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Foes Of Tax Cuts, Fans Of Big Gov't

BY James C. Miller III
by James C. Miller III on 3/22/01.

Amid the controversy over House action on President Bush's tax cut, it's easy to miss the bigger battle. Whether Bush is moving too fast or too slowly, whether government should address revenue before outlays or vice versa, whether there should be a "trigger" on the tax cut - these are all tactics in the larger battle over the size and scope of the federal government. Take the argument that the president has "rushed through" the tax cut. Any new administration can get more done in the first day than in the next week, and more in that week than in the next month. Also, it is easier to defeat a bill than to get one passed into law. So fail to act quickly, and your tax cut is toast. Not surprisingly, those making the charge that the House acted precipitously and ignored "democratic processes" are found on the side of bigger government. Or take the debate over deciding revenue before outlays. Should Congress first decide how much of the taxpayers' money it can "afford" to spend and then budget accordingly? Or should it decide how much to spend and then adjust tax revenue? The second approach leads to greater revenue and spending than the first. So is it any wonder that those whose vision is an ever-larger government are among the most vocal critics of addressing revenue first? Finally, take the proposal to incorporate a "trigger" that would suspend the tax cut if the surplus fell below forecast. Such triggers do work. In the 1980s we had one called Gramm-Rudman-Hollings (GRH). In the first year of its operation, the growth in the federal deficit was reversed and came down a record $ 71 billion. Government spending, adjusted for inflation, actually fell for the first time in nearly two decades. In fact, GRH worked so well that it came under intense fire from members of Congress who simply could not live within its restraints. The GRH trigger was on the spending side. If the deficit failed to be eliminated according to schedule, a "mechanical robot" would cut spending across the board. Under the trigger being promoted today, if the surplus weren't maintained, tax rates would go up. But if the concern is really about the surplus, a spending trigger would suffice just as well. In fact, a spending trigger would work better. The tax cut is designed to put the economy back on its expansionary course by lowering marginal tax rates and giving investors more incentives to expand production. A tax trigger would add uncertainty and dampen the response the tax cut is meant to create. Naturally, proponents of the tax trigger tend to be aligned with larger government. What is surprising is that the proponents of the tax cut don't counter with a trigger of their own - one that would cut spending and thus focus the debate on the real issue, the size and scope of government. James Miller is a former director of the Office of Management and Budget. He is currently counselor to Citizens for a Sound Economy Foundation, a market-based education organization in Washington, D.C.