The two congressional tax-writing committees have passed their anti-recession plans. As the strict party-line votes make clear, these plans have little to do with economic stimulus and everything to do with political stimulus.
It has been a classic election-year set piece: The Democrats stick it to the rich, and the Republicans bullyrag the Democrats for raising taxes. Sen. Bob Dole explained the game this way: "While Democrats get their issue of `class warfare,' they've got to explain to the people why they voted to raise taxes." Meanwhile, the president has promised a veto, and the prospect is for no pro-growth package this year.This charade serves the election-year purposes of Democrats and Republicans. But it grossly disserves a nation starving for economic leadership. The gamesmanship is all the more disgraceful when you consider that both parties essentially agree on the shape of an economic package.
Here's the consensus:
Capital gains, everybody gains. It is silly to tout a capital gains tax cut as the holy grail and equally silly to demonize it. Most appreciate that if a cut is structured to reward long-term investments, it can make a difference. Democrats on both congressional tax-writing committees have voted unanimously for cuts in capital gains taxes. Indeed, the Ways and Means Committee's plan would more generous than the president's.
Lollypops for the middle class? Pollsters tell politicians that this tax cut is a sure-fire vote-getter. But economists from John Kenneth Galbraith to Alan Greenspan, the Federal Reserve chairman, ridicule it. Most politicians are (vaguely) for a middle-class tax cut in public statements, but in private most admit it is the same old game of buying votes with deficits.
Investment in the private sector. We don't need a jump start, but America's great capitalist engine needs a new battery. To that end, we need investment-oriented tax incentives including a capital gains cut, investment tax credits, accelerated depreciation and more. The challenge is to increase innovation and investment - and jobs. Even Democrats have come to realize that you can't be anti-business and pro-jobs.
Investment in the public sector. Just as Democrats have embraced business-oriented tax incentives, mainstream Republicans favor robust investment in public-sector infrastructure and human capital. A Democrat could have delivered President Bush's State of the Union message: He's for a boost in Head Start, in the Women, Infants and Children nutrition program, Pell grants for college students, highway spending and more.
Indefensible defense spending. The president proposes cutting the Pentagon budget by $50 billion over five years, and he insists "this much and no more." But just about everyone else believes we can reap a bigger peace dividend. We don't need five more B-2s at $1 billion each or 150,000 troops in Europe. And why do we still have 45,000 soldiers in Japan?
Goose the economy, not the deficit. All must agree on this: With a whopping 20 percent of outlays going to pay interest on the $3.8 trillion national debt, the anti-recession package must not add a dime to the deficit.
Earlier this month, Greenspan advised Congress to reject both the president's plan and Democratic alternatives. Many others believe that the best plan is no plan at all. But they are wrong.
Given the remarkable extent of Democratic-Republican agreement, why are we being so disagreeable? Let the Democrats pass their plan, and let the president have his veto. Then let's move a truly bipartisan plan through Congress.
For 50 years, we have had great success with American plans for Asia and Europe. Today, we desperately need an American plan for America.
(Ernest F. Hollings, D-S.C., is a member of the Senate Budget Committee.)