AS most high school students could tell you, trying to cram large tax cuts into a balanced-budget plan just doesn't make sense. When you want to get out of a hole, you should stop digging it deeper.
We shook our heads when the Republican Congress stuffed a substantial child tax credit and capital-gains and other tax cuts into its balanced-budget plan. We were equally dismayed when President Clinton weighed in with his own proposed child tax credits, education credits, small-business tax provisions, and incentives to clean up "brownfields," abandoned industrial sites.
Despite public opinion polls reporting that voters rank balancing the budget ahead of cutting taxes, political cynics counseled that the budget deal needed tax cuts to make it palatable. We have always maintained that there's no "right" way to balance the budget, so we hoped that Congress and the president could work out a mutually agreeable balanced-budget plan even though the tax cuts defy common sense.
Large tax cuts would either force more spending restraint than otherwise would be necessary or necessitate accounting tricks and gimmicks to achieve the illusion of balance. It was no great surprise that the spending cuts proved too difficult to enact in today's partisan climate and the gimmicks were ridiculed. Tax cuts have, in effect, taken the balanced budget hostage.
The time has come to separate the two issues. Pass a budget plan that holds government spending to a path that will achieve balance in six or seven years. Then, and only then, bring up a deficit-neutral tax cut paid for by closing corporate tax loopholes or by making additional spending cuts. Taken separately, each will have a far better chance.
Fortunately, two groups of sensible legislators, Republicans and Democrats with the courage to stand up to their party leaders, have reached the same conclusion. Each group has outlined a responsible and sustainable plan for reaching balance without tax cuts. One plan was put forward last autumn by "The Coalition" of so-called "Blue Dog" Democrats. In January, moderate House Republicans offered a plan to balance the budget in six years without tax cuts. Here are the key elements common to both plans:
*No tax cuts. That way, no one can say that any spending cut was made in order to pay for tax cuts. The spending cuts, which are needed and long overdue, can be debated on their own merits. Tax cuts can be considered later.
*Smooth, steady deficit-reduction paths with credible and sustainable spending restraint. Planning anything, including the federal budget, over seven years, is an uncertain proposition. So it's particularly troubling to see balanced-budget plans - like those offered by the Republican Congress and the president - that call for no deficit reduction in the next year or two. The near-term spending cuts they realistically can make are swamped by the cost of their tax cuts. It's disturbing as well that both these plans achieve balance in 2002 only by assuming, incredibly, that revenues will be boosted that year.
In contrast, the plans of the moderate Republicans and coalition Democrats avoid this hazard. Their spending cuts bring deficits down right away and move steadily toward balance in roughly equal increments without accounting tricks or gimmicks.
*Responsible entitlement- program policies. Balancing the budget by the year 2002 solves the budget problem only temporarily and paves the way for making the more fundamental reforms needed to sustain middle-class entitlement programs when baby boomers begin retiring and claiming Social Security and Medicare benefits. The plans offered by coalition Democrats and moderate Republicans responsibly begin this process by scaling back Medicare to more-sustainable levels. Both plans, commendably, include means testing that would charge affluent retirees the full cost of this insurance against doctors bills.
*Tough enforcement. Both plans call for strict enforcement rules to make it easier to keep future budgets in balance. Caps would be set for each entitlement program, and if costs began to exceed permitted levels, remedial actions would be required.
The moderate Republicans backing the six-year balanced- budget plan and the coalition Democrats are in broad agreement on these principles, which make sense to most voters and to us.
Burgeoning entitlements and lukewarm economic prospects will make balancing the budget more difficult each year. Taking the issue to the voters this fall will solve nothing - they've already said they want a balanced budget.
The window of opportunity is closing. It's time to set tax cuts aside and balance the budget.