A cynical approach to the federal budget

A cynical explanation can carry you a long way in dealing with public policy issues in Washington. Take the well-known subject of governmental gridlock. By any objective measure, the legislative output of Congress has been modest in recent years.

Nevertheless, the often-maligned phenomenon of Capitol Hill gridlock has been an important and positive contributor to the emergence of the first surplus in the federal budget since 1969. As a practical matter, Democrats have prevented the Republican members from passing large tax-reduction bills.

Simultaneously, the Republican senators and representatives have restrained Democrats from pushing through many more spending bills. We can only speculate what the results would have been if one party - or the other - were to have held decisive majorities in both houses of Congress. My guess is that, despite the health of the national economy, the impending budget surpluses would have been substantially smaller than we are now anticipating.

Continued gridlock provides an opportunity for decisionmakers to take a much longer look at the major budgetary issues that face the nation. One example is the perennial matter of tax cuts. Though I share the standard Republican view favoring lower taxes, I'm not too disappointed action on the revenue side of the budget may be deferred for another year or two.

That delay would provide Congress with a badly needed opportunity to consider carefully the major alternatives for tax reform. At present, it doesn't seem that any of the suggestions - whether a flat tax, a national sales tax or a savings-exempt income tax (the USA Tax) - commands anywhere near enough support to be passed by both Houses of Congress.

A year or two of serious hearings might result in a newer version of comprehensive tax reform - perhaps a much flatter variation of the current income tax, revised to encourage more saving and investment. Combining such tax reform with a delayed cut in income tax rates would enhance the likelihood of passage of the combined package. That would have some special charm.

That is so because, on its own, a substantially modified income tax structure would likely generate many "losers" as well as "winners" in terms of the change in the net tax burden of different groups of taxpayers. Combining reform with rate reduction would result in more winners and fewer losers - and on balance a more politically attractive tax proposal.

Continued legislative gridlock through the year 2000 might also be helpful on the expenditure side of the budget. Agreements on long-term reforms of social security and medicare are proving quite elusive. As in the tax area, more time - if constructively used - could provide the basis for developing a broader consensus on these complex and controversial areas of public policy. Surely, the public deserves more than a legislative "quick fix" in both of these large and complex programs.

Also on the expenditure side, more time could be used constructively in order for the relevant House and Senate committees to develop a new approach to financing the military establishment in a clearly dangerous external environment. It does seem that the military operations in Kosovo are having a much smaller immediate impact on the Pentagon's budget than the public expected, but that is likely to be true only in the short term.

A brief, albeit intensive, period of military operations is fought with existing personnel and equipment - and thus already budgeted for. The main financial effect of Kosovo will occur in the future as the items of equipment lost (downed aircraft) or expended (missiles and ammunition) are replaced. But, given the changing nature of the national security threats faced by the US, a period for serious review of the long-term needs of the military establishment might be especially productive prior to placing lots of new production contracts.

Thus, on both revenue and expenditure sides of the federal budget, gridlock may not be so bad after all.

*Murray Weidenbaum is chairman of the Center for the Study of American Business at Washington University in St. Louis.

(c) Copyright 1999. The Christian Science Publishing Society

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