Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, December 17, 1994 TAG: 9412230044
SECTION: EDITORIAL PAGE: A9 EDITION: METRO
SOURCE:
DATELINE: LENGTH: Medium
This week, he tried to regain initiative by entering his tax-cut package in a bidding war for middle-class support. Parts of the plan are excellent. But his acquiescence in Republicans' relegation of deficit-reduction to a lower priority is rich with risk for the country.
It may not do him that much good, either. Clinton's tax proposals, like those of the triumphant GOP, have more to do with politics than with economics. But their effect on his leadership stature and chances for political survival is not clear. No one can doubt that November's election results, not some recommitment to core values, prompted his newfound enthusiasm for tax cuts.
What is certain is that Clinton's entry in the tax-cutting derby virtually assures a break for taxpayers next year. They deserve some kind of a break, and the federal government could use the discipline. At issue are matters of focus, context and timing.
Clinton himself proposed a middle-class tax cut while running for president. But once in the White House, he shelved the idea on the grounds that deficit reduction must come first (though he did expand the Earned Income Tax Credit to cover more low-income families, a good thing).
Clinton deserves more credit than he has gotten for helping to push the federal deficit down. But the deficit is expected to start rising again soon and, driven by middle-class entitlements, to balloon around the turn of the century. This week, Clinton joined the Republicans in downplaying this prospect, preferring to focus on the here and now and a Christmas display of tax-cut goodies. That's what is worrisome.
The president's tax plan is a lot better than the GOP's, featured in its "Contract With America." The amount of tax relief - $60 billion over five years - would swell federal debt far less than the GOP Contract's $184 billion. Clinton's tax cuts are more focused: on middle-class families with children, and incomes up to $120,000, rather than the Republicans' $200,000.
The education tax deduction, for college tuition or vocational and professional training, is a great idea. As tuitions rise beyond the reach of many family budgets, and as the importance of lifelong learning rises within the global economy, this is one way to promote education and a more productive work force. As Clinton noted in his speech Thursday night, education is as much an investment in the American Dream as is home ownership, for which generous deductions now are allowed.
Another good idea is the job-training voucher for workers who get laid off. One result of freer trade, which Clinton has been pushing, is increased international competition. Many Americans will need help upgrading their skills and transferring them to different kinds of work. Training vouchers are more promising than unemployment insurance, and they would bypass government bureaucracy.
Good moves, all; the question is paying for them. Clinton said his $60 billion in tax cuts would be offset with $76 billion in spending reduction. But again, like the Republicans, he was more specific about the tax cuts than the spending discipline. (In fact, most federal spending goes to Social Security and Medicare, defense and interest payments on the debt - none of which are on the cutting table.) And Clinton said nothing about warding off rising federal debt a few years hence - a certainty without serious entitlement reform.
The Federal Reserve has been jacking up interest rates this year to try to slow down a booming economy and avert inflation. An unusual time for tax-cutting, most economists would say. But they'd be missing the point. The tax breaks' likely effective date will be Jan. 1, 1996, six weeks before the New Hampshire primary. That's how far ahead Washington is looking now.
by CNB