ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, August 7, 1996 TAG: 9608070019
SECTION: EDITORIAL PAGE: A10 EDITION: METRO
THE ECONOMIC plan unveiled Monday by Bob Dole is less about cutting taxes than about cutting into Bill Clinton's lead in the polls. If it weren't, the plan would not make sense - certainly not to most budget analysts and economists. Nor to the former Bob Dole.
The former Dole is the one who, as a 35-year veteran of Congress and 12-year Senate Republican leader, scoffed at the notion that tax cuts balance budgets and warned that deficits should be controlled before tax reductions are proffered.
But the new Dole, the private citizen running for president, knows that big tax cuts - no matter how untimely, no matter what their likely fiscal effects - possess proven appeal on the campaign trail.
The new Dole is invoking every confection in the candy store. Hey, wanna $500 tax credit for kids? How about a phased-in cut of 15 percent in personal income-tax rates? While we're at it, let's halve the tax rate on capital gains, repeal the 1993 tax increase for more affluent Social Security beneficiaries, and expand Individual Retirement Accounts.
Total cost, over the next six years, as estimated by Dole's advisers: $548 billion. Where's the money to come from?
Well, let's see. Can't touch Social Security. Forget more defense cuts. Oh, and Medicare and veterans' benefits must be preserved. Er, um, well, let's take a closer look at the other stuff - the national parks, perhaps? meat inspections? environmental protection? - when the time comes, like after Election Day.
The dirty little secret of American government is that there's no way to pay for billions in tax cuts with billions in spending cuts without carving into programs, such as entitlements, that most voters support.
Well, there's always economic growth. Surely tax cuts will spur the economy.
Don't bet on it. The old Dole wouldn't have. As a short-term boost, government spending with borrowed money can help lift a below-capacity economy out of a recession. That was taught the world decades ago by John Maynard Keynes, a point retaught during the Reagan years.
But the U.S. economy today is growing - and the Reagan experience also showed that the long-term effect of chronic credit-card addiction is a crippling national debt, which now is four times what it was in 1980. High debt retards growth by boosting interest rates, sopping up private savings that otherwise could go toward productive investment and diverting government revenues for debt service.
The Clinton administration has had its share of failures, but deficit reduction - helped mightily by the 1993 tax increases that fell mostly on the richest 1 percent - stands out as a success story. Interest rates have fallen in tandem with the deficit's drop. That has helped sustain steady annual growth of 2.5 percent.
Underlying economic problems persist: the wage stagnation of the past quarter-century; the looming pressures on Medicare and Social Security; the widening gap between rich and poor; the inadequacy of investments for the future in human capital, physical infrastructure and basic scientific research.
But the Dole plan would deliver the worst of both worlds: exacerbating each of the above underlying economic problems while also undermining the recent advances in deficit reduction. By embracing the tax-cut switcheroo in hopes of election-year gain, the new Dole betrays the old Dole's reputation for fiscal sobriety and responsibility.
LENGTH: Medium: 66 lines KEYWORDS: POLITICS PRESIDENTby CNB