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Simpler tax, lower deficit: how to keep them working together

By EARL W. FOELL / September 18, 1984



Boston

If there is any doubt in Congress that the American people want action on both deficits and tax reform, I offer the contents of my mailbox in recent weeks. In mid-August this column contained some proposals on both subjects, and - way down at the end - word that the Monitor would be glad to hear readers' proposals.

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Well, they've come in by the score. (A selection of excerpts will be printed later this week on the Monitor's op-ed page.) There was backing for some well-known plans for cutting the deficit and simplifying taxes. There were also many ingenious and thoughtful new approaches on both subjects, some of them paying attention to specific detail. The latter should please Peter Grace and all the previous auditors of government who have put out Hoover Reports detailing waste in government.

The overall tone was not simply thoughtful and measured. It was urgent without being polemic. The answers were imbued with quiet patriotism. They did not, on the whole, take the ideological route of blaming ''devils'' for our predicament. And, most of all, many of them conveyed a willingness to make sacrifices to get the nation on track. There were frequent references to the need to make the American system of voluntary tax assessment simple, universal, and widely trusted once more.

Given this kind of ingenuity and steady morale on the part of the taxpayer/voter, why is there so much pessimism about the ability of leaders in Washington to get both jobs done?

Perhaps the simplest answer is timing.

Deficit reduction ought to be voted while we still have the luxury of a continuing strong recovery. If growth becomes puny, there will be a strong logic for continuing the stimulus that comes from deficit financing. But that will only make worse the day of reckoning when an even bigger load of interest on the national debt will have to be dealt with. So the window of opportunity on deficit-cutting may begin to close sometime next spring or summer. But that may be too early to expect completion of action on the larger project of tax simplification.

Tax reform itself may be said to have a window of opportunity that doesn't extend too far into 1986 with its midterm elections for all House members and one-third of the senators.

In that case, why not push for a second installment of deficit cuts (to add to this summer's congressional down payment) by spring or early summer '85, and then move on to tax reform in the fall or winter?

That's logical, but not realistic. Conventional wisdom is right when it says that tax reform is never passed unless there is irresistible pressure on Congress to act. In this case, that means linking voter anxiety about the size of coming deficits to tax reform.

And linkage works the other way, too: Action on deficit-cutting is a lot easier for a member of Congress if he/she can deliver a package to voters also includes tax simplification. If federal services are cut or taxes raised, the sacrifice will sell a lot better if Congress can simultaneously promise a Form 1040 that's a breeze.

All right. It's better to keep the two subjects linked together. Can't we slow down the deficit-reduction part of the package or speed up tax reform?

Given a choice, the Congress ought to play it safe and push for speed. Very few forecasters believe we can simply grow our way out of deficits of the size that loom ahead. That would take something like a 7 percent growth rate for five years or more. And there's no record of such a prolonged superheated economy in our modern past. So logic seems to point to doing something sizable about budget cuts while we still have momentum from the extraordinary Reagan recovery.