro — Mon, 20 Dec 1999 00:00:00 -0500

It would seem, on the face of it, that the only thing standing between George W. Bush and the presidency is a persistent reservation about his intellect. The doubts have crystallized around a reporter's now-famous pop quiz, in which the Texas governor could not identify various difficult-to- pronounce heads of state. Bush, according to many in the press, needs to wonk himself up, and fast. He needs to cocoon himself with all those Stanford Ph.D. s and reemerge with a deep, studied interest in the stability of Central Asia and the efficacy of scattered-site housing. He needs to throw out some acronyms and cite some studies, maybe quote Hayek now and then. He must learn to mask his boredom with the daily grind of government. If he could only show some mastery of the issues, he'd be a brilliant candidate.

Nonsense. Bush hasn't done a bad job of masking his boredom with the details of governance; he's done an excellent job of flaunting it. When asked by Tucker Carlson of Talk magazine to enumerate his weaknesses, Bush baldly replied, "Sitting down and reading a 500-page book on public policy or philosophy or something." In another moment with Carlson, Bush reported having read a profile of Al Gore by Louis Menand in which the vice president discusses Maurice Merleau-Ponty's Phenomenology of Perception. This prompts Menand's observation that "it is a little hard to imagine having this conversation with George W. Bush." Bush does not take umbrage at this slight to his mental capacities. Instead, he sees in it proof of his political virtuosity. "Bush finished the piece," writes Carlson, "convinced that Gore lacks the warmth and personal appeal necessary to win a presidential race." More recently, Bush advisers have confided their pleasure at the pop quiz " fiasco," saying it makes their man seem like a normal guy.

In fact, Bush's lightweight persona has the feel of a deliberate strategy. What Bush understands, and the pundits do not, is that he is a brilliant candidate not despite his antiintellectualism but because of it. He has stumbled upon a fortuitous moment in which the political culture, tired of wonks and pointy-heads and ideologues, yearns instead for a candidate unburdened by, or even hostile to, ideas. It is a moment made for the chipper governor from Texas, and he is soaring upward, propelled by his own weightlessness.

Of course, journalists have not set out to reward Bush, or other candidates, for being dumb. What they say is that they're interested in "character." But what they don't admit is that this comes to much the same thing.

"Character," in current parlance, means lived experience--preferably outside of politics. It takes into account neither public philosophy nor programmatic detail. In fact, such things tend to mitigate against strong " character," since they suggest an obsession with government. In the current landscape, the coin of the realm is personal qualities such as "leadership" and "authenticity," which are implicitly set against accumulated knowledge or unashamed braininess. "Leaders" are men of action, not men of words. " Authenticity" is a close relative of simplicity--you can much more easily imagine the description applied to, say, a rancher than to a biophysics professor. The obsession with character inherently disfavors a candidacy based on ideas--such as, for instance, Steve Forbes's--in favor of one based on biography. A superior grasp of issues is irrelevant, or even a hindrance, in that it can detract from a candidate's effort to craft a personal narrative.

Slow-witted candidates, of course, are nothing new. But such candidates can still campaign on ideas--Ronald Reagan and Dan Quayle ran some of the most fiercely ideological campaigns in recent memory. George W. Bush is something new--a slow-witted candidate parading his campaign's lack of substance as a virtue. Consider the chronology of his candidacy. First, Bush decided to run; next, the Republican establishment coalesced around him; and only then were a series of experts dispatched to Austin to help Bush decide what he believes. His most recent TV ads are almost a parody of gauzy non-specificity, portraying the candidate talking with minorities, standing with children, and actually kissing babies. Indeed, with the Iowa caucuses just two months away, Bush has yet to elucidate opinions on most major topics.

All this has elicited raves from the press. Consider some of the adjectives used to describe Bush: "upbeat," "affable," "untroubled"--a man who, as Talk put it, "doesn't give a damn what you think of him." Such praise may not be intended to reward Bush for his shallowness, but it does so nonetheless. After all, how could someone fully aware of the stakes involved in running for president maintain such a stress-free demeanor while preparing to determine the course of human history? Even George Will, who cloaks his every utterance with chin-stroking affectation, has explicitly defended Bush on anti-intellectual grounds, writing that "intellect in politics is rare, and perhaps should be."

Bush's early success has set the terms of the race; the other candidates are grasping to match his style. The farce of Al Gore's campaign lies in its frantic efforts to conceal the public-policy rationale for his candidacy. He has the appearance of a man who prepared for a spelling bee and found himself in a swimsuit competition. Not too long ago, Gore's detailed knowledge of defense, technology, and the environment might have been considered his strongest selling point. Today, he and his advisers treat it as a kind of embarrassment. Instead of emphasizing his knowledge, they have trotted out a succession of vignettes--young Al Gore laboring in the fields of Tennessee, enlisting in Vietnam, crusading as a small-town reporter--all meant to portray the vice president (implausibly) as a folksy man not overly interested in government. Arizona Senator John McCain has been wildly applauded for publishing a campaign book that eschews political philosophy in favor of straight personal narrative. And, while McCain has oriented much of his candidacy around the fight for campaign finance reform, the press rarely, if ever, discusses the substance of the bill he proposed. Instead, they view it as further evidence of the personality traits McCain exhibited as a prisoner of war in Vietnam. Even Bill Bradley, who disliked talking about his basketball career while in the Senate for fear of looking like a dumb jock, now mentions it at every opportunity--since it makes him look less government- centric than Gore.

Doesn't this dumbing-down occur every campaign season? Actually, no. Compare the current race to the one in 1992. The telling difference lies not in the comparative brain mass of the candidates but in the way they presented themselves. Eight years ago, candidates waved graphs and ten-point plans. Clinton published a campaign book, Putting People First, that laid out nearly everything he would try to do as a first-term president: an economic-stimulus package, a tax hike on the wealthy, a plan to implement universal health care, and so on. In retrospect, it was a nearly pure embodiment of the civics- class model of government: a candidate laying out exactly what he intends to do and asking the voters to judge his platform on its merits. Paul Tsongas put forth a book, A Call to Economic Arms, spelling out his economic program in harsh detail, and his itemization of otherwise unpopular measures to reduce the deficit actually won him favor as a truth-teller. Ross Perot promised, if elected, to bring together the nation's foremost policy experts. He did not have defined solutions to problems such as the deficit or health care, but the fact that he sought to cultivate an aura of wonkery is telling, in the same way that Gore's current effort to cultivate an air of folksy disinterest in government is telling.

The serious mood was captured by the press, whose coverage of the campaign, in contrast to today's, stands out as a virtual celebration of intelligence. In 1992, The Washington Post marveled at Gore's scientific literacy. "Gore's smartest-guy-in-the-class routine is forgivable: He probably really is the smartest guy in his class," a profile declared, proceeding to describe a Gore speech in which " i t seemed as though he had synthesized the entirety of human knowledge since the discovery of fire." Such an interpretation is unimaginable now. More typical of the current thinking is a recent Post account that described a similar Gore event as "a down-in-the-weeds policy summit that only a man with a steel-trap brain and a steel rear end would describe as 'fun.'"

It is not that the media covered the presidential hopefuls more favorably in 1992 than it does now. It simply enforced a different standard-- programmatic coherence rather than personal style. Consider some of the events of 1992 that were chewed over in the pages of The Washington Post: Tsongas "insisted that he was not guilty of creeping Santaclausism" for offering a tax break for the natural-gas industry (March 6); Clinton "hedged on whether he was giving up on a tax cut for the middle class" (June 19); President Bush "pleaded ignorance" of federal regulations that favored an environmentally harmful form of refining oil (also June 19). One sentence in particular sums up the tenor of the 1992 campaign: " Perot continued to insist that he is 'the only guy that talks numbers,' but offered none today" (April 27). Then consider this year's coverage of the Gore campaign. The vice president has faced little policy-related criticism for his shaky claim that Bradley would eliminate Medicare. But he has been endlessly reviled as " boring," "condescending," and the "class prig"--insults typically reserved for intellectuals.

The difference comes through in the buzzwords of each race. In 1992, the word dropping from the lips of every candidate and reporter was "specificity," as in the Post's report that "closer examination shows that Clinton has provided far more specificity about the programs and tax breaks he would initiate than the ways and means of bringing about savings." ("Specificity is the character issue of 1992," said George Stephanopoulos at the time.) Today the phrase is "authenticity." (Newsweek: "Bradley and McCain are hawking this year's hottest commodity: the aura of authenticity--and plainspoken candor-- that comes from a life that starts outside politics.") This is borne out in the coverage by other major news outlets as well, including The New York Times, the Post, and Time. Eight years ago, in articles that mentioned the major presidential contenders, the most influential newspapers and magazines used the words "specific" or "specificity" more than ten times as frequently as "authentic" or "authenticity." In the current election cycle, variations of "authenticity" have occurred almost twice as frequently as "specificity."

The country has changed since 1992, and the most obvious difference is its material condition. Eight years ago, America was emerging from a recession, and the populace wanted a president with concrete proposals for improving the standard of living. Today, the ensuing prosperity, along with technological progress and the rise of the stock market, have dulled Americans' expectations of their political leaders. People look mainly to the private sector, not to the government, as the vehicle for improving their lives. Concern for material well-being has been replaced by a concern that modernity has undermined the moral underpinnings of American culture--witness the reaction to the Littleton massacre, in which a large portion of the blame was placed on the Internet and new entertainment technologies. As a result, the president is seen as a moral exemplar and a figure of cultural import rather than as a solver of problems.

All this was evident in the results of a survey conducted last summer by the Pew Research Center. "Science and technology are widely seen as the engines of the century's prosperity," Pew reported. At the same time, " misgivings about America today are focused on the moral climate, with people from all walks of life looking skeptically on the ways in which the country has changed both culturally and spiritually."

