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Tax cuts based on fantastic supposition

WASHINGTON — A little puff of smoke went up over the Capitol the other night to signal: We have a president. His style holds the low key to the kingdom.

The president (we no longer have to identify him by name and initial) was reasonable and amiable. He stuck to positions presented during his campaign and in his first month in office. Best of all, he was not his predecessor.

The message in his budget speech was that we could have it all. More federal dollars to education and science (liberal) coupled with mild restraint in spending increases elsewhere (conservative). A box festooned with locks to protect Social Security (liberal) combined with a plan for partial private investment accounts (conservative). A paydown of the national debt to reduce interest rates (once conservative, now liberal). And above all, tax cuts (about time, say conservatives; me-too but less, say liberals).

This was not exactly a call to sacrifice. The "hard choices" are among goodies. The first Bush budget will be alive on arrival because congressional debate is centered on ways to divide America's expanding pie.

This optimistic certitude even has a number: the solemnly agreed-upon estimate of $5.6 trillion in surplus over the next decade. Democrats will counter by rejiggering priorities within that number — half the tax cuts and that much more federal spending — so that they, too, can "have it all."

Hold on. All this is bottomed on breathtaking suppositions. First is that the long-range prediction will be on target. But not long ago, economists were sure of deepening deficits "as far as the eye can see"; now they are equally certain of huge surpluses as far as their other eye can squint.

The one certainty, however, is that the $5.6 trillion number being murmured like a mantra will be off by a few trillion either way (not to mention a couple of hundred billion in loose change if this year's tax cut is retroactive).

Democrats are aware of that, and — eager as ever to keep taxes, spending and government involvement climbing — have struck a pose of caution. They counterpropose a "trigger" to halt the decade's tax cutting if yearly surpluses disappear. That would automatically raise taxes during recessions, a course that contributed to the Great Depression.

Republicans in the Bush White House and in Congress are aware of the evanescent quality of that $5.6 trillion number, too. Their whispered explanation: the surplus could be twice as big — who knows where we'll be in 10 years? But by stretching out the projections you can determine the general direction of taxing and spending.

To do that, the Bush team had to pick a number, stand fast on what percentage it wants to give back in tax cuts, and insist that its crystal ball is crystal clear. A $1.6 trillion tax cut, including the death of the death tax, is political victory; anything less than three-quarters of that is defeat, with the fallout to be used by a popular president against recalcitrant Democrats in 2002.

The second breathtaking leap presupposes that this 107th Congress will determine the budget decisions of the next four Congresses, and that this president will bind the budget of presidents to 2010.

But almost every tax change is changed by the following Congress, and even the most sweeping reforms are themselves reformed within five years. The next president, no matter who she is, will hoot at Bush's exercise in hubris back in 2001 (before the inflation, or recession, or war, or incredible boom). "The president proposes, but Congress disposes," goes the adage, but the presidential proposals get blown away by events, and congressional disposal is never dispositive.

Therefore, the citizen bombarded from both sides with outlandish numbers about "out years" should ask: What are you going to do for me, and take from me, in the short term — say, this Congress and the next, and this president's four-year term?

Nobody wins intellectual hosannas for saying "Take the short view." Political economists much prefer the long view, with its golden vistas, because the short view is measurable and its proponents accountable.

Conservative realists don't expect to "have it all" in the sweet by-and-by. That's why we look for tax reduction and spending restraint here and now.


New York Times News Service