March 19, 1996

Sorting out the budget mess

By Steve Scroggins

 

Americans want a balanced federal budget. Some also want it delivered without disturbance, pain or rhetorical fighting. Get a grip, dreamers! There are too many disagreements about how to balance the budget.

Most Americans think they’re taxed enough and most agree spending reductions are the answer but a fickle "cut-theirs-not-mine" philosophy emerges when specifics are discussed. To liberals and others who derive their power from government spending, cuts are unthinkable. They believe higher tax revenues are the only answer if budget-balancing is required. But liberals aren’t politically suicidal; most employ semantic subterfuge.

Candidate Clinton promised a painless balanced budget within five years and a middle-class tax cut during the 1992 campaign. Both evaporated to the extent that even lip-service regarding a balanced budget became rare until 1995. If not for the 1994 elections, a balanced budget wouldn’t even be seriously discussed, much less passed by Congress.

Most media coverage of the budget impasse casts Clinton as defender of the aging and poor against those uncompromising GOP "extremists" bent on imposing their "heartless, draconian and mean-spirited spending cuts to finance tax cuts for the wealthy." Brazen factual distortions like this brought GOP leaders to the brink of surrender. Rather than holding firm on the government shutdown, they retreated seemingly to await a November referendum on the issue.

The truth is apparent to the attentive but let’s review some relevant facts.

1. The GOP seven-year budget plan as originally written increases federal entitlement spending $350 billion over the period. Elimination of certain regulatory agencies is proposed, but spending on entitlements is INCREASING. There are NO CUTS.

2. History shows that tax rate reductions result in higher tax revenues. Tax rate cuts under Presidents Kennedy and Reagan induced economic booms that raised taxable incomes and tax revenues.

3. A budget is only a plan. Actual balance is achieved only when actual spending is curtailed within actual revenues. Congress has complete control over spending but little over the private activity that determines taxable incomes. Hence, spending discipline is the key to fiscal responsibility.

4. Chronic deficit spending is morally wrong; it’s stealing from future generations.

5. Washington spenders have no inherent right to our money despite their rhetoric that tax cuts must be "financed." Citizens must exert their political will to keep more of their earnings.

These facts illuminate numerous problems with the GOP plan. Let’s review a few.

First, the plan takes place over seven years. It’ll take three (four forsaking 1996) more Congresses to complete. The current Congress has spending authority only through 1996. Future Congresses may stay the course or reverse it. Some say spending addictions built over forty years cannot be undone in one cold-turkey term. They endorse tentative steps. While the journey’s first step is important, the considerable distance to the ultimate goal demands longer strides.

Second, the Congressional Budget Office (CBO) economic forecasts used to project future tax revenues do not, repeat not, include a recession or significant economic slowdown. History indicates seven years of uninterrupted steady growth are unlikely. Yet, Clinton demands even rosier assumptions to forecast higher tax revenues. Doing so allows higher spending levels while reaching budget balance on paper. When the rosy revenue projections inevitably prove faulty, Clinton is betting Congress will lack the discipline to reduce actual spending accordingly. He may be right.

Third, the child tax credits aren’t enough. Capital-gains rate cuts and regular income tax rate cuts are needed in the final plan. GOP leaders shouldn’t concede these economic growth requirements.

Finally, after we balance the budget (and more importantly the actual revenues and spending), we’ll retain a mountain of national debt. Further politically painful spending discipline will be required to generate the fiscal surpluses necessary to retire that debt.

GOP fiscal policy is moving in the right direction but seven years is too long. If we agree chronic deficit spending is theft, shouldn’t we end it now?

Copyright Ó1996 Steve Scroggins - All rights reserved.

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