Read his lips: "New taxes." On May 9, George Bush and congressional leaders agreed to begin negotiations on the federal budget. Announcing the budget summit, White House spokesman Marlin Fitzwater did not explicitly repudiate Bush's campaign pledge of "no new taxes," but he did say that the President wanted "an open debate that is unfettered with conclusions about positions taken in the past." In other words, Bush reserves the right to break his promises. A kinder, gentler president? Maybe. A more trustworthy one? No.
Budget Director Richard Darman says that the federal government may have to raise $45 billion to $60 billion in new revenue to meet Gramm-Rudman deficit-reduction targets.
Anonymous White House sources have rushed to their favorite reporters to explain their boss's new position. They say that rising interest rates, a recent jump in unemployment, and slow economic growth have Bush worried that a recession is imminent.
But Bush's plan to prevent a recession must have been drawn up without the aid of an economist. A Keynesian, for example, would advise Bush to stimulate demand by raising spending or cutting taxes. At the other end of the political spectrum, Milton Friedman probably would also recommend a tax cut and a spending cut in order to ease the burden on the private sector. No economic theory justifies raising taxes in the face of a recession. But Bush is surrounded by able apologists who will surely concoct some rationale.
Already these men are devising ways to raise taxes without "breaking" Bush's promise. The plan seems to be to say that Bush meant no new income taxes. Republican leaders now talk about new "user fees," increases in gasoline, alcohol, and tobacco taxes, or a national sales tax. Still, as Gertrude Stein might have said, "A tax is a tax is a tax." We pay it in the end, if not through the nose.
While Bush wants to forget his campaign promise, other Republicans seem determined to make him stick to it. Hours after Bush announced his budget summit, 20 Republican senators released a joint statement that they would not vote for any budget package that includes new taxes.
These senators have taken the correct stand. Let's take the "worst case" scenario. The government misses the Gramm-Rudman targets by $60 billion. All that happens is that federal spending will automatically be cut across the board by that amount. Since the federal budget is over $1.2 trillion, it will only have to be cut by about 5 percent. Does anyone really think that there isn't 5 percent of fat in the federal budget?
Of course, Congress can avoid automatic cuts by making reductions of its own. There are plenty of targets for the budget ax. The Bush administration already plans a 2 percent to 5 percent reduction in defense spending. Joint Chiefs of Staff Chairman Colin Powell has said that Pentagon spending could be cut by 25 percent without hurting America's defenses. Some outside experts put the figure closer to 50 percent. Still, taking Powell's estimate but speeding up his timetable slightly, we could cut defense spending by about $75 billion next year; that's $62 billion more than is currently planned.
We could scale back domestic spending, too. Congress could cut farm subsidies, slow cost-of-living rises in social programs, and even eliminate controversial agencies such as the National Endowment for the Arts.
That should be more than enough to meet Gramm-Rudman. But it all depends upon Congress and the president agreeing to use the peace dividend to reduce the deficit, not spending that money on new social programs.
And there lies the problem. Politicians seem to think they aren't earning their keep if they aren't passing new programs; they are drooling over that peace-dividend money. Maybe some smart congressman can convince his peers that applying the peace dividend to the deficit is itself a new program. One that promises to reduce interest rates, keep the burden on taxpayers from going up, and make America more competitive. But don't hold your breath. In the meantime, read Bush's lips carefully, and keep your hands over your wallets.