Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, February 25, 1993 TAG: 9302250364
SECTION: EDITORIAL PAGE: A-13 EDITION: METRO
SOURCE: RAY L. GARLAND
DATELINE: LENGTH: Long
IN TIME, CLINTONOMICS, TOO, WILL BE CALLED A FAILURE
ON THE morrow of Clinton's victory, the New York farceur, Sen. Pat Moynihan, gulped and said, "It's our deficit now." A more serious and admirable man, former Vice President Walter Mondale, was more precise. "If we blow it this time," he said, "we won't be out for 12 years, we'll be out for 25."The degree of public confidence now being reposed in Clintonomics is touching if hardly surprising. The operative phrase is "benefit of the doubt," and all new presidents enjoy that to some extent. As one man-in-the-street told MacNeil/Lehrer, "Do something. We almost don't care what it's going to be."
Confronted by the quadruple whammy of political disaster (at least at the presidential level), falling interest rates, much lower inflation and sustained economic growth, the Democratic Party and its allies in the media declared class warfare. Today's conventional wisdom is that Reaganomics failed, and that conviction will yield only to a similar wave of hysteria when the present nostrums are accepted as a worse failure. Nor should it be forgotten that the Democrats have won only a battle, not a war. This isn't 1894, when congressional Democrats were annihilated; nor 1936 or 1964, when the same thing happened to the GOP.
But facts, as Winston Churchill observed, are like rocks: They may disappear beneath the waves for a time, but they remain what they are and have an inconvenient way of reappearing. The problem, of course, comes in defining a "fact." Conservative economists, writing mainly for The Wall Street Journal, point to the new jobs and businesses created during the 1980s, while their liberal brethren tell you it was all an illusion.
Before leaving the debate, we might consult the impartial pages of The World Almanac, and the annual report of the Internal Revenue Service.
In Jimmy Carter's last year, the federal government took in $517 billion and spent $591 billion, leaving a deficit of $74 billion. Eight years later, in Ronald Reagan's last year, it took in $991 billion and spent $1.143 trillion, leaving a deficit of $152 billion.
After those unfair tax cuts, the Republicans had increased federal revenues by 80 percent. But as hard as they were on all those poor people, they increased spending by 94 percent. Had outlays risen only as fast as receipts, the deficit for 1989 would have been a very manageable $73 billion instead of $152 billion, but let it pass.
When considering the deficit, the number to keep in focus is the percentage it represents of the nation's total economic activity. Carter's last deficit represented 3 percent of 1980's gross national product of $2.7 trillion. That was almost precisely the same as Reagan's last deficit because GNP had grown by 100 percent!
The basic argument of Clintonomics is that those who got us in the ditch are the ones who should pay to pull us out. "They" are now defined as any single taxpayer earning more than $115,000 a year. As one well-spoken woman, basking in the warm glow of Clinton's departure from her home town of Chillicothe, Ohio, said, "They're making more money than anybody else in the country, but they're paying hardly any taxes on it." Really?
Well, the IRS annual report tells us that in 1990 the top 5 percent of taxpayers paid 44 percent of all federal income taxes - up from 37 percent in 1980. What about that extra-vicious top 1 percent? The IRS says that in 1990 the top 1 percent of taxpayers paid 26 percent of all federal income taxes - up from 18 percent under that paragon of fairness, Jimmy Carter.
Now, this isn't the whole picture. If the top 5 percent of all taxpayers paid a substantially larger share of total federal income taxes in 1990 than they did in 1980, it's because they reported substantially higher earnings. Those at the bottom did not get a corresponding break because Social Security and other regressive taxes were raised.
But this is ancient history now, to be pressed between the pages of a book like a rose from an old beau, revisited when and if the glitter of this new dawn turns to dross.
There is nothing a liberal loves quite so much as a hidden tax that drives revenues relentlessly higher without anybody taking much notice. Clinton's proposed tax on energy will cost the average household only about $300 a year. But it will also be levied on all commerical and industrial users. How much of this will be passed through to consumers is anybody's guess, but it will have to be eaten by somebody. And a second round of new taxes will be unveiled with the health proposals.
A federal tax of 36 percent on incomes above $115,000, and 40 percent on anything over $250,000, doesn't sound excessive to most people until you realize that it translates to a total, combined tax burden in most states very close to 50 percent. And in those high-tax states such as California and New York - where much of it is earned - it will be in excess of 50 percent.
Also under the Clinton plan, that portion of business profits declared as dividends to private citizens would be taxed at rates as high as 70 percent! No other Western, industrialized democracy even comes close to that.
While there is much here that I see as bad, it deserves to be tried. Not so much because I believe it will work as advertised, but because that woman in Chillicothe needs to measure two diametrically opposed philosophies of government.
In all the talk of higher taxes reducing the deficit, remember this was tried as recently as two years ago. Every dollar the government raises in revenue is a dollar less that individuals and corporations have to spend as they see best. If you believe that Clinton and Congress can more efficiently spend and invest those resources than you can, then join the madly celebrating majority.
Republicans will make a great mistake if they get drawn into the game of offering alternatives; accepting some aspects of the plan in the hope of modifying others. Without ranting, they should stand united against it on the simple premise that the people put Democrats in charge of both the presidency and the Congress, and deserve to receive what they had good reason to know was coming.
Ray L. Garland is a Roanoke Times & World-News columnist.