According to a poll in the current issue of Newsweek, 67 percent of Americans favor President Bush's proposed $1.6 trillion tax cut, but a nearly identical 65 percent say it is more important that the projected budget surpluses be used to reduce the national debt.
Politicians in Washington can choose to cite the poll findings as further proof that voters want to have their cake and eat it, too. Or they can credit their constituents with common sense and fashion the tax cut in ways that assure continued progress in paying down the debt.
Bush claims to do both -- but his proposal leaves the debt reduction largely to chance. Its official $1.6 trillion, 10-year cost does not include the additional billions that would be entailed in his suggestion that the cuts be made retroactive to Jan. 1, or the billions of additional interest that would have to be paid on the higher debt that would remain if revenues are reduced. By some calculations, the Bush plan would consume the entire projected non-Social Security surplus, thus slashing the promised debt reduction.
There is a better, safer, more prudent way. It is to give people a tax cut now, from the surpluses that are actually in the Treasury, but to trigger additional tax cuts over the coming decade only if agreed-upon debt reduction targets are met. It looks as if that "prudence policy" can prevail, if the politicians who support it don't lose their nerve or fall victim to partisan quarrels among themselves.
They find their rallying point in a section of Federal Reserve Chairman Alan Greenspan's testimony to Congress last month. The headlines went to Greenspan's declaration that current surpluses are large enough to permit a significant tax cut -- an important green light from a notably cautious guardian of fiscal integrity.
But Greenspan also said, "It is important that any long-term tax plan, or spending initiative for that matter, be phased in. Conceivably, (it) could include provisions that, in some way, would limit surplus-reducing actions if specified targets for the budget surplus and federal debt were not satisfied."
Picking up on that hint, three moderate Democratic senators, Evan Bayh of Indiana, Mary Landrieu of Louisiana and Dianne Feinstein of California, have sent Bush a letter saying that "in our view, such a 'trigger' mechanism offers a safety valve to protect against what many senators fear: a return to deficits should economic conditions -- and budget estimates -- change in the years ahead."
Were they the only signatories, it would be interesting but not significant. But two Republican senators, Arlen Specter of Pennsylvania and Lincoln Chafee of Rhode Island, also signed on to the letter. Independently, Sens. Olympia Snowe of Maine and George Voinovich of Ohio, both Republicans, have urged the president and senior administration officials to get behind the Greenspan idea for conditional, phased-in or triggered tax cuts in future years.
That means there is a potential majority in the 50-50 Senate for this proposal. The House outlook is less certain, but Democrats on that side of the Capitol are showing some backbone -- and a degree of cohesion -- in their response to the Bush proposal.
Minority Leader Dick Gephardt of Missouri told me he was surprised -- and heartened -- by the embrace members of his caucus gave to former Treasury Secretary Robert Rubin's late-January speech at the House Democratic retreat, where Rubin warned of the risks the Bush proposal raised to the hard-won fiscal discipline of the last eight years. Rather than telling Rubin how tough it would be politically to oppose the Bush plan, Gephardt said, members urged him to go public with his message and help rally voter opposition.
Within the Democratic caucus, both liberals and conservatives are finding reason to question Bush's plan. Conservative "Blue Dogs" are fearful it will endanger the balanced budgets for which they fought so long and hard. The "Progressive Caucus," made up of about five dozen liberals, is pushing a proposal that would declare an annual "dividend" of $300 for every man, woman and child, but only as long as surplus targets are met and debt-reduction continues.
The debate is just beginning, but the good news is that, unlike 1981 -- when congressional Democrats swooned over Ronald Reagan's tax cuts -- the skeptics have not been silenced and are making their arguments heard.
Washington Post Writers Group