Tax cuts and the prudence test

Democrats offer own proposal, saying Bush plan is not just unfair, but irresponsible.

If Democrats are to have success fighting President Bush's proposed $1.6 trillion tax cut, they may have to convince voters that it is not just unfair, but imprudent.

On the whole, the American people already believe that Mr. Bush's tax plan tilts toward the wealthy, say pollsters. For now, this doesn't bother them enough to create concerted middle- and lower-class opposition to the plan.

If the Bush plan is vulnerable at all, it may be over the issue of fiscal responsibility. Voters don't want to do anything that would interfere with paying off the national debt, or put Social Security, Medicare, and other popular programs at risk.

"People generally aren't going to fight a tax cut unless it comes back to hurt [them] in other ways, like deep program cuts," says Andrew Kohut, director of the Pew Research Center for the People and the Press.

Thus do the trade winds of politics change. For decades, the Republicans were the party that pushed a conservative, with a small "c," approach to national accounts. Now, suddenly, it's the Democrats who want to appear more like gray-suit bankers.

The GOP's tax cut effort "is irresponsible in the extreme," Senate minority leader Tom Daschle (D) complained on Thursday.

Congressional Democrats unveiled their alternative to Bush's across-the-board tax reduction at a hastily scheduled Thursday press conference.

They estimated the total cost of the plan over 10 years at $900 billion, and claimed that the true price tag of Bush's plan over the same time period would be well over $2 trillion, instead of its current $1.6 trillion price tag.

The Democratic plan would lower the tax rate on the first $20,000 of earned income from today's 15 percent to 12 percent. It purports to substantially eliminate the so-called "marriage penalty" by increasing the standard deduction allowed for married couples. And it would eliminate the estate tax for all estates under $4 million per couple, effective next January.

Overall, Congressional Democratic leaders said that, given their druthers, they would devote one-third of surpluses over the next decade to tax cuts; one-third to debt reduction, Social Security, and Medicare; and one-third to spending increases on items such as education and a prescription-drug benefit for Medicare.

"Our plan does not squander the whole surplus on a massive tax break for the wealthy, which is exactly what the president is proposing to do," said House minority leader Dick Gephardt.

Immediate prospects for the Democrats are dim. At time of writing, the House Ways and Means Committee was scheduled to vote Thursday on - and likely pass - the president's proposed personal income tax reductions. Approval by the full House could come later this month.

The real battleground is the Senate, where the current 50-50 partisan split gives the Democrats more political leverage.

The perceived unfairness of devoting much of the tax cut to wealthier individuals clearly continues to be one of the Democrats' main themes. But whether that is a politically productive charge is an open question.

Voters already believe that the Bush tax cut will benefit some people much more than others. When asked what the surplus should be spent on, a plurality of voters in a recent Pew Research survey picked Social Security and Medicare. Domestic spending came in second, and reduction in the national debt third. Tax cuts finished fourth.

"Opinion about these issues has changed only modestly over the last year, in spite of Bush's emphasis on the issue and a growing sense that a major tax cut is inevitable," says a Pew opinion report.

But these numbers do not necessarily translate into political opposition to the Bush plan. Tax cuts are free money, and who doesn't want that? Someone else may get more free money than you, but so what?

"People generally always think the rich don't pay their fair share [of taxes], and that idea has intensity at certain times," says Karlyn Bowman, a public-opinion expert at the American Enterprise Institute here. "But right now I don't sense it."

It is in emphasizing trade-offs that the Democrats may find an opening, if they find one at all.

Under President Clinton, the Democrats made great strides in shaking off their Great Society tax-and-spend image, notes Ms. Bowman. By balancing the budget, then cleverly vowing to use the surplus to "save Social Security first," Mr. Clinton went a long way in transforming Democrats into the party of fiscal discipline.

President Bush's priorities are arguably tax cuts first, debt reduction second. The question is whether Democrats will be able to portray his tax plan as potentially bringing back the bad old days of red ink.

(c) Copyright 2001. The Christian Science Publishing Society