The Tax-Cut Derby

DO Americans want their president to lead or to listen? To tell them what they need to hear or what they want to hear? These are the yin and yang forces tugging at any elected official.

In his speech to the nation Thursday, President Clinton decided to ''give them what they want.''

His $60 billion ''middle-class bill of rights'' would offer tax credits up to $500 per child per year and tax deductions up to $10,000 a year for post-high-school education. And it would let Americans use tax-free individual retirement accounts for education or a first-time home purchase, or for dealing with catastrophic illness, long-term unemployment, or the care of elderly parents.

All these are worthy ideas. And the president showed some fiscal responsibility in saying that the costs would be offset by savings elsewhere in the budget, though some of the steps he outlined, such as selling government-owned hydroelectric dams, are likely to be politically touchy. He would also extend the freeze on government discretionary spending (essentially, what's left over after excluding entitlement programs such as Social Security and payment on the national debt). By doing this, he does not yet have to specify which programs will be cut and by how much.

Mr. Clinton had strong political temptations to offer a plan. The tax-cut train was moving out of the station without him. Already on board were the even-more-generous promises of the Republican ''Contract With America'' and other plans from Sen. Phil Gramm (R) of Texas, a presidential candidate, and Rep. Richard Gephardt (D) of Missouri, the new minority leader. Even if the president is seen by voters to be saying no more than ''me too'' on tax cuts, he may be able to take his share of political credit

23 months from now.

But are tax cuts what is really needed? Most economists say no. MIT Economist Lester Thurow calls them ''at best a shot of opium,'' temporarily easing economic pain but not dealing with the underlying problems.

Chief among these is the deficit, which is projected to rise sharply in future years. Members of the just-concluded Bipartisan Commission on Entitlements and Tax Reforms, chaired by moderate Democrat Sen. Bob Kerrey of Nebraska, have criticized the tax-cut talk as no more than offering a free lunch while the long-term budget crisis worsens. Whatever savings Clinton or Republicans find in the next budget should be applied to this menace to America's economy.

Near the end of his address, the president promised he would ''do what I think is right,'' putting ''the country first, and politics-as-usual dead last.'' This is a worthy presidential ambition for the next two years. But by entering into the tax-cut derby, Mr. Clinton has moved no closer to claiming this high ground.

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