The historical precursor to this sentiment appeared in the 1920s. Then, as now, economic growth and innovation served to direct idealism toward the economy. The notion took hold that, as the title of an article popular at the time put it, "Everybody Ought to Be Rich." Some of the euphoria was fueled by the stock market, which prompted stories of humble folk attaining unimaginable wealth. "Edwin Lefevre told of a broker's valet who had made nearly a quarter of a million in the market, of a trained nurse who cleaned up thirty thousand following the tips given her by grateful patients," writes Frederick Lewis Allen in Only Yesterday, "and of a Wyoming cattleman, thirty miles from the nearest railroad, who bought or sold a thousand shares a day-- getting his market returns by radio and telephoning his orders to the nearest large town to be transmitted to New York by telegram." Note in particular the last example, which combines both market and technological ebullience. It is a forerunner to a recent TV commercial for an online brokerage firm in which a tow-truck driver, dripping with working-class mannerisms, reveals that online trading has made him wealthy enough to buy his own island.

The economic giddiness of the time palpably deadened interest in government. "The more or less unconscious and unplanned activities of business men," wrote Walter Lippmann, "are for once more novel, more daring, and in general more revolutionary than the theories of the progressives." During such a time, in contrast to the earlier years of the century, the country did not seem to require great and able presidents. William Leuchtenburg recounts, in The Perils of Prosperity, the reaction of one Republican senator to the nomination of Warren Harding: "The times, said Connecticut's Senator Brandegee with a shrug, did not require 'first-raters.'"

Likewise, today's material circumstances have given rise to a view that is not so much anti-government as simply bored with government. A Pew poll identifies a new voting block called "New Prosperity Independents"--moderate social liberals who are stock- and Internet-savvy, optimistic about the status quo, and heavily supportive of Bush. This is more of a sensibility than an ideology, and it has no manifesto to define it, probably because none of its adherents has bothered to write one. But the general flavor was caught by Kurt Andersen, writing in Slate magazine's Breakfast Table, a chatty e- mail exchange:

Politics don't and really can't matter all that much in this country right now. There are rough, large consensuses on all the big issues-- economics, social welfare, civil rights, women's rights, war and peace, even abortion. And they will continue as long as the economy chugs along like this and we stay out of wars any longer than a mini-series. Sure, there's a biggish, scary lunatic right--the Gary Bauerite creationist anti-gay regiments--but they're not going to be running the country or amending the Constitution anytime soon. In fact, Pat Buchanan is right about the virtual indistinguishability of the Democrats and Republicans. I sympathize with both Buchanan and Warren Beatty viscerally, if not ideologically. I really think national politics kind of needs to be blown up and rebuilt. For the couple weeks seven years ago before he revealed himself to be a horrible, crazy gnome, Ross Perot seemed to me like a great idea. And if next November the candidates are George Bush, Al Gore, and Jesse Ventura, it isn't inconceivable that I would pull the lever for Ventura. And I certainly wouldn't be upset if Bush won, even if he can't name a single book he's ever read.

This small piece of political anthropology embodies many of the stylistic and intellectual tics that are shaping coverage of the presidential race. There is little in the way of substantive philosophy other than the social prejudices of the yuppie class, which holds the simultaneous beliefs that the current arrangement is producing highly satisfactory results and, at the same time, is somehow terribly wrong ("kind of needs to be blown up"). Mostly, yuppies consider politics amusing but fundamentally unimportant, and they prefer leaders who share their unburdened disposition.

But there is another reason for the anti-intellectual turn of the political zeitgeist: Bill Clinton. It is most evident in the criticisms of the right, which make clear connections between Clinton's venality and his intellect. On his domestic policies, particularly health care, the right has portrayed Clinton as arrogant and elitist, a central planner plotting with a coterie of utopian academics to impose a new order upon the populace. Regarding his many scandals, he is devious and clever, an evasive Yale lawyer driven by legalisms rather than by basic moral sense.

But this is a minor strain of anti-intellectualism--the anti- intellectualism of a discontented, highly ideological subset. Most of today's anti-intellectualism is rooted in boredom, not anger, and it arises not from a hatred of Clintonism but from an approval of it. The widely remarked-upon irony of Clinton's presidency is that the backlash against him reached its greatest intensity just as his policies attained their popular zenith. Clinton's success in capturing the majority view on all major issues has banished policy from public discourse, leaving only considerations of character, where Clinton fares poorly. The obsession with personal character is rooted in the premise that policy no longer matters.

This sentiment has been absorbed, more or less unconsciously, by the news media. The pattern in the media loosely tracks the thinking of the general public. Reporters--more than the population at large--sympathize with Clinton's ideology and generally confine their most penetrating inquiries to character-oriented questions. The press, of course, has always covered both the symbolic and the substantive functions of the presidency. But now the scales have tipped far in one direction. Even the most serious newspapers write about the presidency almost as if it were simply a fascinating parade of characters, intrigue, and scandal--culturally meaningful but functionally insignificant.

Richard Ben Cramer's What It Takes is the seminal work of the genre. Although the book chronicles the 1988 presidential campaign, it reached the height of its influence, at least among scribblers, in 1996. This is because its most famous section details Bob Dole's ordeal recovering from wounds suffered during World War II. It is gripping and evocative prose, and it inspired countless numbers of Cramer's colleagues to trek to Dole's hometown of Russell, Kansas, in an effort to understand the Republican nominee. The trouble is that, however fascinating it is on a personal level, the tale does not go very far toward explaining what sort of president Dole would have been. Dole entered politics essentially as a blank slate, and his worldview resulted largely from careerism, the Midwestern Republican tradition, and a series of attachments to interest groups--not from anything he learned while fighting in Italy or recovering in a hospital bed.

Nonetheless, the personal account has become the predominant mode of analysis. The Washington Post's David Maraniss, the leading Clinton interpreter, has distinguished himself with a series of extremely long psycho- biographical profiles of powerful politicians, all of whom inevitably come across as marked by childhood traumas, haunted by ghosts of dead parents, and otherwise defined by life events that have nothing to do with their careers in government.

The Cramer-Maraniss genre, while not explicitly antiintellectual, naturally favors candidates who run on biographical platforms. In fact, it renders candidates who run on platforms of political philosophy practically inexplicable. Consider one particularly illustrative example: a recent profile of Steve Forbes that ran on the front page of the Post. The headline-- "forbes reveals little but his ideas"--captures the fundamental assumption. " Forbes's book expounds on dismantling the Internal Revenue Service and instituting a flat tax," reports the amazed writer. "But his column rarely mentions his family and the book index doesn't list his father, wife, or children." The article goes on in this vein, portraying Forbes's desire to run for president on the basis of what he would do as president as the product of a bizarre personality disorder.

It is true, to be sure, that Forbes's fascination with ideas is not an intellectual passion but the zealotry of a half-educated man. But the Post writer does not go anywhere near that far. The story does not even entertain the possibility that Forbes's candidacy stems from a genuine desire to promote supply-side economics--a creed to which he has a long-standing and fanatic devotion. Instead, it pores over the details of Forbes's youth and wonders why Forbes declines to discuss them on the stump. It is tantamount to explaining Karl Marx without mentioning his affinity for communism.

Underlying all this is an unstated but coherent view of the American president: a symbolic monarch who embodies the national spirit. George Will, in his discourse against intellectualism in politics, writes: "The headmaster of Bush's private secondary school in Houston aspired to give students 'a sense of style,' meaning 'the individual's capacity to attain his goal without wasteful and irrelevant effort.' At Bush's Andover graduation, the headmaster urged graduates to 'take with you a sense of style,' a 'distinction in manner and bearing.'" What Will (along with many other Americans in the post-Clinton age) is really looking for is a president who will make us proud--and do little else. Indeed, the biggest applause line in George W.'s stump speech comes not in response to any policy preference but at the speech's dramatic finale, when he raises his right hand and promises to bring honor to the office of the presidency, "so help me God."

The trouble, of course, is that the American presidency embodies not only the ceremonial role of a head of state but also the functional duties of a prime minister. Current prosperity notwithstanding, there remains work to be done, and problems that will arise. History shows that unless presidential candidates campaign on a pledge to address specific problems, they have great difficulty rallying the people, and their representatives in Congress, to tackle them once in office. It was such ideological campaigning that allowed Reagan to pass his tax cuts in 1981 and Clinton to pass his deficit-reducing budget in 1993. What, by contrast, are candidates elected on the basis of character and personal history empowered to achieve? Nothing much, Americans may respond cheerily, confident that they will have as little need of effective governance tomorrow as they do today. Such are the happy delusions of a contented people.

Old Tax Policy but New Marketing Strategy

Cecille Isidro — Sun, 19 Dec 1999 04:00:00 -0500

When George W. Bush's campaign leaked his economic plan to the press recently, the lucky recipients were forced to accept a special condition: Any reporter who wanted to see it had to agree not to share the details with other campaigns or, more importantly, outside analysts. "This is between you, me, and your typewriter," a Bush aide told one reporter.

In truth, Bush's tax cut would do nothing of the sort. More than three- fifths of the cut would accrue to the upper 10 percent of the income spectrum, with barely more than one-tenth for the lowest 60 percent. Bush's proposal, in this respect, resembles the tax cut passed by Congress last summer.

Moreover, the Bush campaign's masterful sales job has shoved aside other questions about the plan. Take, for instance, how the campaign accounts for revenue losses. Bush promised that his tax cut would be paid for entirely out of budget surpluses -- and that it would not use any of the surplus that derives from Social Security. But Bush assumes that future Congresses will adhere to spending caps that, while still on the books, would require a 20 percent cut in domestic spending and, as a result, have been all but abandoned by even the staunchest conservatives.

