Democrats in Congress plan to restore pay-as-you-go budget rules. The rules preclude tax cuts, unless paid for by other tax increases or spending cuts. This is mostly a good idea -- but unless Democrats get serious about repealing Bush's tax cuts for the rich, the result could be further cuts in social outlays for the regular people whom Democrats supposedly champion.
Democrats in Congress plan to restore pay-as-you-go budget rules. The rules preclude tax cuts, unless paid for by other tax increases or spending cuts. This is mostly a good idea -- but unless Democrats get serious about repealing Bush's tax cuts for the rich, the result could be further cuts in social outlays for the regular people whom Democrats supposedly champion.
Pay-as-you-go rules in effect during the 1990s helped Congress eliminate the Reagan and Bush I budget deficits. The rules were then widely breached by Bush II allies in Congress after 2000, and repealed outright in 2002. Bush used this loophole in sound budgeting to ram through multiple tax cuts for the wealthy, re-creating his father's huge deficits and then some.
It is virtuous of the Democrats to resurrect pay-as-you-go, but it's a little like closing the barn door after the horse escaped. In this case, the horse got away with about $3 trillion of deficits -- for tax breaks, military escalations, and special-interest spending for Republican clients like the drug companies.
Even with pay-as-you-go restored, there is pressure for more tax cutting. The new Senate Finance Committee chairman, Max Baucus of Montana , has joined his GOP counterpart, Chuck Grassley of Iowa , in seeking repeal of the Alternative Minimum Tax, which pushes middle-income taxpayers into rich people's brackets. Baucus also wants to make permanent the tax credit for research and development. These are defensible tax cuts. But under the honest accounting rules of pay-as-you-go, Baucus will need to find $750 billion of offsets. Where?
On the spending side of the ledger, Bush has been hacking away at needed social spending for six years. The No Child Left Behind law got shortchanged. Medicare keeps passing budget cuts along to doctors and hospitals. Affordable housing gets almost nothing. Head Start, a proven success, is chronically under-funded.
Did Democrats win a hard-fought campaign to take back Congress only to govern like fiscally prudent Republicans -- delivering balanced budgets but with shamefully low levels of social investment? If that turns out to be the case, there will be a chasm between the Democrats' rhetoric and their program -- a huge gap between what voters chose and what Democrats delivered. The risk is that, by embracing pay-as-you-go rules but flinching at the task of restoring tax equity, Democrats set themselves a trap.
The solution, of course, is to embrace a progressive tax code. A repeal of the Bush tax cuts for the rich, coupled with more relief for working families, would allow both fiscal balance and some increased social spending.
For now, too few Democrats are embracing this path. Kent Conrad, chairman of the Senate Budget Committee, says he could support some tax increases, but as part of a grand bargain that would also restrain social spending.
If Democrats are to be more than Eisenhower Republicans, one good idea is to tie particular tax increases to valued public spending purposes. House Speaker Nancy Pelosi has talked up the idea of rolling back tax breaks for the hugely profitable oil industry, and using the proceeds to fund research and development of alternative energy. At the state level, liberals in Washington State handily defeated a ballot initiative to repeal that state's estate tax (paid only by very large estates) by tying the proceeds of the tax to public education and college scholarships.
Democrats also need to begin undoing the damage of three decades of government-bashing. Massachusetts Governor Deval Patrick set the right tone in the opening of his inaugural address.
"For a very long time we have been told that government is bad," he boldly declared, "... that its job is not important enough to be done by anyone competent, let alone committed, and that all of us are on our own." He promised "a common cause to lay that fallacy to rest."
More Democrats in Washington need to start talking like that. Some of those telling us that government is bad were our last two Democratic presidents. Maybe, once we remember that much of what government does is highly valued, we can have a serious conversation on why government needs to be funded by fair taxes.
Democrats hope that with pay-as-you-go budget rules, it will be fiscally impossible to extend the Bush tax cuts when they expire after 2010. But the Bush tax cuts are not merely crippling to budgetary soundness and needed social spending in four years; they are crippling right now. Political leadership requires more than running down the clock.
Robert Kuttner is co-editor of The American Prospect. This column originally appeared in The Boston Globe.
If you enjoyed this article, subscribe to The American Prospect here.
Support independent media with a tax-deductible donation here.
