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COLUMN RIGHT/ PAUL CRAIG ROBERTS

Deficit Ogre Shouldn't Stop GOP Tax Cut : The $500-per-child credit for all is essential to keeping the middle-class voters' faith.

March 28, 1995|PAUL CRAIG ROBERTS | Paul Craig Roberts, a former assistant secretary of the Treasury, is chairman of the Institute for Political Economy and a Distinguished Fellow at the Cato Institute in Washington. and

Former Treasury Secretary William E. Simon underlined the difficulty of changing anything in Washington with his observation that "as soon as a President is elected, he is captured by the past." The same thing is happening to the new Republican Congress. Newt Gingrich's revolution is being captured by George Bush's past and Bill Clinton's past.

Elephants are supposed to have long memories, but not if it is a GOP elephant. It was only a few years ago that Bush destroyed his presidency by reneging on his promise not to raise taxes, and it was even more recently that Clinton crippled himself by going back on his promise of a middle-class tax cut.

Now 102 House Republicans and, no doubt, a majority of Senate Republicans want to destroy the credibility of the new Republican majority by scuttling the centerpiece of the Republican "contract with America": the $500-per-child tax credit and a reduction in the capital-gains tax rate.

The GOP moderates plead the deficit. This is an ancient refrain that has been the mainstay of the Washington status quo. Every time there is a prospect of people sending fewer tax dollars to Washington, there is an eruption of deficit pieties.

The ability of this piety to prevail over political experience is the only reason Bill Clinton is in office. Indeed, the power of this piety to strike Republicans stupid is the only force capable of reelecting Clinton in 1996.

Ronald Reagan and Jack Kemp are the only Republican politicians immune to this piety, and their popularity exceeded that of their party. To GOP moderates, these two successful Republican leaders were snake-oil salesmen, voodoo economists, riverboat gamblers.

Every time Republicans have the public's support for tax cuts, the Democrats bait the same old trap, and the Republicans head straight for it like lemmings. They make themselves unpopular with budget cuts, while putting off a corresponding tax cut to sometime in the future when the budget is balanced. It boils down to taking away school lunches while refusing to hand back the taxes that were paying for them.

This Republican program has rewards only for rich bond owners. By cutting the budget but not the taxes, the Republicans drive down the deficit. This pushes up bond prices and creates capital gains for Wall Street. The rich get a windfall instead of a tax cut, and the middle class gets fewer benefits for the same tax dollars.

Evaporating public support is the result. By March 21, the Republicans had resurrected Clinton as a middle-class champion. The latest Washington Post-ABC News poll shows Clinton more trusted than Republicans to help the middle class and that the public is growing wary of GOP budget cuts. Republicans will not succeed in cutting spending without offsetting the pain, or perceived pain, with tax cuts and an economic growth program that expands opportunities. People will give up government benefits in exchange for tax cuts and the prospect of a brighter future. But they are not masochists impelled to give up benefits for the sake of pain and suffering.

Republicans, however, will do anything to reduce the deficit, including incorporating the class warfare of left-wing Democrats in their policy proposals. To accommodate the deficit, Republicans have modified their pro-family stance: Families are still worthy of protection, but only as long as they don't make too much money. In order to save a total of $7 billion over a five-year period--a sum that would have no measurable impact on the public debt--Republican moderates and fiscal conservatives want to deny the $500-per-child credit to families with more than $95,000 in annual pretax income.

This is the policy bankruptcy to which preoccupation with the deficit has brought Republicans. It is so unappealing that even a discredited President, mired in sexual, financial and political scandals and beleaguered by special prosecutors, is taking on luster by comparison.

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