This is still more evidence of the ingenious marketing of Bush's tax cut -- Bush has defined himself to the broader public as a dissident from the conservative wing of his own party while still hewing firmly to the supply- side orthodoxy of the Republican right.

If you advocate tax cuts during a recession in order to get out of the recession (as Keynesians do), and if you advocate tax cuts during an economic boom in order to prevent a recession, then what you really mean is that you advocate tax cuts all the time. So, while Bush's rationale may seem to resemble mainstream economics, it is really a disguised argument for supply- side economics -- the defining characteristic of which is the belief in tax cuts as the proper response to any conceivable set of conditions.

Finding justification for that belief is another matter. Supply-side economics holds that current tax rates massively discourage work and investment. That's a hard case to make in today's economy.

The essential tenet of supply-side theory holds that tax hikes cannot raise government revenue because tax increases will slow down the economy, leaving the government larger chunks of a smaller pie. The Journal has frequently illustrated the point with a chart purporting to show that federal tax revenues have never risen above 20 percent of GDP and, therefore, never will. According to this logic, the upper-bracket rate hikes of 1990 and 1993 should have so devastated the economy that by now people would be selling off their tooth fillings and clubbing rats for food.

It hasn't quite worked out that way, of course. So the Journal has taken to arguing for rolling back the Clinton tax hike -- not on the traditional grounds that it failed to raise revenue but because it raised too much revenue, thereby fueling big government. It has a new chart showing how tax revenues as a percentage of the economy have grown in recent years. "The bad news," argued a recent editorial, is that, in the absence of tax cuts, federal revenues will "continue to rise as prosperity pushes more and more Americans into higher tax brackets."

Such a scenario -- a rising tide resulting in bulging government coffers -- is precisely the utopia that the right once promised would arise from massive tax cuts. Now it is a nightmarish vision from which only tax cuts can save us.

Behind these airy generalities lies a very specific intent. Bush's constant invocations of "Latino communities" and "waitresses, store clerks and janitors" are meant to imply that the status quo is immoral because of its impact on the middle and lower classes. But the substantive thrust of his proposal acts upon an altogether different moral indictment: a belief that taxing the rich, whatever its practical effects on the economy, is simply wrong. It's no accident that Bush's tax cut would exactly repeal the upper-bracket tax hike enacted by President Clinton. Repealing that increase has been a goal of supply-siders for years, but Bush makes no mention of the fact that his plan would do so. That's no accident, either.

Clinton's Bequest

Cecille Isidro — Mon, 06 Dec 1999 08:00:00 -0500

If there is one thing that most everybody agrees upon regarding the ideological legacy of the Clinton presidency, it is that there is none. President Clinton, left and right typically concur, is a man of polling and expediency, and almost infinite flexibility of viewpoint. A subset of this thinking, indigenous to the left, holds that Clinton does stand for something, sort of, but it's really nothing more than warmed-over Republicanism. A number of liberal economists have indicted Clinton's fiscal policies on these grounds, and even Clinton himself famously complained in 1993 that his administration had turned into "Eisenhower Republicans."

As a characterological indictment of Clinton, this is all true, alas. But the well-known fact of Clinton's political inconstancy has obscured a more complicated reality. Quite accidentally, and with little notice, the Clinton White House has given rise to a new economic synthesis on the center left. It does not have a name, but for the purposes of this article, we'll call it progressive fiscal conservatism because it combines the twin notions of modest economic redistribution and a restrained federal budget. And this economic doctrine, wholly separate from the administration's risible political doctrine, is a genuine and meritorious legacy.

Clinton's Conversion

Since Bill Clinton was elected in 1992, the economic predilections of the Democratic Party have been completely remade. Clinton's economic program is far more fiscally conservative than anything a president of either party would have dared propose any time in the past three decades. "When deficits disappear, capital, more than $1 trillion so far, is liberated to create wealth and jobs and opportunity at every level all over America," Clinton stated earlier this year. "The less money we tie up in publicly held debt, the more money we free up for private sector investment. In an age of worldwide capital markets, this is the way a nation prospers . . . by saving and investing, not by running big deficits." Subsequently he pledged to "make America debt free for the first time since 1835," and argued that "fiscal discipline has widened opportunity and created hope for all working people in our country."

Not long ago, a liberal economist would have considered such statements strange, if not outright nonsensical. How did such a radical transformation come about? The faction of liberals who are chagrined at this development tell the story like this:

In 1992 a populist Democrat captured the presidency on a platform of Putting People First, which meant spending money on infrastructure, education, and worker training to boost the productivity of the work force and raise hitherto stagnant living standards. But once in office, the newly elected president instead chose to emphasize deficit reduction above all else, shunting public investment for the sake of cooperating with Federal Reserve Chairman Alan Greenspan. Once detached from his ideological moorings, Clinton drifted steadily rightward, fell in with the likes of Dick Morris, and promptly balanced the budget and block-granted welfare. The culmination of this process came early this year, when Clinton went even beyond balanced budgeting to propose completely eliminating the national debt.

There is a lot of truth in this narrative, but it misses the essentially liberal nature of the new kind of fiscal policy that Clinton forged in 1993 and the way that his subsequent centrist lurch betrayed, rather than continued, that brand of economics.

It was not particularly unusual for a Democratic politician in 1993 to make deficit reduction his highest domestic priority. After all, most liberal economists had spent the previous decade decrying the enormous budget deficits rung up by the Reagan and Bush administrations. What was revolutionary about Clinton's decision to cut the deficit was that it gave birth to a new way of thinking about the government's role in promoting prosperity.

Modern liberal economic thought dates back to John Maynard Keynes. Keynes's central insight was that, contrary to the conventional wisdom of his day, market economies are not inherently self-correcting and, hence, the government must play an active role in promoting prosperity. If a downturn occurs, for example, the government should try expanding the supply of money, or, under more serious circumstances, it should spend money or cut taxes in order to bolster the demand for goods.

So in an economy in a slump -- as America's was before World War II and seemed at risk of becoming afterward -- generous deficit spending made a great deal of sense. But the easy liberal economic certainties started to run aground in the 1970s, when inflation and unemployment rose in tandem -- a malady for which economics had no ready cure. The perplexity of "stagflation" was accompanied by a gradual realization that certain Keynesian assumptions about the budget, even if economically sound, were politically na•ve. It would be nice if every time a recession loomed, Congress would fiddle with tax rates or spending just enough to smooth things out and then, when the danger passed, cut back its largesse just as quickly, with a long-term result being a budget that was balanced on average but with surpluses or deficits in any given year depending on circumstances. It became clear, however, that politicians had a natural tendency toward chronic deficits, to press the gas pedal harder than the brakes.

And then, in the 1980s, the massive Reagan tax cuts, coupled with a large boost in defense spending, unleashed a tidal wave of red ink. With enormous deficits threatening the very solvency of government, it was no longer possible to administer a fiscal stimulus. As the Democratic Party took control of the presidency for the first time in 12 years, the device favored by liberals for furthering economic growth had been rendered useless.

The Unexpected Breakthrough

All of these developments were known at the time, but they had not fully cohered when Clinton began to construct his first economic plan. The key decision was not whether to reduce the deficit -- given its size, the White House had no other realistic option -- but rather what effect this would have upon the economy. Everyone present assumed that raising taxes or cutting spending would, at least in the short run, dampen economic growth. White House economists gave serious consideration to the possibility that their plan would throw the economy into recession. The only way to avoid this dismal fate was if the Federal Reserve or the bond market would lower interest rates to spur economic activity and make up for the depressing effects of deficit reduction. According to Bob Woodward's account in The Agenda, Clinton replied to this news in a half whisper: "You mean to tell me that the success of my program and my reelection hinges on the Federal Reserve and a bunch of fucking bond traders?"

The question that so bedeviled the White House in 1993 -- can the Fed and the bond market overcome the effects of tight budgets? -- is no longer in doubt, and therein lies the great transformation of liberal economics. Previously, even liberals who favored deficit reduction considered it a painful trade-off: Reducing government borrowing would free up more savings for private investment and, in the long run, improve productivity, but in the short run, it would slow or even halt economic growth and throw millions out of work. The White House accepted this bargain in 1993 and hoped it would work out for the best. Now fiscal restraint is seen not even as a trade-off but, rather, as a way of getting the best of both worlds. This does not mean that forbearance is the one true answer, now and forever. It merely suggests that, under the present economic and political circumstances, the interests of current and future prosperity both argue for reducing deficits or expanding surpluses.

That intellectual breakthrough forms the bedrock of progressive fiscal conservatism. The principles of this economic synthesis are eminently clear. It begins with a recognition that the Federal Reserve and the bond market wield an effective control over the economy and that these instruments, rather than deficit spending, have become the most effective levers available to government for promoting economic growth. At the same time, there is an understanding among liberals that the burdens of fiscal restraint should fall primarily upon those most able to bear it and that the government should make a special effort to ensure that the benefits of economic growth also flow to those at the bottom.

Clinton's 1993 budget bore out these tenets in their purest practical form. Its overall framework was deficit reduction, with the purpose of reducing interest rates and promoting economic health. It also had a strongly progressive tilt, raising the tax rate on the highest earners while expanding low-income subsidies such as the Earned Income Tax Credit (EITC) and Head Start. Six years later, Clinton and his advisers -- and even like-minded economists outside the administration -- continue to hold up the 1993 budget as their pinnacle achievement.

