Jewish World Review Jan. 24, 2003 / 21 Shevat, 5763
Rebirth of the balanced budget Republican
http://www.NewsAndOpinion.com | It's obvious to any observer of our national economy that the Federal Reserve has gone about as far as it can in cutting interest rates, unless it wishes to mimic Elton John's song "Too Low for Zero." This inability of monetary policy to shock us out of our economic sluggishness leaves fiscal policy as the only real alternative - hence the new Bush tax cut.
The only problem is that, while the public believes in monetary action, it is distinctly non-Keynesian when it comes to running budget deficits.
The manipulation of fiscal policy to accelerate or dampen the economy has never enjoyed a favorable public constituency. The right believes in cutting taxes and the left likes to raise them, but neither agenda has much to do with revving up or slowing down the economy. To the great mass of voters, tax cuts are much less popular than shrinking the deficit or reducing spending.
In light of this, disjuncture between what is needed economically and what is popular politically opens up the Bush administration to the rebirth of the balanced budget Republican on its left flank.
The likes of GOP bulls like Sens. Pete Domenici (R-N.M.) and Ted Stevens (R-Alaska) may be tempted to rediscover the balanced budget rhetoric of their political past while moderates such as Olympia Snowe (R-Maine), Susan Collins (R-Maine), George Voinovich (R-Ohio), Norm Coleman (R-Minn.) and Lincoln Chafee (when we last checked a Republican from Rhode Island) move away from the tax cut dogma of the right.
Historically, the Republican center has opposed tax cuts when larger deficits would be the result. Only the shocks of Reagan's victory in 1980 and Bush's in 2000 induced moderate Republican senators to abandon their historic fiscal orthodoxy and embrace broad tax reductions.
The White House's recent high-handed treatment of Sen. Trent Lott (R-Miss.) and signs of executive arrogance in the weeks since might well catalyze a new Republican center that blocks, or at least modifies, tax reduction.
Second terms have traditionally been the downfall of popular presidents because their reelection victories tend to encourage overreaching and arrogance. FDR's court packing of 1937, LBJ's Vietnam escalation in 1965, Nixon's Watergate cover-up of 1973, and Clinton's perjured testimony of 1997 are all recent reminders.
George W. Bush's unique triumph in the midterm elections of 2002, so unprecedented that there are no recent historical examples to explore, might kindle the same kind of omnipotence and, perhaps, trigger a similar backlash.
But George Bush needs a tax cut. When the smoke clears after the war-to-come in Iraq, a sluggish economy could trigger a sickening repetition of his father's fate unless there is adequate stimulant to move the economic numbers. But with the ranks of his own party thinning in support of his cuts, his chances of reaching the 60 votes he needs to pass the Senate seem limited.
The message for Bush is that he may find that he has to compromise on the mix of his cuts, although not on the amount of the aggregate stimulus. The Democratic Party opposes tax cuts but it cannot say so publicly. Thus, it is forced to support the idea of lowering the tax burden but using class warfare rhetoric to dispute the allocation of the relief. The key to crossing up the Democrats is to insist on the amount, but compromise with them on the specific mixture of which cuts and who benefits.
Bush's effort to make stock dividends tax-exempt appeals to a sense of justice and
fairness. He is right in identifying small investors as the modern equivalent of the
soccer moms who were the swing voters of the 1990s. But he should settle for a phase
in of the exemption and use the remaining revenue to sprinkle goodies in the form of
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