Boxing Clinton In

New spending? It's time for tax relief.


"The budget has been to our era what civil rights, communism, the depression, industrialization, and slavery were to other times," wrote the late Aaron Wildavsky and Joseph White in the preface to The Deficit and the Public Interest (1989). "Year after year, the key question has been, What will the president and Congress do about the deficit?"

Ours is still the era of the budget. But as a result of high tax rates and a booming economy, the central question faced by Washington's redistributors changed unexpectedly from "How do we reduce the deficit?" to "How shall we spend the surplus?"

This new question has been rumbling through Washington since late summer, with Democrats split between those salivating to spend and those wanting to pay down the debt. Republicans, who were first to see the surplus on the horizon, have been debating whether to reduce taxes or pay down the debt, although there are spenders in the Republican ranks as well.

Prior to Monicagate, things weren't looking very good for limited-government advocates. They had settled their differences, deciding on an agenda of both tax cuts and debt reduction. But in the "balanced budget" Clinton submitted to Congress in February, the adminstration went on a spending spree, including more than $40 billion in new spending on such warm-and-fuzzies as child care, new teachers, and anti-discrimination efforts.

Conservatives, who have traditionally invoked the deficit to restrain new social spending ("That is indeed a noble goal, Senator Kennedy, but we can't afford the program"), found themselves in an awkward position. Unpracticed in arguing on principle why government shouldn't provide such things as child care even if it can afford to, they met Clinton's proposals with silence, as recommended in a memo from Speaker Gingrich.

Then came the State of the Union and President Clinton's unexpected proposal to use the surplus to "Save Social Security First." In no position to spend the speech talking about children's issues, Clinton was triangulating, arguing against both "unwise spending" and "untargeted tax cuts" in order to position himself to dictate the contours of both. His preoccupation with Social Security is an attempt to head off any meaningful tax cuts by pitting tax cuts for the undeserving against Social Security for the deserving. But this time, the president's triangle provides an opportunity for those who want a smaller, more effective government to box him in and achieve both tax cuts and real Social Security reform.

First, congressional leaders must make the case that with the federal government already absorbing 20 percent of the nation's economy, any new spending is unwise even if it can be done under a balanced budget. House Ways and Means Committee Chairman Bill Archer (R-Texas) got it right in January when he proposed capping the federal tax grab at 19 percent of gross domestic product. "I believe a balanced budget must lead to a smaller, less-taxing government," Archer said, "letting people keep more of what they earn, easing their financial burdens, freeing them to invest in themselves and their communities."

Clinton was too clever by half when he warned against "unwise" spending at the same time he proposed numerous new spending programs. If the president can spend on new programs without threatening to bust the budget, so too can Congress cut taxes without engaging in fiscal irresponsibility. Therefore, Clinton's call for upward of $40 billion in new spending should be turned into a call for $40 billion in broad-based tax relief.

Congress need not further complicate the tax code to accomplish this. Stephen Moore of the Cato Institute and economist Lawrence Kudlow point out that simply raising the income threshold on the existing tax brackets–a simple change in the tax tables–would provide considerable relief for many Americans.

Clinton's offer to reserve any further surplus for Social Security reform should also be eagerly accepted. This is a sound idea if executed properly. Testifying before a House Budget Committee hearing in October 1997, Cato Institute Chairman William A. Niskanen proposed just that: "The most valuable use of a budget surplus, I suggest, would be to help finance the necessary transition from our pay-as-you-go Social Security and Medicare programs to advance funded individual retirement accounts."

A transition, of course, isn't what Clinton has in mind. But he has promised to provide a forum in which to debate Social Security, one that provides proponents of fundamental change an opportunity to make their case. No doubt there will be charges that tax cuts would be financed at the expense of Social Security. But tax cuts don't threaten Social Security; government spending does. There would be no talk of budget surplus if excess Social Security revenues weren't paying for other government programs.

As the era of the budget shifts from deficit to surplus, proponents of limited government, bereft of the "we can't afford it" excuse, face even greater challenges in restraining Washington's urges to increase the role of the federal government in American life. If our political scientists are ever to write of an "era of small, effective and limited federal government," our representatives in Washington will have to employ political tact as well as advancing fundamental arguments. Bill Clinton has provided the opportunity for both.