The theoretical grounding of this new ideology rests, in part, on the assumption that the 1993 budget contributed to the economy's performance over the past six years. The case for this, while circumstantial, is compelling. The administration argued that its 1993 budget would do three basic things to help the economy. First, as the federal government borrowed less money to finance its deficits, more savings would be available for private investment. Second, tighter fiscal policy would allow the Federal Reserve to keep short-term interest rates low. Third, a tighter budget would change the psychology of the bond market, lowering long-term interest rates. All these factors, in combination, would increase business investment and, hence, boost corporate productivity and economic growth.

In the end, all of these things happened. That does not prove that the deficit package caused those things to happen; in order to establish that, we would have to go back in history and see what would have happened if Clinton's 1993 budget had failed. But the fact that all subsequent events have aligned in its favor should at least grant this theory a powerful benefit of the doubt.

The link between the 1993 budget and the performance of the economy is crucial for progressive fiscal conservatism because it is an ideology for prosperous times. It is easy to forget that liberal economics has been defined for a generation by particularly grim material conditions that no longer hold. Starting in the mid-1970s, incomes for workers at the bottom and middle have stagnated or declined, even while those at the top have enjoyed spectacular gains. Liberals often defined this as a problem of rising inequality, which was a true description, but the more troubling fact was that most people were not enjoying the rising standards of living that previous generations of Americans had taken for granted. In this context, the main project of liberal economics was to improve the lot of those who had been left behind.

Exactly that is now happening. In the past few years, strong economic growth and low unemployment have substantially improved living standards for low- and middle- income workers. The giddiness of the late 1990s is not confined to stock owners and fat cats, but it is also for the sort of people liberals want most to help. The income of average households, after stagnating for years, has risen smartly. Since 1993 the after-tax income of the poorest fifth of all families has grown by an average of 2 percent per year. About one-seventh of that growth is due to the expansion of the EITC, and the rest is attributable to higher wages. Government transfers, such as the EITC or subsidized health care, can raise living standards for the poor and middle class, but not as effectively as economic growth. Liberals have always understood that low unemployment is the best social program; the difference is that, for the first time in two-and-a-half decades, it is actually happening.

To be sure, this does nothing to redress income inequality. Inequality in earnings (and perhaps also in total income, though the data are less clear) is no longer getting worse, but neither have the pernicious effects of the previous two decades' trends been reversed. Yet inequality is far less troubling in the context of a rising tide. The gains of the wealthy, insofar as they do not come at the expense of everybody else, produce tax revenues that can be put to beneficial purposes. It is not illiberal to forgo some measure of redistribution in the name of economic growth if the fruits of that growth are widely shared. This is not to say that public investment and transfers have no role; a willingness to contemplate expanded roles for government is what separates progressive fiscal conservatives from conservative fiscal conservatives. It is simply that the calculation has changed. Liberalism no longer requires a transformation in the basic direction of the economy.

Role Reversal

This proposition sounds suspiciously conservative. But in the current political context, this very modest sort of status quo economics is actually quite liberal. The reason that this is true is that the transformation of the economics of the Democratic Party has occurred along with -- and, in part, because of -- a concurrent transformation of the economic ideology of the political right.

In the decades that followed the New Deal, economic conservatives believed that budget deficits cause inflation and sap capital from businesses, and should be avoided under normal circumstances. Conservatives did not always oppose taxes -- in fact, Republicans sometimes proposed tax increases in order to stem inflationary deficits. All that changed in the late 1970s, when the GOP embraced supply-side economics, a radical and quite unconservative notion that paid little attention to inflation or budget deficits. The now-familiar idea behind this doctrine was that economic growth depends almost entirely upon tax rates, especially for upper-income earners.

Supply-side economics remains at the heart of Republican dogma, but the intellectual rationale has changed in an important yet little-noticed way. Since the time of Reagan, conservatives have justified tax-cutting on the grounds of expanding the size of the economic pie; it didn't matter if those whose taxes were cut all resided at the upper crust, the claim went, since the fantastic economic effects of unleashing the pent-up vigor of the entrepreneurial classes would ultimately benefit one and all. The salient point about this claim was that it was fundamentally utilitarian, purporting to stand for the interests of the whole society. In 1993, for instance, Republicans argued against Clinton's tax hike on the wealthy not on grounds of fairness, but on grounds of efficiency: It would cripple the economy and thereby inflate the budget deficit, making even the nonwealthy worse off.

Contrast this kind of reasoning with the arguments put forth this past summer regarding the use of the budget surplus. Instead of justifying tax cuts on the grounds of economic growth, the right now argues that since the budget surplus was caused by higher income tax receipts, it rightfully belongs to the taxpayers -- and since the wealthy disproportionately bear the burden of income taxes, it is only natural that they will receive the lion's share of any such tax cuts. Taken together, these two arguments require Congress to give the surplus to upper-income earners as a matter of basic fairness and moral desert. "The only reason for this surplus is because taxpayers are paying too much," said House Ways and Means Committee Chairman Bill Archer, "which is why they deserve a refund." This is a purely moralistic assertion, divorced from any consideration of the efficient distribution of goods. Not only has the economics of conservatism ceased to be conservative; it has ceased even to be economic.

The result is a strange reversal of historic roles. Republicans, who are traditionally associated with the notion of a rising tide lifting all boats, have taken to arguing in the language of distributional justice. As House Speaker Dennis Hastert put it, "We see the surplus as the best opportunity to bring some fairness to the tax code." And while Republicans employ the moral logic of populists -- a strange and perverse kind of morality, to be sure -- Democrats sound like investment bankers, fretting over deficits and inflation and the warnings of Alan Greenspan. The turnabout has been mutual. As Democrats have embraced an economic growth strategy, Republicans have been left with no complaint except on grounds of fairness. And as Republicans have abandoned any pretext of safeguarding economic growth, Democrats have taken it up.

Growth is the governing concern that the Clinton administration has applied in apportioning the budget surplus. Over the past two years, Clinton has steadfastly insisted that the proposed surpluses be saved rather than spent. The reasoning is identical to that employed in 1993. Running a budget surplus, after all, has the same economic effects as reducing a budget deficit. It allows savings that would have been used to finance government debt to fund increased business investment instead, and it allows the Federal Reserve to maintain lower interest rates.

There is also in this a frankly political calculation. Liberal economists understand that private investment is not always more productive than public investment. For instance, we could just as well prepare for the retirement of the baby boomers by boosting funding for education or science research, and hence improving the productivity of future workers, as by reducing federal debt. Liberals also understand that there are certain kinds of spending that have a clear moral necessity, such as expanding health insurance coverage, even if they might not raise productivity. In an ideal world, it would be possible to boost federal spending in key areas and still run substantial surpluses.

Unfortunately, political circumstances (mainly Republican control of Congress) do not allow for the perfect choice. The administration has proposed, in its fiscal blueprints over the past two years, to preserve the bulk of the budget surplus and to offset the cost of new spending with tax increases on tobacco and other things. This insistence on paying for new spending, rather than financing it out of the surplus, makes it less likely that the ideal level of spending will actually be enacted (since tax increases are not politically popular), but it at least ensures that the entire surplus is used in a productive manner. The alternative -- proposing to pay for new spending out of the surplus -- would probably result in more new programs but at the cost of draining away a large chunk of the surplus for a Republican-oriented tax cut.

Henry Aaron, an economist at the Brookings Institution, reckons it the following way: "If I had to decide between $5 billion for Pell Grants or children's health insurance versus $5 billion for debt reduction, I would take Pell Grants or children's health. But in the current political climate, the price for that would be $20 billion in tax cuts skewed to the upper income brackets, and I would say the price is too high. In that case, I would rather use the whole $25 billion to pay down the debt."

This political assumption has proved the most controversial element of progressive fiscal conservatism, at least among liberals. Robert Kuttner has argued in this magazine that a policy of permanent surplus to pay down the public debt would needlessly constrain public spending, and that it was more restrictive than necessary if the purpose was to reassure money markets and the Federal Reserve. And, indeed, there is a potential danger that the rhetoric of forswearing deficits and debt could go too far, paralyzing affirmative government.

Yet any single notion can be taken to a dangerous extreme; the fiscally conservative rhetoric of the Clinton administration shows little sign of going too far. While he has decried deficits, Clinton has not denigrated public investment. The administration frequently cites spending programs, mainly education, as an essential point of difference with congressional Republicans. There is a legitimate criticism, to be sure, that the White House's actual achievements on public investment do not match its rhetoric, but this shortcoming is hardly likely to discredit government spending. The White House's most recent budget has simply proposed that any new spending be "paid for" with offsetting tax increases rather than by tapping into the surplus.

Moreover, some of the strongest arguments for maintaining, rather than spending, the surpluses actually have a strong Keynesian bent. Remember that Keynes's main lesson was not that the government should spend like a drunken sailor but that it should "lean against the wind," running surpluses in good times and deficits in bad times. We have been enjoying good times now for more than seven years. If we can't sock some money away now, we never will. Even more important, the economy faces a fiscal shock in 15 years or so when the baby boom generation retires and places a huge strain on Medicare and Social Security. Running surpluses now will improve the fiscal position of the government and help it to deal with those crises as painlessly as possible.

But doesn't all this talk of running surpluses play into a puritanical fear of deficits and reinforce the simplistic notion that budgets must be balanced all the time? Actually, it is just as likely to have the opposite effect. The conservative insistence that the budget deficit be zero every single year is a fetishization of an economically meaningless number. It used to be an excuse for mindless budget slashing, and now that there is a surplus, it has become an excuse for mindless profligacy -- any surplus is an "overcharge," say Republicans, that must be dissipated immediately. Contrarily, the proposition that we should save money during prosperous times inherently presupposes that we can spend the money when we need it. As Treasury Secretary Larry Summers has put it, "The time to reload the fiscal cannon is now." The point of loading a cannon, of course, is to have the ability to fire it.

