Tax-Cut Battle Lost, Democrats Can't Let Up Now

In losing $1.35 trillion of federal revenue to George W. Bush's tax cut, the Democrats
lost an important battle, but maybe they haven't lost the war.

The war, in this case, is a principled conflict between two contending philosophies of
governance and the good society. Should people fend mostly for themselves or should some
needs be provided socially?

In this debate, conservatives want to shrink social spending. Since the Reagan era, the
Republican grand design has been to starve government for resources. President Reagan
accomplished that, big time, with his massive tax cut of 1981.

That tax cut was responsible for more than a decade of spending cuts and escalating budget
deficits, which increased the national debt by more than $3 trillion.

The Democrats barely got those deficits under control and began to contemplate restoring some
social spending when the Republicans came back in and cut taxes again.

Seemingly, Bush's $1.35 trillion tax cut, most of it to the wealthy, removes money that might
have been spent on social outlays that Democrats (and many independents and even
Republicans) support: more reliable health coverage, better schools, comprehensive child care,
and so on.

This philosophy of government, derided by Republicans as ''tax and spend,'' is actually what
made Democrats popular.

The original version of that line, spoken by Franklin Roosevelt's New Deal aide Harry
Hopkins, was ''tax and tax, spend and spend, elect and elect.''

It was spending programs like Social Security and Medicare, the GI Bill, and postwar programs
for housing and education that made Democrats the majority party.

If Democrats have forgotten that, Republicans haven't. More than one Republican strategist
observed that if Democrats ever got to spend the surplus on popular social needs, they would
be the majority party again.

This option is now, supposedly, moot.

But let's not forget that tax policy fluctuates between cuts and increases. Even Ronald Reagan's
massive tax cut was barely in force when his own budget advisers realized it was excessive.

There were no fewer than nine major tax increases enacted between 1982 and 1992, when the
presidents were named Reagan and Bush.

Most of these increases were sponsored by Democrats, and most of the impact hit the rich, not
the middle class.

According to US Treasury statistics, for example, the 1982 tax act increased revenues by $130
billion in its first four years. The 1984 Deficit Reduction Act increased tax collections by $72
billion in four years.

And this under Ronald Reagan!

Under Bush the elder, Democrat-led bills increased revenues by more than a hundred billion
dollars more. If ordinary voters were upset, they certainly didn't show it. In 1992 they returned
a Democrat to the White House. And Bill Clinton promptly raised taxes again (on the top 2
percent of taxpayers) to finally undo the damage of the first Reagan tax cut and turn the deficit
to surplus.

So the stage is set for a repeat of these battles, assuming that the Democrats can recover some
nerve.

George W. Bush has actually made it easier for Democrats by budgetary sleight of hand that
backloaded the tax cut.

To disguise the real impact on government revenues, the tax cut is rigged so most of it doesn't
take effect until after 2005.

In other words, if the Democrats take back the White House in 2004, they could rescind much
of the tax cut on the upper brackets before it ever takes effect.

This would not increase anyone's current tax rates but merely expunge a future tax giveaway
that never should have been enacted. And thanks to budget rules that Bush lacked the votes to
waive, the entire tax cut expires in 10 years, when the tax code must revert to its present form
unless Congress extends the cuts.

In the 2002 midterm elections and in the 2004 presidential contest, the Democrats could starkly
frame the national choices that they so pitifully failed to pose in 2001: Do Americans want
better health coverage or tax cuts for millionaires? Do we want better schools or repeal of the
estate tax on the top 2 percent of Americans?

Throughout the tax debate, polls continued to show that desired social spending is more
popular than tax cuts. So the Democrats did not lose the country on this issue; they were
simply outmaneuvered inside the Beltway.

Properly designed and articulated, tax and spend remains sound politics as well as the necessary
instrument of a decent society. Democrats shouldn't run from that. They should wear it as a
badge of honor.

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