As Sheldon Pollack writes in this issue ["It's Alive," page 29], Republicans in Congress are close to killing the estate tax. Some remnant will survive, but it could be significantly cut, and with the collusion of many Democrats. Why get rid of a tax paid only by the richest 1 percent of Americans? Why scrap our only wealth tax, one that accounted for $28 billion dollars of revenue in 1999? You can understand why Republicans favor repeal, but why do numerous Democrats follow suit?
The answer, in brief, is campaign finance. Only half of 1 percent of voters contribute more than $250 to political candidates. But these are the people that candidates hang out with--and of course these are the people with estates large enough to pay tax. Only in this crowd is $28 billion of federal revenue chump change. As Pollack points out, the lost revenue gradually rises to over $50 billion a year. That kind of money could buy prescription drug coverage for the elderly. It could more than finance universal Head Start. Yet several Senate Democrats favor a "compromise," and President Clinton will likely sign legislation eliminating much of the estate tax.
This sort of policy shift is one more price we pay for the dependence of politics on donations of very wealthy people. Politicians of both parties start adopting their world-view of the rich; fundraisers look for ways to curry favor with their patrons. The estate tax currently excludes money left to a spouse. It has an additional exemption of $675,000, which will soon rise to a million dollars under existing law. In Main Street America, hardly anyone has such wealth. But on Wall Street and K Street, a million bucks is a paltry estate.
If Democrats were not spending so much time raising money from rich people, they might seize on this as the populist issue that it is. Every dollar cut from the estate tax is a dollar less available to help working people. The party of the common American could benefit from a little more of this brand of class warfare.
Speaking of class warfare, the latest budget numbers put the total federal surplus at $4.2 trillion over the next 10 years. That's $1.3 trillion more than the February projection. Of these numbers, almost $1.9 trillion is the surplus outside the Social Security accounts. General government will take in nearly $200 billion a year more than it pays out.
Even these numbers may be overly cautious. They project an average annual growth rate of less than 3 percent. Not very long ago, the official forecasts assumed barely 2 percent. But now, the economy has demonstrated a capacity for noninflationary growth in excess of 4 percent, and the Federal Reserve has been willing to tolerate it.
Faced with this marvellous windfall, what did our president do? Mainly, he promised to pay off the national debt a year sooner. In fairness, the president and vice president have been willing to throw a little more money at partial prescription drug benefits and clean energy programs as well as a supplemental retirement scheme. But the Clinton administration's signature tokenism continues.
It's easy to forget that these huge deficits are not just the result of higher economic growth. They are also the fruit of the 1997 budget deal, which cut federal discretionary spending over the next decade to well below the rate of inflation.
Clinton and Gore have framed a historic political debate: Do we use the money to shore up Social Security and to pay off the debt (Gore)? Or do we give most of it away in tax cuts (Bush)? What a stunted debate. It might as well be Hoover versus Coolidge. Today there is enough money to underwrite a truly bold progressive program--one that could finance child care and paid parental leave, and first-time homeownership, and better schools, and universal health care. You will look in vain for this debate in what James MacGregor Burns has called the "dead center" of American politics. This, too, is a price we pay for the domination of politics by big money.
There is a real paradox here. Although the public is fairly bored with the election, Bush and Gore are a far cry from Tweedle Dum and Tweedle Dee. As my colleague Paul Starr observes, the 2000 election is the first time since 1928 that conservatives could win control of all three branches of government. (Since 1980 we've had divided executive and legislative branches and a split High Court. In 1953-54, the Republicans had the White House and both houses of Congress, but there was a liberal Court.) A Bush victory would very likely continue a Republican Congress and shift a delicately balanced Supreme Court into conservative hands for a generation.
My political intuition tells me that this will be a very close election. Gore has a near lock on California and New York. Bush will likely carry Florida, Texas, and much of the South. So the election will be won in Ohio, Illinois, Michigan, Pennsylvania-- middle America. As we go to press, Ralph Nader has just proposed a $10-an-hour minimum wage. He is drafting a plan for national health insurance. Issues generally are trending progressive. The Republicans are proposing ersatz versions of patients' rights and prescription drug legislation. Even George W. Bush has distanced himself from the Republican Congress, as a "different kind of Republican." Think how Democrats might fire the imagination of workaday voters if they could just propose something bolder than paying off the national debt. ¤
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