The Surprise Winner

There exists among liberals a tendency to view Clinton's economic policies as a part of his larger political machinations. Out of sheer expediency, Clinton has co-opted Republican ideas until the scantest differentiation remains. According to this critique, while Clinton's brand of fiscal conservatism may be slightly more benign than the Republican version, the two form an essentially compatible worldview -- what Barry Bluestone calls a "Wall Street-Pennsylvania Avenue Accord."

It is true that the White House deficit hawks would have much in common with the Republican Party of a generation ago. But the GOP is now seized by a fiscal dogma that values tax cuts for the wealthy above all other considerations. On grounds of budgetary soundness as well as equity, the economic disposition of the right is utterly diametrical to the tenets of progressive fiscal conservatism.

What, then, accounts for Clinton's vacillation, the continual narrowing of difference, the hemming and hawing? The vagaries of his domestic policy can be sensibly understood only if we separate his economic and political strategies. Clinton has wavered not because of his economic policy, but despite it. Fiscal conservatism has never been thought of as a political winner. Voters might prefer austerity as an abstract proposition, but they actually favor politicians who deliver concrete benefits -- or so most political observers believe. Republican strategist Jude Wanniski has called this the "dueling Santa Claus" theory -- Democrats played the spending Santa Claus, Republicans the tax-cutting Santa Claus.

Clinton's campaign for the presidency certainly conformed to this thinking. He promised to reduce the deficit but did not emphasize the point, and he promoted a middle-class tax cut. While necessity forced him to abandon this latter pledge and concentrate on the deficit in his first year, after the Republican congressional landslide in 1994, he abruptly switched directions once more. Clinton began to listen to Dick Morris, an adviser inclined toward conservatism, rapprochement with the GOP, and general political amorality. During this Morris-influenced period, Clinton turned away from the kind of economics he set out in 1993. In 1995 Clinton reissued his promise of a middle-class tax cut and then set out a conciliatory line toward Republicans in Congress that culminated in his signing the 1997 Balanced Budget Act.

Many economists who consider Clinton's 1993 budget to be the pinnacle achievement of his presidency -- including many who have worked for his administration -- also regard the 1997 deal as anathema. The central conceit of the agreement, balancing the budget within five years, was a symbolic goal that would be achieved by mandating that future Congresses allow for unrealistically low levels of domestic spending. Worse still, the deal reduced estate and capital gains taxes, another economically dubious move that overwhelmingly benefited the very rich. These compromises by Clinton were an attempt to re-ingratiate himself with suburban, upscale voters.

Yet amid this ideological drift and retrogression, a progressive trend had already begun. In the summer of 1996, encouraged by the administration, congressional liberals successfully pushed bills to increase the minimum wage and to bar "pre-existing condition" exclusions from private health insurance. These reforms, though all of the small-beer variety, showed that the public still had an appetite for federal activism. After signing the Balanced Budget Act, Clinton proposed a series of initiatives -- mostly bite-sized, oddly constructed, tax-credit sorts of things in the familiar Clinton way, but still laden with the symbolic import of renewed government activism. And in returning to fiscal conservatism, Clinton has insisted that the cost of all these measures be offset by new taxes, so as to preserve the surplus for debt reduction.

The traditional pattern of politics would seem to dictate that such counsels of forbearance must inevitably fail, that as the magnitude of the projected surpluses grew apparent to the voters, the two parties would inevitably devolve into a bidding war. Certainly it appeared this way this past spring. Republicans proposed a massive tax cut, and Clinton countered that he would accept a smaller one but was open to negotiation. The process seemed to be heading on a predictable course as the GOP leadership set out into the countryside to sell their constituents on the merits of a tax cut. They did so -- in keeping with what their economics had become -- in the manner of game-show hosts. House Speaker Dennis Hastert waved a handful of dollar bills before a crowd of factory workers, and Republic National Committee Chairman Jim Nicholson arrived in New York toting a suitcase filled with $10,000 cash, which, he claimed, represented what his tax cut was worth to the residents of that state.

And then a wonderful thing happened. In crowd after crowd, and in poll after poll, the populace insisted that it did not want a tax cut. Some expressed a view that, in good times, the government, like an individual, should begin to pay off its debts. Surprisingly large numbers also stated that the government should spend more on education, on the poor, and on retirement programs. Perhaps it was born of the unprecedented prosperity of recent years, but there nonetheless seemed to be an unusual feeling of generosity: People preferred that tax dollars go not into their pockets but toward some kind of public good. In this sentiment there is -- just maybe -- a political majority waiting to be born.

The Dark Prince

Cecille Isidro — Tue, 23 Nov 1999 00:00:00 -0500

Here are some of the chapter headings in Dick Morris's latest book: Issues over Image, Strategy over Spin, Generosity over Self-Interest, Racism Doesn't Work.

No, really. Dick Morris, inventor of triangulation, who advised President Clinton to alter his vacation plans on the basis of polling data, and who was forced out of politics for sucking a call girl's toes, has now decided to reincarnate himself as David Broder. What we had long mistaken for conniving, scheming, and duplicity, Morris assures us, was actually his sincere effort to make the world a better place. As Morris explains it, "If American politicians were truly pragmatic and did what was really in their own best self-interest, our political process would be a lot more clean, positive, nonpartisan, and issue oriented. . . . If Machiavelli were alive today, he would counsel idealism as the most pragmatic course."

Well, that depends on how one defines "idealism." To Morris, idealism means eschewing ideologically faithful members of one's own party to craft deals with the opposition, adopting your opponent's most popular positions as your own, and taking care at all times to maintain a 50-percent approval rating. ("When [the president] dips below 50 percent," Morris asserts, "he is functionally out of office.")

Some politicians come to this particular brand of idealism more easily than others, as Morris recognizes. Using the pseudoscientific methodology that predominates throughout the book, he classifies elected officials into two categories. "Ideological stalwarts" -- the first kind -- "march to the beat of their own drummers and value consistency above compromise, purity above pragmatism." Needless to say, Morris finds these types distasteful. The other type, however, "are more interested in achieving something, getting reelected, and moving ahead." This is the good type of politician, whom Morris dubs, in an unfortunate turn of phrase, "men of affairs." Morris and Clinton are men of affairs.

Morris has an interesting definition of idealism: if this is principle, just imagine how a cynical politician would behave.

The most credible argument for Morris-style politics is half-a-loaf pragmatism: sure, you can stand by your beliefs in their purest form, but then you'll lose, and the policies that result will be worse than compromise. But Morris doesn't make this argument. As one proceeds through this small sausage of a book, it becomes horrifyingly clear that Morris believes his kind of politics is idealism because he cannot even conceive of any purpose for governing beyond power as an end in itself. He is not writing against the conventional notion of idealism; rather, he is writing in complete ignorance of it.

A good deal of the book is taken up with Morris's rage at the economists and wonks within the White House who battled with him to shape Clinton's policies. It is easy to see why such people infuriated Morris; arguments about the merits of policy seem to baffle him. A longstanding goal during his tenure as Clinton's advisor was to cut the tax on capital gains: this, Morris believed, would bolster Clinton's tax-cutting credentials and allow a deal with congressional Republicans. In the end, that's what happened -- in the form of the 1997 budget deal -- but only after a (to Morris) annoyingly protracted internal debate. "Liberals argued that it was important to maintain the [capital gains] tax," he recalled in his memoir Behind the Oval Office: Getting Reelected Against All Odds, "but I never really grasped why."

In Morris's telling of his White House tenure, he is constantly brainstorming brilliant new policy innovations, only to be assailed with pointless objections by number-crunching bureaucrats. The logic of Morris's proposals is supposed to be self-evident -- tax cuts for the elderly, for instance. (If you reacted to that last one by wondering why tax cuts for the elderly are justified or how they would work, then you're not thinking like Dick Morris). You can easily picture some earnest Brookings-type delicately trying to explain in slow, patient tones some of the programmatic and theoretical barriers to Morris's latest scheme, and Morris staring back vacantly, as if he were being jabbered at in Swahili.

Perhaps Morris's greatest triumph has been to win nearly universal acclaim for his intelligence, even among those who find him morally repugnant -- "a gleeful genius," as Time puts it. The assumption seems to be that anybody this diabolical must also be brilliant. Read Dick Morris's books and you'll know better.

Security Guard

Cecille Isidro — Mon, 22 Nov 1999 00:00:00 -0500

The annual budgetary fight between the president and Congress has, this year, boiled down to a heretofore arcane accounting question: Should Social Security be counted as part of the federal budget or separate from it? This topic used to interest almost nobody outside the pocket-protector crowd. This fall it has precipitated a partisan jihad, with Republicans--in a reversal of their usual role--accusing Democrats of robbing old ladies of their pensions, and Democrats accusing Republicans of gross intellectual dishonesty.

The question of whether or not to exclude Social Security from the federal budget was first broached by the Republicans, who arrived at their position in a roundabout way. Last spring, they planned to corner President Clinton by passing a large tax cut and daring him to incur the wrath of the voters by vetoing it. But Clinton took the dare--and the voters remained unwrathful. So the congressional Republican leadership fell back on Plan B: force Clinton to abide by the austere spending cuts mandated by the Balanced Budget Act of 1997 and brand him a big spender if he asked for one nickel more. Alas, that maneuver failed, too: the cuts were so severe that even many conservatives in Congress blanched.

Now the Republicans have drawn a final line in the sand. They vow not to spend any part of the budget surplus that derives from Social Security taxes. And, since President Clinton wants to spend more money than the Republicans do on some programs, they claim he is raiding Social Security money to pay for big government. To drive the point home, the GOP has broadcast commercials portraying the congressional Democrats as burglars pilfering money from the Social Security safe.

