Clinton's proposed tax cut
There was a speech to be given by the president the other night, but alas, he didn't give it. And there is surely deeply felt and well justified unhappiness among vast numbers of middle- income Americans who -- to quote a phrase President Clinton has made familiar -- "play by the rules" and yet find the federal government in a variety of ways shoving them around, misusing their tax dollars and being pretty haughty and smug about it all the while.
But the remedies the president set out don't get to the source of their grievances and don't really even acknowledge, let alone address what those grievances are. The proposals had a hush-money quality to them.
All this is why we found the speech disappointing. With its blithe reversal of a sound policy regarding the danger of the federal deficit and its piecemeal offerings to a hostile electorate, the administration enters a bidding war with the Republicans that it can't win and in fact loses merely by entering.
For the first two years of his administration, Clinton said that the deficit was the great threat to future prosperity. That was why he felt that at no small political cost to himself he had to propose raising taxes in Year One; it was also partly why he proposed health-care reform and health-care-cost containment in Year Two.
The health plan he actually introduced may have been a mess, but this reasoning was right. The first-year steps he took to drive down the deficit were Clinton's greatest accomplishment. But already the deficit threatens to head back up again. What sense does it make in the face of such a recurring threat to reverse policy? And to get down to political particulars, how can it be smart to invite a wider deficit that must inevitably drive up interest rates, hurting many of the same people the tax cuts are trumpeted as helping.
The president says his tax cuts will be paid for, unlike, presumably, the larger ones the Republicans propose. But scraping together budget cuts to pay for tax cuts when the government is running deficits the size of these is circular policy at best.
Officials say there could yet be deficit-reduction proposals in the rest of the budget, but it's hard to see where serious savings might come from.
Some of the tax proposals would be wasteful in other respects. In the name of increased savings, the president proposes an expansion of IRAs, or individual retirement accounts. But most of the evidence suggests that IRAs haven't increased savings in the past.
Some of these would also be so-called backloaded IRAs, whose true cost is understated. because it wouldn't occur until well after the five-year estimating period the budget rules require. House Republicans have also proposed backloaded tax cuts, including a backloaded IRA, which pre-Thursday night administration officials reasonably denounced on grounds that the understated costs are a time bomb.
The president likewise proposes granting tuition deductions for college and other post-secondary education to taxpayers with incomes up to $100,000 a year. The cost would be met in part by imposing further caps on so-called discretionary spending subject to the annual appropriations process.
It's not the president's intent, but among the programs that such caps could end up squeezing are most of the current forms of federal aid to education, including grants to the lowest-income college students. The third tax cut would be a children's credit for families with incomes up to $75,000 a year.
We repeat: The president is right to believe that many middle- income people in the country find that hard though they work, they can barely keep their heads above water, and that the government slights them, taxing more than ever it gives back.
What isn't clear is that tax cuts of at most a few dollars a day are either going to make them change their minds when they see what the benefit is or change the circumstances about which they are unhappy.
In some respects the cuts could make those circumstances worse. If that's a political winner, it will be the news of the century.
-- The Washington Post