Recruits for a tax hike
Just mention the words ''tax increase'' in the year or so before a presidential election campaign and a goodly number of congressional lawmakers are likely to find convenient reasons for leaving the room - or quickly changing the subject.
Lawmakers in effect did that just last week when a tax package that would have boosted revenues by $5 billion to $8 billion over a three-year period was suddenly withdrawn from full House consideration.
The sounder course would be to face the tax-hike issue squarely - and do what is necessary for the well-being of the nation, rather than letting economic policy be guided by political fears.
Some perspective is in order: The issue is not one of so sharply hiking taxes as to dilute the three-year personal tax cut already put in place by Congress. Rather, the issue is one of so adjusting prior tax cuts - taken alongside a correlative reduction in the rate of growth in federal spending - as to help reduce massive federal deficits now projected in the range of $200 billion or more for the next several years.
Deficits of that magnitude could work against economic recovery by keeping interest rates at historically high levels, if not even forcing them higher.
In this regard, one cannot help but note the grittiness of Martin Feldstein, chairman of the Council of Economic Advisers, Senate Finance Committee chairman Robert Dole, and Federal Reserve Board chairman Paul Volcker. All three officials continue to speak out in favor of tax hikes and spending reductions.
Inside the White House, Budget Director David Stockman is now making somewhat the same case.
Would a modest tax hike - one designed to take effect next year, after the recovery has presumably been well under way - meet with outright public disapproval?
Public opinion polls have shown strong support for modest tax increases.
There is also considerable support in the business community. A number of key executives at a business conference held earlier this month at Hot Springs, Va., argued that tax hikes were preferable to spiraling deficits.
Ironically, the tax package that was to have come up in the House last week was a modest venture that, among other things, would set a ceiling on the amount of industrial revenue bonds that could be issued by a state. The entire package (raising no more than $8 billion over three years), is far less than the Dole proposal announced last week. Senator Dole would raise $56 billion over three years, along with seeking federal spending reductions of $64 billion.
The Dole plan is probably far too much for lawmakers to buy.
Some aspects of the plan may well merit rejection, such as giving the president limited power to impound funds appropriated by Congress.
The point, however, is that Senator Dole has faced up to the central challenge - namely, that taxes will have to be raised in some fashion if the deficits are to be held down. And his plan is balanced in that it couples tax hikes with spending reductions.
Are lawmakers listening?