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WILL `CONTRACT’ WORK FOR AMERICA?

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It will be interesting to see if the "Contract With America" is anything more than a marketing ploy or whether it is intended for actual implementation. If Republicans are serious about substantially reducing taxes, increasing military spending and passing a balanced budget amendment, the implications of these policies should be communicated to the electorate.

A balanced budget amendment would remove from lawmakers the responsibility of either increasing taxes or cutting spending. It would provide lawmakers with a "Devil Made Me Do It" escape clause when they have to increase consumption taxes and cut Social Security.Another Republican escape mechanism is the line item veto. This shift in the balance of power from the legislative to the executive branch is less likely with the Republicans controlling the Congress. They may, however, desire this constitutional mechanism as a way of deferring responsibility to the president when they cannot use fiscal restraint in their own legislation.

The other Republican strategy for reducing the deficit, which should be viewed with some trepidation, is the revival of the New Federalism idea of the Reagan years. Shifting to the states the responsibilities currently administered by the federal government will likely result in either diseconomies of scale, because of the need for fifty central offices in each state rather than one in Washington, or in the ultimate elimination of many services.

This states' rights agenda is probably another case of the Republicans' desire to cut programs at the federal level without accepting responsibility for those cuts by shifting the burden to the states.

My biggest fear is that Republicans will show the political savvy to reduce taxes but not the political courage to make the difficult choices needed to reduce federal spending. If this is the case, the deficits will return to the Reagan/Bush levels and real interest rates will rise, stifling the current economic recovery.

President Clinton should immediately draw a line in the sand, indicating that he would veto any tax cut which does not have an equal amount of spending cuts to finance it.

I suspect that the poor and the middle class will be the economic losers during the next two years and if Democrats effectively communicate these results, Republican control of Congress is likely to be short lived.

David L. Swan

Salt Lake City