Well, maybe. The whole country is hungering for Clinton’s leadership. But the moment the president puts his tax package on the table, he’ll face opposition from every quadrant on the compass. His political advisers are already worried that some new taxes under consideration will be taken as a betrayal of Clinton’s promises to the middle class. So they want him only to nibble at the deficit and hope for the best.
But the Clinton economic team, from Treasury Secretary Lloyd Bentsen to budget director Leon Panetta, believes there are ways to sell a really Big Bite deficit program. One way is to hammer away at Clinton’s Inaugural theme of “shared sacrifice.” This appeals to the common good by boosting everybody’s taxes a little-the middle class, business, the elderly and, especially, the rich. A second ploy follows from the first: by nicking all interests equally, the administration plays each faction off against the other when they plead for relief in the Congress. Former senator Russell Long of Louisiana coined a cynical saying about voter views on taxes: “Don’t tax you, don’t tax me -tax the fellow behind the tree.” The Clinton team’s tax plan puts everybody behind the tree.
Some parts of Clinton’s plan will be easy. Soaking the rich is always popular among Democrats, and both parties enjoy providing the kind of investment tax credits to industry that Clinton envisions. The administration wants to increase taxes on the wealthy in at least two ways-by raising the top income-tax rate from 33 percent to 38 percent and by imposing a 10 percent surcharge on all income over $1 million a year. But these two devices will raise only about $15 billion a year, while the budget deficit is more than $300 billion annually and climbing. So some business taxes are also planned. These include a major reform in collections from foreign corporations operating in the United States, which now pay little if any taxes. For the elderly, an increase in the taxation of social-security benefits for couples with incomes above $32,500 is being considered.
It’s the middle class that poses Clinton’s knottiest problem. Clinton promised to cut middle-class taxes, not to raise them. But last week Treasury Secretary Bentsen-supported, significantly, by Rostenkowski and Senate Finance Committee chairman Daniel Moynihan-said the worsening deficit meant that middle-class tax cuts had to be shelved. A broad new energy tax on all fuels, or maybe a carbon tax on all coal, oil and natural gas, was being considered instead, Bentsen said.
The administration’s ploy will be to label this a tax on basic industry. But even Bentsen conceded that the costs would be passed through mainly to the middle class. The lobbies erupted. A dozen environmental groups released a letter supporting energy taxation, claiming such levies encourage conservation and reduce the emission of such greenhouse-effect gases as carbon dioxide. But liberals, such as Robert McIntyre of Citizens for Tax Justice, blasted the idea as a middle-class tax boost that “totally reverses” Clinton’s promises of cuts. Business claimed broad energy levies would increase the cost of industrial production. “It will make American-made goods less competitive both here and abroad,” said Jerry Jasinowski of the National Association of Manufacturers. Bizarre alliances were proposed amid the crosscurrents. The American Petroleum Institute tried to make common cause with the Democratic left. Big Oil violently opposed any new energy taxes. The API argued that consumers should be directly soaked with a new national sales or value-added tax instead. Then the API asked CTJ’s McIntyre whether he’d join in pushing such a levy. “I told them,” laughs McIntyre, “that they’d have to endorse my 18-point program for taxing corporations first.”
It is possible-just barely-to see that Clinton might balance taxes finely enough to achieve a sullen acceptance among lobbies of the equally injured. But if he does, he still would have an even bigger policy peak to climb on the spending side of deficit control. Entitlements, chiefly social security, Medicare and Medicaid, are the runaway problem in federal spending. Deputy budget director Alice Rivlin last week announced that Clinton was actually studying a cut in social security’s automatic cost-of-living adjustment-the sacrosanct COLA. If Clinton does that, he will unleash the wrath of the 32 million-member AARP-the biggest lobby of all.
