FEBRUARY 11, 2002
Tried arguing against tax cuts lately? Tom Daschle has. And the
results weren't pretty. The day after Daschle's January 4 speech
explaining how as yet unenacted tax cuts might worsen a recession,
he was promptly ridiculed for suggesting that "tax relief" had
caused America's economic woes and for advocating a tax increase.
As the president so eloquently put it, "There's going to be people
who say we can't have the tax cut go through anymore. That's a tax
raise."Daschle, of course, is right. The problem is that his argument is
complicated: Large future tax cuts mean large future deficits, which
mean higher interest rates in the future and higher long-term
interest rates today. (Despite eleven short-term interest-rate
reductions since last January, the ten- year Treasury rate is
virtually unchanged.) And complicated arguments are easy to
caricature. So, after three weeks of being pilloried as wanton
"tax-raisers, " the Democrats have caved. House Minority Leader
Dick Gephardt raised the white flag at the Democratic Leadership
Council (DLC) last week, conceding that "we shouldn't be
reconsidering tax cuts in the middle of a recession."
But backpedaling isn't the only response to an opponent who
successfully caricatures your argument. The other is to caricature
the argument yourself. And as it happens, the Democrats have a very
obvious, very promising caricature available for just such an
occasion. It's a little program called Medicare.
Last week a highly respected federal commission concluded that many
seniors risk losing their health care unless the government raises
Medicare reimbursements to doctors, hospitals, and nursing homes by
some $15 billion per year. Since 1997, when Congress created it,
the commission's recommendations have been more or less adhered to.
But this year there's practically no chance of that happening. As
Representative Jim McCrery, the Republican Medicare expert on the
House Ways and Means Committee, told The New York Times last week,
"[I]t's going to be difficult, in the current budgetary environment,
to come up with increases in reimbursement." Indeed, rather than
increasing Medicare funding, the Bush administration will almost
certainly propose dipping into Medicare's $400 billion trust-fund
surplus to pay for other parts of its budget. All told, Democrats
could argue that Bush's budget shortchanges Medicare by as much as
$550 billion over ten years. Meanwhile, the Bush tax cut, according
to a recent Congressional Budget Office report, totals $1.6
trillion over the next ten years (assuming, as just about everyone
on Capitol Hill does, that the tax cuts won't be allowed to expire
after year nine, as currently slated). When you further consider
that the top 1 percent of Americans will receive 38 percent of the
tax benefits, the case seems clear: Republicans are cutting taxes
for the rich on the backs of the elderly.
As a purely tactical matter, the benefits of "demagoguing" Medicare
are plain. When Newt Gingrich proposed a $270 billion tax cut just
as Republicans were "slowing the growth of Medicare" by roughly the
same amount in 1996, Bill Clinton connected the dots--not only
killing the tax cut, but reviving his presidency along the way. And
Medicare is just as politically potent now as it was then: In a
recent NBC/Wall Street Journal poll ranking the issues Americans
care about most, "health care and Medicare" came in third, behind
only the recession and terrorism.
Critics will object that the practical effect of linking Medicare
and Bush's tax cut will be to put off dealing with the root causes
of America's looming Medicare crisis. Or worse, that by sowing
Republican ill will, Democrats will make it harder for the parties
to come together once difficult choices are no longer avoidable. In
fact, entitlement nags have been making this argument for years.
When Clinton began banging the drum on Medicare in 1996, Concord
Coalition President Pete Peterson complained that "[T]he minute you
get in a demagoguing cycle like this, it's a vicious circle. Both
sides know that we have to do something about entitlements ... but
you can't do it if you demagogue it."
But Peterson's argument falls flat on several counts. For starters,
it doesn't jibe with the historical record. During the 1982
campaign, Democrats "demagogued" Social Security like never before.
In October of that year, the party ran a commercial that featured a
pair of scissors slicing up a Social Security card while an
announcer accused Republicans of "try[ing] to cut the
cost-of-living increases by sixty billion dollars over ten years"
and threatening to "increase Social Security taxes." (The
commercial concluded, "It isn't fair. It's Republican.") A
Democratic National Committee spokesman advised candidates to
"shelve the lesser issues and go heavy on Social Security" during
the final weekend of the campaign, and The New York Times observed
that Democratic candidates everywhere were honing in on the message
that "a vote for the Republicans is a vote against Social Security."
And yet by January of 1983 a bipartisan commission had agreed to
key changes in the pension program--among them, the same
cost-of-living and payroll-tax adjustments the Democrats had
supposedly rendered radioactive. President Reagan signed the plan
into law three months later.
More importantly, though, the Concord crowd ignores the reason it's
so important to repeal the tax cut in the first place: If the
Treasury has been drained of trillions just as the baby-boomers
begin to retire, saving Social Security and Medicare will be much,
much harder--even with all the bipartisan goodwill in the world.
Deficit hawks want the tax cut repealed, but they're like the
leftists who wanted the Taliban overthrown but opposed the American
military's effort to do so; they're so concerned with their moral
purity that they won't give Democrats the tools to do the job.
To be sure, it is dishonest to pretend the tax cut debate is about
Medicare per se and not part of a larger debate about the size of
government. Unfortunately, Republicans have made it impossible to
have this debate honestly. Rather than identify which programs they
would cut, the Republican strategy ever since Reagan has been to
force deficits through huge tax cuts--which they justify with
various quack predictions (supply-side economics in the 1980s,
wildly optimistic surplus projections last year)--and then leave it
to future administrations to make whatever cuts will balance the
budget. As long as that's the strategy, Democrats are perfectly
justified in cutting intellectual corners as well. Call it fiscal
Tom Daschle seems to understand. On "Face the Nation" last Sunday,
Daschle began setting the stage for take two of the Democratic
budget strategy: "We're gonna be using one trillion dollars of
Social Security and Medicare trust funds over the course of the
next ten years for purposes other than retirement," the majority
leader noted. "I think we've got to be very concerned about that."
Most Americans probably couldn't agree more.