Let me see if I understand this correctly. The United States is on the verge
of bankruptcy because of a national budget deficit that has only come down
from $290 billion to under $100 billion since 1992 As a result of this unacceptable
performance, the business community has lost confidence in government policy
to the degree that the stock market and corporate profits have only been
at record levels for most of the 1990s. Things are so bad, in fact, that
if the economy continues on its present course, the deficit may actually
disappear on its own by virtue of additional unanticipated tax revenues,
precluding the need for any balanced-budget agreement between Capitol Hill
and the White House.
What can be done about this catastrophic situation? Is there a solution? Why, of course. It's as plain as the nose on your face. What we need are more tax cuts. Most especially, we need tax cuts for the wealthy, and thanks to Congress and the president, we will get them.
The wealthy, you see, have been feeling put upon; they have not been getting a fair return on their investments because of the capital gains tax, which has only been reduced from 50 percent in 1980 to 28 percent (14 percent on large stock transactions). Those who point out that capital gains income -- profits from the sale of stocks, bonds, mutual funds. real estate, art treasures, and so forth -- is already taxed at an equal or lower rate than most salary and wage incomes, simply don't understand; they just don't get it.
Newt Gingrich gets it; so do Dick Armey, Bill Archer, Trent Lott, and the rest of the congressional Republicans. President Clinton gets it, too, although he wasn't sure at first. They all know that a capital gains tax cut is necessary to free up investment dollars that can then flow into the overvalued stocks of corporations that have downsized their work forces, sending those stocks even higher. With this injection of capital, the fortunate companies will soon boast of stock prices far beyond any intrinsic worth the companies themselves may have, based on their actual assets. This is called "growing the economy," and it will only end when some spoilsports puncture the big Wall Street balloon.
What else bothers the wealthy in America? Well, for another thing, they have to pay an estate or inheritance tax when they want to pass their wealth along to the next generation. At present, only their first $600,000 can be bequeathed to needy heirs tax-free. This is hardly fair, so we are going to help them out by raising the estate-tax exemption to $1 million. That will allow the children and grandchildren of the elite a proper head start in life. The benefit of this tax break goes to only the richest 1 percent of American families, but we shouldn't be small-minded and quibble over pocket change. Besides, one early Republican proposal would have repealed the tax entirely, so the Treasury is getting off cheap.
Estate taxes that were increased in the 1930s to break up excessive concentrations of wealth must be what Republican Congressman Bob Livingston, chairman of the House Appropriations Committee, had in mind when he called the New Deal "socialism." Once you've gotten it (no matter how), he and his colleagues believe, you should get to keep it -- all of it.
That is one of the rules of the new greed-is-good America. Taking away the welfare of the undeserving poor is one thing; tampering with the stockpiled assets of the deserving rich is something else again, and we can't have it.
To be fair, the wealthy are not the only ones whose taxes President Clinton and the Republican Congress plan to cut. The middle class will also share in the booty. Their most interesting gift is the pending $500-per-child tax credit. In addition to growing the economy, Congress would like to grow the population. They are saying, in effect, go forth and multiply.
Everyone knows that the United States is short of people. In order to compete with countries like China in the next century, we will need a lot more than 260 million Americans What better way to catch up to the competition than to subsidize child birth? The more kids you have, the more Bill, Newt, and the gang will permit you to write off your IRS return. What could make more sense? As the saying goes, a billion Chinese can't be wrong.
What about those unfortunates without children, you ask? Well, they had their chance to add to the surplus population and didn't take it; they don't deserve a tax break. Tax breaks go to those with the foresight to get their heart's desires written into the Contract with America. The Christian Coalition did that for "families"; other interest groups should have been more politically aware
We almost forgot the corporations, the 800-pound gorillas of the American economy. Corporate America also needs a tax break in these tough economic times, and they are getting it, courtesy of the president and the Republican Congress. Something called the corporate alternative minimum tax was enacted in 1993 on the notion that businesses should pay at least some taxes if they are profitable. The GOP has been righteously trying to get rid of the measure ever since, and they have largely succeeded with the help of their friend Bill Clinton.
The virtual elimination of this tax will relieve corporations of the onerous necessity of helping to support the country, and they can concentrate instead on worrying about their stockholders, which is all any reasonable citizen can expect them to do The average CEO is busy enough these days, what with fending off consumer lawsuits and converting his annual salary bonus into stock options. Anything we can do to relieve him of patriotic obligations and ease his heavy burdens will be a help.
There we have it. Tax cuts galore and no pain - or so it would seem. There is just one fly in the tax-cut ointment: the question of how to pay for all these budget-balancing tax reductions Again, the solution is obvious to Congress and the president: cut Medicare and Medicaid. This is only logical. If the tax cuts are going to the wealthiest among us (65 percent are earmarked for the richest 20 percent of U.S. households, according to the New York Times), shouldn't the budget cuts be aimed at the least well off and those who need government services the most? No need to worry. The budget agreement guarantees that seniors on Medicare will do their part to finance the tax cuts by paying 70 percent more in monthly premiums for doctor visits and outpatient treatments. Medicaid funding cuts of over $8 billion will ensure that poor health-care recipients also make a contribution. If any objections are raised, they can be squelched by saying the programs are going broke and can only be saved by slashing them; this always works.
There is a charming mathematical symmetry to the balanced budget plan passed by Congress tax reductions amounting to $95 billion are nicely balanced by Medicare and Medicaid program cuts of $124 billion. This may sound familiar to those who remember the 1995-96 budget struggle between the Democratic president and the Republican Congress. GOP tax breaks for the wealthy, it was said at the time, were being unfairly paid for by cuts in Medicare That accurate public perception of the issue brought President Bill Clinton back from the political dead and helped to re-elect him. So, what happened to the president after the election? He discovered, apparently, that he is really a Republican after all, when it comes to tax and budget policy.
Wayne M. O'Leary is a research associate in history at the University of Maine in Orono.