Even by the standards of attack ads, the Republican claim is dishonest. First of all, spending the Social Security surplus will not rob Gramps of his check, as both parties have been spending the surplus for 30 years with no ill effect on retirees. Second, the White House budget does not touch the Social Security surplus. Third--and this is the truly Orwellian part--the Republicans are spending the Social Security surplus on government programs. The Congressional Budget Office (CBO), which calculates the cost of everything Congress does, determined that the bills passed by the Republican majority are so costly that they require the government to borrow from Social Security--to do, in effect, precisely what the congressional Republicans have insisted must not be done.

So Congress told the CBO to do the calculations again--and, this time, to subtract several billion dollars from the result so that the numbers would come out right. (This is called "directed scorekeeping"; essentially, Congress has the legal right to make the CBO do anything it wants, even if that means pretending certain budget items don't really exist.) The CBO dutifully followed its orders, as it must, allowing House Speaker Dennis Hastert to trumpet its new report as a vindication of his position. "Some may say these calculations don't fit together," he told The Wall Street Journal--neglecting to mention that "some" encompassed every independent analyst, including the very agency he claimed was backing him up--"but the bottom line ... is we protect the Social Security trust fund."

Among the opinion-making classes, the flimflammery is so transparent that it has created a backlash. Media accounts have rightfully poured scorn on the Republican tactic, but, in so doing, they have also dismissed the entire notion of maintaining the Social Security surplus. And that is unfortunate. While the Republicans may not have pure motives, they are actually standing up for a momentous and beneficent principle. Moving Social Security off-budget would strengthen it. Conservatives and liberals are so preoccupied with partisan exigencies that they are actually taking up positions antithetical to their convictions.

In 1935, when Franklin D. Roosevelt devised Social Security, he wanted to keep it separate from other government programs in order to prevent future presidents from cutting it. So, rather than funding it from the normal stream of federal revenue, he created a new payroll tax whose sole purpose was to fund Social Security. In addition, he structured the program on a "pay as you go" basis. This meant that, instead of each generation setting aside payroll taxes to fund its own benefits, all payroll taxes would immediately fund benefits for current retirees. The Social Security recipients of, say, 1957 would be supported by the workforce of 1957, and, when the workers of 1957 retired, they would be supported by whoever was paying taxes then.

Eventually it became clear that this arrangement was structurally unfair, because not all generations are equal in size. The baby-boomers, for instance, formed a very large contingent of workers and would have had little trouble paying for the retirement of their far less numerous parents. But, when the boomers retired, their benefits would have to be paid for by the smaller generation of "baby bust" workers, who would have to pay very high payroll taxes. To rectify this injustice, President Reagan and Congress agreed in 1983 to raise payroll taxes significantly higher than was necessary to fund current benefits. The extra taxes from workers would go into the Social Security trust fund, and, when the boomers eventually retired, they could draw upon the built-up reserves. Payroll taxes would still, in the long run, match Social Security benefits, but the equilibrium would work itself out across generations, not merely within them.

The trouble was that, during the '80s and most of the '90s, the rest of the budget was running huge deficits. Since extra money was now sloshing around in the Social Security trust fund, and since the trust fund was technically part of the overall federal budget, it helped mask the deficit's true size. Instead of putting the higher Social Security taxes aside to help save for the baby-boomers' retirement, Congress used them, in effect, to keep other taxes low--and to put off the day of reckoning on our growing national debt. (Actually, the extent to which this is true depends on what you think would have happened if there were no Social Security surplus. If you think we would have let the deficit run that much higher, then we were still "saving" the Social Security surplus to pay for the retirement of future generations. If you think we would have raised taxes or cut spending to bring the deficit down to a more reasonable level, then we were taking the Social Security surplus and using it to pay for other programs. The truth is probably somewhere in between.)

In case your eyes are beginning to glaze over, here's the essential point: the flaws with the Social Security trust fund stemmed from the fact that it was mixed in with the rest of the budget. But today the Republicans are taking advantage of good economic times to turn Social Security once again into a distinct, almost sacrosanct category. This year, Social Security is projected to take in $161 billion more than it spends, while the rest of the budget is projected to take in $14 billion more than it spends. The GOP is saying it can spend the $14 billion on federal programs, but not a dime of the $161 billion. That money would go, instead, toward reducing the national debt.

Put aside, for a moment, the fact that the congressional Republicans are only pretending to do this. The concept itself makes sense. The point of running a surplus in Social Security is to lighten the burden on future workers. Reducing the national debt does two things that make it easier for future workers to support retired baby-boomers. First, it lowers the government's interest payments on the national debt, freeing up money in the budget--and thus making it easier for the regular budget to pay back all the money it has borrowed from Social Security. Second, the money that the government would otherwise borrow to finance public debt becomes free for investment by the private sector, which increases productivity and makes for a more prosperous future economy.

Liberals have two arguments against this. First, they claim that using the Social Security surplus to pay down the debt will not alleviate Social Security's fiscal woes. This is true only in the narrow sense that, in the Social Security accounts, it doesn't matter whether the national debt is $10 trillion or zero. Somehow, no matter what, the government will make good on the IOUs to future retirees. But surely the level of national debt affects our ability to bail out Social Security in the future. Suppose you have a student loan that you need to begin paying next year and a credit card debt that you need to pay right now. Paying off the credit card debt--as opposed to, say, splurging on a new beach house--would not affect the amount of money you owe on your student loan, but it would make it a lot easier to handle next year.

The second objection is that, sure, paying down the debt would help Social Security, but, if we spend a few billion bucks of the Social Security surplus, it won't kill anybody. That's true, and, in an ideal world, we wouldn't have to choose between necessary spending and debt reduction. But it's probably worth sacrificing a bit of spending to establish a principle in the public's mind. It's worth it because there is a sneakily liberal long-term benefit to keeping Social Security off-budget. It would force the government to pay down debt for approximately the next ten years--which, if the economy holds up, is an ideal time to do so. But after that, remember, Social Security is going to start dipping into the red. If the current fiscal dogma--that the budget deficit must be zero every single year--holds, then we will face the unpalatable choice of slashing either Social Security or everything else the federal government does. But, if Social Security is thought of as a separate budgetary item--on behalf of which the public did without for several years--then it will be allowed to run deficits during a lean period and draw on the surpluses it's building up now. This would also help protect it from GOP efforts to "save" Social Security by privatizing it.

Of course, there's a danger that the consensus against spending Social Security surpluses could grow so extreme that it would prevent the government from borrowing during wartime or recession. But most people give the government slack during a crisis. And, if the Democrats continue to explain their restraint as saving up during good times, it should inculcate in the voters an understanding of the need for deficits in hard times. In the long run, then, the GOP plan would move us toward a more flexible, intelligent kind of budget and away from the mindless, zero-deficit fetishism that Republicans have done so much to foster. Shhh. Nobody tell Denny Hastert.

Relativity Theory

Cecille Isidro — Mon, 22 Nov 1999 00:00:00 -0500

Were he not a reactionary and a demagogue, I would feel sorry for Pat Buchanan. Not long ago he held a respected position within the Republican Party, wherein he gave keynote speeches at political conventions, represented the conservative viewpoint on TV talk shows, and was courted by party leaders. Now he has become a figure of almost universal disrepute. His former colleagues in the conservative punditocracy gleefully declare him unfit for the GOP, and his TV appearances, while still frequent, are typically interposed with grainy footage of goose-stepping members of the Wehrmacht-- the kind of associative imagery that would make any former White House communications director (even one as right-wing as Buchanan) cringe.

The ostensible basis for Buchanan's excommunication is his recent book, which has scandalized the conservative movement. It turns out Buchanan is a 1930s-style America Firster. Imagine! The curious thing is that there were previous signs of such thought in Buchanan, and they were not subtle: he has obsessively defended Nazi war criminals, waxed conspiratorial about the dual loyalties of American Jews, run for president under the campaign slogan "America First," and so on. Granted, it's possible to imagine one or two conservatives for whom Buchanan's book was the straw that broke the camel's back. But it seems as if all the camels' backs broke simultaneously at the precise moment when Buchanan became a threat to the electoral prospects of the Republican Party.

In the washington lexicon, Buchanan has turned "radioactive," which means he has violated the norms of decency so flagrantly as to cross the line between man and kook. The procedure for assigning radioactivity typically begins with the discovery of an objectionable factoid, ideally an inflammatory quotation by the subject. In Buchanan's case, the factoid is that he wrote a book arguing that the United States should not have entered World War II. In reality, Buchanan's book is the logical extension of an isolationist worldview held by a large number of conservative Republicans and not a few left-wing Democrats. The real evidence of Buchanan's repugnance is a career of eclectic obsessions that, taken together, are almost impossible to understand except as the product of an animus against Jews and other minorities. But most journalists do not like to make such normative judgments, so they gauge the subject's radioactivity by his allies' willingness to denounce him publicly. Thus, the standard of radioactivity is entirely relativistic.

When Jesse Jackson first ran for president in 1984, the gold standard in black militant anti-Semitism was Louis Farrakhan (sound bite: Judaism is "a gutter religion"), against whom Jackson's own views were gauged. Not long ago, a Farrakhan disciple named Khallid Abdul Muhammad delivered an even more poisonous sound bite (Jews are "the bloodsuckers of the black nation"), and then reporters began asking Farrakhan if he would denounce Muhammad--which he did, thereby deflecting attention from his own views. (Muhammad didn't think to get himself off the hook by counter-denouncing Farrakhan's anti-Semitism.) On a recent Sunday, Pat Robertson appeared as a panelist on "Face the Nation" not as an object of controversy but as an arbiter of it. Robertson, you might recall, once wrote a book asserting that world history was dictated by a plot of Freemasons, Bolsheviks, and "European bankers." By contrast, Buchanan's treatise looks positively Schlesingerian. Yet Robertson never attained anything close to Buchanan's level of radioactivity, perhaps because few conservative intellectuals had the temerity to invite him to take his 20 million followers out of the Republican Party. By now any stain on his reputation has faded, so Robertson can sagaciously hold forth as a Sunday panelist. On the topic of the Buchanan book, he scolded, "He's discredited himself tremendously." Oh. Has anyone solicited Lyndon LaRouche's thoughts on the matter?

