In their continuing effort to understand why they suffered such
a painful loss on Election Day last month, Democrats are trying to come to
grips with the tax issue. The evidence thus far shows that they still "don't
Sen. Zell Miller, Georgia Democrat and one of the few in his
party to support President Bush's tax cut last year, says Democrats should
play the same game. "Instead of arguing that Mr. Bush's tax cut goes too
far, we Democrats should be arguing that it doesn't go far enough," he wrote
in The Wall Street Journal.
Former Clinton Labor Secretary Robert Reich also thinks
Democrats should embrace tax cuts -- but only liberal ones. He favors
exempting the first $20,000 of wages from the Social Security payroll tax
for 2 years. But he would pay for it by raising estate taxes.
Former Clinton economist Gene Sperling favors more tax rebates
financed by freezing the portions of last year's tax cut that have not yet
taken effect. This would constitute a net tax increase over current law,
because the rebate would be temporary while the tax freeze would be
At a minimum, this discussion shows that George W. Bush and the
Republicans are still driving the economic agenda. Democrats are fighting on
a field chosen by Republicans, where the latter have an inherent advantage.
Republicans have been cutting taxes for more than 20 years and have
credibility with voters on the issue, whereas the last Democratic tax cut
was enacted in 1964. Democrats have fought every tax cut since and imposed
tax increases whenever they had the opportunity.
In any case, Miller, Reich and Sperling are probably on their
own in advocating any sort of tax cut within the Democratic Party. The
dominant view among its leadership is that last year's tax cut is the root
of all evil. The only reason they don't advocate its total repeal is because
they don't have the political courage to say openly what they believe.
In truth, the fuel that runs the Democratic Party is spending.
The party exists mainly to take money out of some peoples' pockets and put
it into others. There is no problem imaginable that Democrats cannot find a
new government program to deal with. But all of this largess must, at some
point, be paid for. That means high taxes and no tax cuts.
In the good old days, from the point of view of Democrats,
Republicans did a lot of their dirty work for them. In the name of fiscal
responsibility, Republican presidents opposed efforts by congressional
Republicans to cut taxes and often pushed tax increases to close budget
deficits caused by Democrat spending. This gave Republicans the reputation
of being tax collectors for the welfare state.
The 1970s were Nirvana for Democrats. Inflation pushed taxpayers
into higher and higher tax brackets, leading to an automatic tax increase.
Because of graduated tax rates, income tax revenues rose about 50 percent
faster than inflation. Thus, if inflation was 10 percent, taxes increased 15
percent. This provided ample revenues not only to pay for myriad new
programs, but to balance the budget as well -- 5 years or so in the future.
But, of course, the budget was never balanced; spending went up more than
revenues year after year.
Finally, the middle class figured out that all this new spending
never reached them. They paid more and more in taxes, but got nothing in
return. At this point, they initiated a tax revolt. Democrats warned, over
and over again, that this would lead to fiscal disaster and a decimation of
government services. But it never happened. Taxes were cut by Proposition 13
in California without any meaningful change in services. So they supported
Ronald Reagan's tax cut in 1981 and again saw no diminution of what
government provided them.
As a consequence, the middle class figured out that tax cuts
cost them nothing. There was never a price to be paid; all the Democrat
warnings about widows and orphans being thrown out into the snow was just so
much rhetoric, with no real consequences. Not only was spending never
actually cut, but taxes never really went down. Because of economic growth,
people are still pushed into higher tax brackets. Therefore, there is never
a reason to oppose tax cuts.
Democrats seem to believe that Americans vote for tax cuts
solely to enrich themselves at the expense of the disadvantaged. In fact,
most believe that there is no lack of government resources to aid the truly
disadvantaged. Higher taxes just fuel more government spending on programs
that never benefit them. And opposing tax cuts is the same thing as a tax