Thursday, December 18, 1997

Talk of further tax cuts needs to be squashed

President Clinton and Congress like spending money they don't yet have so much that they're planning to do it again.

The president says he is weighing the idea of a further tax cut and may include it in his new budget. Since it will be an election year, he's certain to find an eager and receptive Congress.

The president and Congress were so pleased by their balanced budget agreement, which calls for balance and even a modest surplus in 2002, that they spent that anticipated dividend on a tax cut. They did this in spite of the fact that the budget is not yet in balance. It is true that, because of a strong economy, the deficit this year is only $23 billion. However, the fiscal 1998 deficit is estimated at $60 billion, and the spending reductions to bring the budget into balance have been left for future Congresses.

The problem of balancing the budget will be aggravated by the 1997 tax cut. It is $95 billion over five years but the cost accelerates to $275 billion over 10 years. And almost unnoticed in the jubilation over the good economy is that Clinton and Congress spent a lot of money this year: Domestic spending was up 10 percent -- $22.6 billion -- over the previous year.

While Congress is talking boldly about scrapping the current tax code in favor of something fairer, flatter and simpler, the fact of the matter is that any tax cut enacted in an election year is likely to be a rerun of the 1997 tax cut: a mixture of credits, shelters, deductions and loopholes designed to appeal to specific constituencies.

The problem with tax cuts is that they are so politically popular that they forestall work on graver economic problems: the deficit, the accumulating bite of the national debt and the immense impending demand on Social Security and Medicare.

The time to act on these problems is when the economy is good, and that means now. The time for tax cuts is when real dollars are coming to finance them.