Robertson is not the only one to benefit from Buchanan's radioactivity. It has also allowed Donald Trump to portray himself as a sane alternative. "It's just a wacko vote," he says of Buchanan's supporters, "and I just can't imagine that anybody can take him seriously." In one recent op-ed, Trump wrote that Buchanan "says stupid things" and then went on to threaten a preemptive bombing of North Korea. The basis for Trump's candidacy, aside from his opposition to Buchanan, is the tired conceit of the businessman-hero: "Having prevailed over a severe (and largely government-created) setback in my own industry, I know the tough decisions a chief executive has to make to return to prosperity." Of course, the life-metaphor argument also suggests another possibility: that, if we elected Trump, he would take the best years of our national life and then dump us to go be president of a younger, more beautiful country, such as Fiji.

Trump's candidacy is actually quite remarkable--it manages to embody all of populism's bombastic ignorance without including any of its reformist impulses. On the one issue about which he has a strong and well-formed view, Trump is aligned with the Beltway's lobbying elite. His core belief, which he brings up at every opportunity, is that all the world's evils stem from the Tax Reform Act of 1986. This is a strange bogeyman for a member of the Reform Party.

The Tax Reform Act was a remarkable triumph of populism and reformism. It wiped out thousands of special loopholes and exemptions in the tax code and then used the proceeds to cut tax rates almost in half. Just about every economist, from right to left, approves of this measure; when there are too many loopholes in the tax code, businesses make decisions on the basis of tax law, which creates inefficient drag on the free market. This is what happened during the early '80s in real estate. The tax incentives for commercial real estate were so generous that they encouraged developers to construct buildings purely for tax purposes, even if nobody would lease them. It was a classic horror story of a centrally planned economy: the government was paying people such as Trump to build empty, useless office towers.

The Tax Reform Act eliminated these subsidies and used the savings to lower tax rates across the board, resulting in a fairer, more efficient system--and forcing Trump off the federal teat. Trump is so bitter about this that last May he penned an op-ed attacking Bill Bradley for having championed tax reform 13 years earlier. Tax reform was "one of the worst ideas in recent history," wrote Trump. "When sweeping changes are abruptly enacted, as they were by Mr. Bradley, it puts those businesses in a bad spot." Cue the violin: "People who were banking their retirement on a condominium or a house saw their dreams destroyed. It was a hard time for developers like me."

Yes, forcing people to create things that have actual economic value can be cruel. The Reform Party already has Buchanan to shelter factory workers from the ravages of capitalism. Somebody has to speak for the endangered real estate mogul.

Busted Budget

Cecille Isidro — Mon, 18 Oct 1999 00:00:00 -0400

If the details of the proposed Republican federal budget were widely known and understood, it is hard to believe that even one American in ten would vote to keep the GOP in control of Congress. Thankfully, few or none of the abominations that Congress proposes will actually survive a veto--the Republicans' political feebleness is their most endearing attribute. And yet the budgetary machinations in Congress offer a telling demonstration of the moral and intellectual decrepitude of the present Republican view of government.

Perhaps the most objectionable scheme currently under consideration is a cut in the Earned Income Tax Credit. The eitc is a subsidy for the working poor that is designed to offset regressive taxes. One might suppose that conservatives would approve of this program--freeing the poor from the burdens of taxation is a staple of Republican rhetoric. Yet, since taking control of Congress in 1995, the GOP majority has repeatedly sought to scale back the eitc.

This time, House Republicans have proposed to delay the payment of the credit. As it currently stands, eitc recipients get their credit, in the form of a check from the IRS, in one lump sum at the end of a year's work. The GOP leadership intends to stretch the eitc out over twelve monthly installments, which would make things easier for Congressional budgeteers by pushing some of the payments into the next fiscal year.

What makes this example particularly instructive is not the proposal itself, which is only mildly repellent by recent Congressional standards, but the phony arguments that have been put forth to justify it. As always, Republicans trotted out their familiar line that eitc recipients "pay no income taxes" and hence are not worthy of support. The eitc is designed mainly to offset not income taxes but Social Security payroll taxes, of which eitc beneficiaries pay a disproportionate share. House Speaker Dennis Hastert's spokesman asserted that the plan "doesn't hurt anybody. It's just spreading out the payments." This is ludicrous. Studies of the eitc show that its recipients use the checks for expenses such as repairing a car or paying off debt. Delaying the payments would force them to carry debt longer and, hence, pay more interest.

Majority Leader Dick Armey mushed together the "undeserving poor" and the " it's not a cut" arguments, commenting, "I would say it is denying them the lump-sum acceptance of my money." Since Armey has broached the topic of his money, we wonder whether he believes delaying his recently voted pay increase for a year would make him any worse off. The Republicans' best argument thus far is that spreading out the payments would actually aid the poor by helping them manage their money. What a touching display of concern for the providence of the impoverished! But whatever happened to keeping the government out of people's personal financial affairs?

Congress has also singled out other programs that aid the poor, proposing to slash the Social Services Block Grant, which allows states to provide various kinds of assistance to the poor and disabled, as well as day care for children and similar programs. But the Republican majority's stinginess is not limited to an indifference to the poor; it is an all-encompassing obtuseness about the general interest and America's role in the world. Congress has zeroed out funding for peacekeeping in Kosovo and implementation of the Wye accord. It has cut federal support for basic science. Meanwhile, at the behest of the restaurant lobby, it has sought to expand the infamous tax deduction for business meals. What America needs, Congress seems to believe, is less scientific research and more three-martini lunches.

If the Republicans are going to wantonly hack away at the federal leviathan, you would think their cuts would at least have the benefit of reducing pork and waste. But, when it comes to these least justifiable of expenditures, Congress has been spending money like a dying tycoon. Members of both parties are engaged in a competition to prop up the most veterans hospitals, which are notorious for their inefficiency. Congress also threw billions of dollars at agricultural assistance--a boondoggle that primarily benefits agribusiness at the expense of consumers and goes against the sound free-market principle that government should not subsidize selected industries.

All this is happening at a time when leading figures in the Republican Party are trying to set out a new, more moderate policy vision. As GOP front- runner George W. Bush puts it, "Government must be carefully limited--but strong and active and respected within those bounds." The Republicans in Congress have made their philosophy in this regard abundantly clear. If Bush disagrees with that vision, he ought to say so.

Pie in the Sky

Cecille Isidro — Mon, 23 Aug 1999 00:00:00 -0400

Congress has spent the summer in the thrall of a weird kind of giddiness. The discovery that the budget surplus may be a trillion dollars larger than previously believed has prompted visions of a kind of domestic End of History. No more scrimping and scrounging: there is talk of new tax cuts, paying off the national debt, new prescription drug coverage, and, well, pretty much anything anybody wants.

Yet somehow, even while it dreams of untold abundance, Congress finds itself virtually impoverished. The chairs of the various committees, charged with doling out the funds to run the federal government during the next fiscal year, have trimmed the FBI's budget and slashed science research -- not because anybody believes these things are wasteful, but simply for lack of money. Even with these savings, the House leadership has sunk to new depths of chicanery and beggary. Recently, Speaker Dennis Hastert decided to fund the 2000 census as an "emergency" -- who saw it coming? -- and beseeched Republican governors to please donate any spare welfare funds to their needy brethren in Washington. Sounding a bit like a United Way commercial, Hastert implored, "We're trying to balance the budget."

Trying to balance the budget? What about those trillions of dollars in surpluses? Something here is profoundly screwy. To understand how it got this way, we must examine the paradoxically named Balanced Budget Act of 1997.

When President Clinton and the Republicans made a budget deal two years ago, each side received a little something. Clinton got a new health insurance program for poor children and a tuition tax credit, and the GOP got cuts in estate and capital gains taxes. In the ensuing jublilation over a bipartisan deal to balance the budget, few bothered to ask how the two sides managed to eradicate the deficit without requiring any sort of sacrifice.

In fact, they pulled it off by fiddling with something called discretionary spending. This is the money that the government spends on the military, education, highways, and everything else besides paying interest on the debt and entitlements such as Social Security and Medicare. While Congress can set the total level of discretionary spending years in advance, it doles out the funds to individual programs on a yearly basis. Clinton and the GOP took advantage of this by declaring that, starting two years later, Congress would begin to steadily ratchet down discretionary spending until 2002, culminating in -- ta da! -- a balance budget. This is like claiming you'll lose 30 pounds by fasting all of next February -- you're not going to do it, nor should you. Yet this farcical promise allowed the two sides to claim fiscal rectitude while leaving it to future Congresses to decide the cuts.

Now fast-forward to the present. Congress is trying to enact the cuts required by the 1997 act, and, to nobody's surprise, it can't be done. In the coming years it will get much harder still. By 2002, assuming the defense budget keeps pace with inflation, all other government operations will have to be cut by 20 percent.

