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Taxes, Civil Rights Key Themes for US in '91

Dems said to have initiative on issues; White House says it can hold ground

By Marshall IngwersonStaff writer of The Christian Science Monitor / January 2, 1991



WASHINGTON

MOST of the key players shaping American domestic policy are expecting 1991 to be more contentious and politically scrappy after the relatively friendly and productive past two years. Two themes expected to emerge early on:

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Taxes - from tax hikes on million-dollar incomes to tax cuts for capital-gains earnings.

Civil rights - with a louder, rougher debate over affirmative action and racial quotas.

The Bush years have mostly been marked by a softening and fine-tuning of the Reagan revolution. A president with historically high public approval built relationships with Congress, passed a long-languishing Clean Air Act, enacted child-care subsidies and credits, and managed - if not to actually shrink the deficit - then to cinch the belt tighter than it might have been over the next five years.

But now a faltering economy and the threat of war are threatening to disrupt peace and prosperity.

White House aides working on domestic policy plans expect domestic politics to be a mere sideshow to the more riveting war-and-peace questions centered in the Persian Gulf.

They are less certain what to make of the economy. As of mid-December, many Bush administration officials, along with Federal Reserve chairman Alan Greenspan, suspected that the recession's bark might be worse than its bite. Since the White House was also leery of taking any action that might contribute to the recession psychology of fear and retrenchment, it was not yet embracing any policies in response to recession.

In fact, the White House response to economic recession came last year with the deficit-cutting budget deal. Budget director Richard Darman believed that if the deficit could be cut, then the Federal Reserve Board would lower interest rates enough to keep the economy humming. The Fed didn't move fast enough. White House chief of staff John Sununu blames Democrats for forcing the process to take so long.

The budget and its staggering, still growing deficit will dominate the legislative landscape and is likely to stifle any government plans for costly programs.

As the administration has been working through the 1992 budget in recent weeks, staff members say they have been struck by how much leverage the new agreement gives them to hold down spending.

``It's almost the equivalent of a line-item veto,'' says a White House aide. ``I think that will be fully realized very, very shortly.''

THE Democrats who control Capitol Hill have the apparent initiative on the most politically charged issues coming up. Republicans acknowledge they were outmaneuvered politically on the question of taxing the very rich this fall. Democrats immediately began plans to revive the issue in the 102nd Congress in January.

The Republican response is shaping up along these lines: The president and his party will not support raising income taxes any more on anybody at any level - including those who earn more than $1 million a year.

The administration is probably going to bring back its proposal to cut capital gains tax rates as a spur to economic growth. Many Democrats have argued that the capital-gains tax cut is a tax cut for the wealthy. In this growth versus fairness debate last year, the Democrats won the most political points, according to opinion polls last fall.

This debate will return. It may open up some new aspects, too, such as Democratic proposals to cut payroll tax rates for Social Security, perhaps making up the lost dollars by raising the level of eligible income.

Some Democrats are eager to send another civil rights bill up to the White House for a veto that was obviously painful for a president who has tried to expand his party in the black community.