Tax Cut: the hidden agenda

As George W. Bush submitted his $1.6 trillion "Goldilocks" tax cut to Congress yesterday, the tactical aspect of the initiative was lost in the ground swell of enthusiasm for lower taxes. Like the Reagan administration before it, the conservative agenda for the tax cut is not anti-recession insurance, as has been touted by various spokespeople from the platforms of popular media, but putting the federal government in a position where every spending initiative must be weighed against balancing the budget.

"Starve the beast" an unnamed prominent conservative told the New York Times. If the Bush tax cut, or something similar is passed, the administration's own calls for spending increases for the military, education, and prescription drug coverage could eliminate the surplus completely. Conservatives would then have the ammunition to repel attempts to spend tax revenue on any programs they didn't like.

Much of the motivation to pass a tax cut quickly is to slow the spending momentum that is present at the beginning of a new administration and congressional session. In the view of some observers, the only reason budget surpluses have grown in recent years is that Congress and the administration have been deadlocked, and unable to agree on how to spend funds. Despite a Senate evenly split between Republicans and Democrats, Republican control of the White House and House of Representatives could enable them to dictate how the surplus is distributed for spending and tax cuts. That could amount to more than $2.5 trillion, which is the entire estimated surplus, excluding that generated by Social Security.

In the words of Jacob J. Lew, budget director for the Clinton administration, "You only decide once how to spend the surplus." The use of tax cuts to prevent spending by the opposition party was employed by the Reagan administration in 1981. The strategy backfired, however, as Reagan was neither able to curb spending by either party in Congress, nor would he cut back his own demands for increased defense spending. The result was "enormous deficits that spiraled out of control and put the economy in peril," in Mr. Lew's words.

The economic situation now, as well as the attitude toward fiscal responsibility on the part of the public and both major political parties, are both very different from 1981. Even with the slowing economy, the federal fiscal environment Mr. Bush receives from Mr. Clinton is vastly improved from the deficits Mr. Clinton encountered following the administration of George H.W. Bush, George W.'s father. Conservatives see eliminating the surplus as necessary to preventing an expansion of government. Like using the buzzword of "bipartisanship" to quash discussion that differs with the administration's point of view, opponents view the tax cut strategy as artificially attempting to prevent consideration of issues and programs that have substantial public support.


Stevenson, Richard W. "The Nation: The High-Stakes Politics of Spending the Surplus" Week In Review. 7 Jan 2001.