Why, then, don't they just use part of this giant surplus to ease the domestic spending caps? Because without those caps, the surplus all but disappears. Here's how: when government economists calculate the size of the budget surplus, they assume that all current laws will be carried out into perpetuity. (As budget geeks, their role is not to question political assumptions, but dutifully to crunch numbers.) Since the sham 1997 Balanced Budget Act is on the books, the budget scorers assume that Congress will enact large discretionary spending cuts over the next few years and that the savings from those cuts will be used to pay down the national debt, which, in turn, will reduce the government's interest costs and create even larger surpluses. When you hear about the $2.9 trillion surplus from a politician, or read about it in the newspaper, or see it on the cover of this magazine, this is the scenario they are relying on.

But since that premise is implausible, so, too, is the projected surplus. Assume that, instead of enacting huge cuts in discretionary spending, Congress merely allows that part of the budget to keep pace with inflation. (Given that Congress has already promised to spend much more on highways and defense, this is a conservative assumption.) Then discount the portion of the surplus that derives from Social Security, which both parties have promised not to touch. Finally, figure in some emergency spending to cover the odd hurricane or military action. That pretty much takes care of the whole surplus. To be sure, it's possible that further economic growth will brighten the picture, but spending the money in the hope that it will eventually materialize is hardly fiscal conservatism. The on-budget surplus is almost entirely an illusion, the product of cooked books and wishful thinking.

At the time it was enacted, the cap on domestic spending was seen as nothing more than a convenient device to snatch a little political credit. Yet it has had a deleterious result that nobody imagined at the time. The phantasmal trillions flowing into the national coffers have so powerfully seized the imagination of Congress that any whiff of restraint has been swept away. They have also allowed conservatives to cast the debate as a choice between tax cuts and new government programs, when, in fact, the choice is between tax cuts and existing programs. The Republican budget assumes that future Congresses will cut domestic spending almost in half -- a ludicrous proposition. If the president and Congress carve up the surplus between them -- say, a tax cut and prescription drugs -- then the practical result will be to plunge the budget back into red ink. The primary effect of the Balanced Budget Act, in other words, will have been to undo balanced budgets.

It is no longer surprising that such a result would delight Republicans -- this, after all, was the essential fiscal policy of the Regan administration, their golden age. On the other hand, one might expect Democrats to recoil from such recklessness. Yet many House Democrats, bought off by pork-barrel spending in their home districts, have supported reckless Republican spending bills.

This represents, at least, a traditionally Democratic sort of venality. What is truly baffling is the claque of Senate Democrats who have openly salivated for a giant upper-class tax cut. Louisiana Senator John Breaux, exemplifying the intellectual depth of this faction, recently appeared before a group of reporters chanting, "Tax cuts, tax cut!" Nebraska Senator Bob Kerrey said of the GOP plan, "To me, this is a no-brainer. It increases Americans' income by $800 billion." Of course, any use of a surplus (including paying down the national debt) would increase Americans' income. The distinctive feature of the GOP tax cut for which Kerrey voted is that the Americans whose income would be increased tend to reside at the upper end of the income scale. It's one thing to sell out the broader interest on behalf of your own constituents and quite another to do it on behalf of the other party's constituents.

While the leading pro-tax-cut Democrats all declined my requests for interviews, their motives can be gleaned from the public pronouncements of New Jersey Senator Robert Torricelli, whose mental processes lie delightfully close to the surface. "There is no financial base for the core issues of the Democratic Party," he told journalist Elizabeth Drew. "Civil rights, the environment, pro-choice -- they have a voting constituency, but they have no financial strength. In current American politics, you can't survive without a financial constituency."

And then there is this Torricelli gem from a few weeks ago: "Democrats have largely captured the education and environmental issues, and have an expanding advantage on guns and abortion," he explained to The New York Times . "There is no reason for us to lose on the tax issue." No, there probably isn't, unless by "reason" one includes such considerations as the good of the country.

In addition to this rather naked striving, there is also a simpleminded variety of centrism that assumes that the proper solution always lies between the two extremes. So, if Clinton wants a $250 billion tax cut, and the Republicans want $800 billion, then the best public policy must be somewhere around $450 billion. Recently, Breaux has dressed up his coarse tax-cutting urges in the soothing, high-minded tones of bipartisan statesmanship. "The bottom line here is that unless we both try to merge our different ideas, nothing is going to happen," he expounded last Sunday. "We're not going to have Medicare. We're not going to have a tax cut unless we come together." So, both parties can just get together and work out a mutually pleasing deal. Hmm. Where have we heard that before?

Budget Surplus Could Leave U.S. Broke

Cecille Isidro — Sun, 15 Aug 1999 00:00:00 -0400

Congress has spent the summer in the thrall of a weird kind of giddiness.

The discovery that the budget surplus may be a trillion dollars larger than previously believed has prompted visions of a kind of domestic End of History. No more scrimping and scrounging: There is talk of new tax cuts, paying off the national debt, new prescription drug coverage, and, well, pretty much anything anybody wants.

Recently, Speaker Dennis Hastert decided to fund the 2000 census as an "emergency" -- who saw it coming? -- and beseeched Republican governors to please donate any spare welfare funds to their needy brethren in Washington. Sounding a bit like a United Way commercial, Hastert implored, "We're trying to balance the budget."

Trying to balance the budget? What about those trillions of dollars in surpluses? Something here is profoundly screwy. To understand how it got this way, we must examine the paradoxically named Balanced Budget Act of 1997.

When President Clinton and the Republicans made a budget deal two years ago, each side received a little something. Clinton got a new health-insurance program for poor children and a tuition tax credit, and the GOP got cuts in estate and capital-gains taxes. In the ensuing jubilation over a bipartisan deal to balance the budget, few bothered to ask how the two sides managed to eradicate the deficit without requiring any sort of sacrifice.

In fact, they pulled it off by fiddling with something called discretionary spending. This is the money that the government spends on the military, education, highways, and everything else besides paying interest on the debt and entitlements such as Social Security and Medicare. While Congress can set the total level of discretionary spending years in advance, it doles out the funds to individual programs on a yearly basis. Clinton and the GOP took advantage of this by declaring that, starting two years later, Congress would begin to steadily ratchet down discretionary spending until 2002, culminating in -- ta da! -- a balanced budget. This is like claiming you'll lose 30 pounds by fasting all of next February -- you're not going to do it, nor should you. Yet this farcical promise allowed the two sides to claim fiscal rectitude while leaving it to future Congresses to decide the cuts.

Why, then, don't they just use part of this giant surplus to ease the domestic spending caps? Because without those caps, the surplus all but disappears. Here's how: When government economists calculate the size of the budget surplus, they assume that all current laws will be carried out into perpetuity. (As budget geeks, their role is not to question political assumptions, but dutifully to crunch numbers.) Since the sham 1997 Balanced Budget Act is on the books, the budget scorers assume that Congress will enact large discretionary spending cuts over the next few years and that the savings from those cuts will be used to pay down the national debt, which, in turn, will reduce the government's interest costs and create even larger surpluses. When you hear about the $ 2.9 trillion surplus from a politician, or read about it in the newspaper, or see it on the cover of this magazine, this is the scenario they are relying on.

At the time it was enacted, the cap on domestic spending was seen as nothing more than a convenient device to snatch a little political credit. Yet it has had a deleterious result that nobody imagined at the time. The phantasmal trillions flowing into the national coffers have so powerfully seized the imagination of Congress that any whiff of restraint has been swept away. They have also allowed conservatives to cast the debate as a choice between tax cuts and new government programs, when, in fact, the choice is between tax cuts and existing programs. The Republican budget assumes that future Congresses will cut domestic spending almost in half -- a ludicrous proposition. If the president and Congress carve up the surplus between them -- say, a tax cut and prescription drugs -- then the practical result will be to plunge the budget back into red ink. The primary effect of the Balanced Budget Act, in other words, will have been to undo balanced budgets.

It is no longer surprising that such a result would delight Republicans -- this, after all, was the essential fiscal policy of the Reagan administration, their golden age. On the other hand, one might expect Democrats to recoil from such recklessness. Yet many House Democrats, bought off by pork-barrel spending in their home districts, have supported reckless Republican spending bills. This represents, at least, a traditionally Democratic sort of venality. What is truly baffling is the claque of Senate Democrats who have openly salivated for a giant upper-class tax cut. Louisiana senator John Breaux, exemplifying the intellectual depth of this faction, recently appeared before a group of reporters chanting, "Tax cuts, tax cuts!" Nebraska senator Bob Kerrey said of the GOP plan, "To me, this is a no-brainer. It increases Americans' income by $ 800 billion." Of course, any use of a surplus (including paying down the national debt) would increase Americans' income. The distinctive feature of the GOP tax cut for which Kerrey voted is that the Americans whose income would be increased tend to reside at the upper end of the income scale. It's one thing to sell out the broader interest on behalf of your own constituents and quite another to do it on behalf of the other party's constituents.

While the leading pro-tax-cut Democrats all declined my requests for interviews, their motives can be gleaned from the public pronouncements of New Jersey senator Robert Torricelli, whose mental processes lie delightfully close to the surface. "There is no financial base for the core issues of the Democratic Party," he told journalist Elizabeth Drew. "Civil rights, the environment, pro-choice -- they have a voting constituency, but they have no financial strength. In current American politics, you can't survive without a financial constituency."

And then there is this Torricelli gem from a few weeks ago: "Democrats have largely captured the education and environmental issues, and have an expanding advantage on guns and abortion," he explained to The New York Times. "There is no reason for us to lose on the tax issue." No, there probably isn't, unless by "reason" one includes such considerations as the good of the country.

Recently, Breaux has dressed up his coarse tax-cutting urges in the soothing, high-minded tones of bipartisan statesmanship. "The bottom line here is that unless we both try to merge our different ideas, nothing is going to happen," he expounded last Sunday. "We're not going to have Medicare. We're not going to have a tax cut unless we come together."

So, both parties can just get together and work out a mutually pleasing deal. Hmm. Where have we heard that before?