- The Washington Times - Monday, January 31, 2000

The ghost of Herbert Hoover is haunting the Republican Party again, as the GOP's presidential candidates and other party leaders bicker over what to do with the mounting budget surpluses.
Nearly two decades after Ronald Reagan led the GOP out of its Hooverite obsession with debt and into a new, high-tech, entrepreneurial world of tax cuts and growth economics that have produced the surpluses, party leaders seem to be succumbing to their old addiction to increasing debt repayment rather than expanding the economy.
House Speaker Dennis Hastert says the GOP's top priority this year will be paying down the debt. That position plays well in GOP polls, but is bad economic policy.
And Arizona Sen. John McCain has made debt reduction the centerpiece of his presidential campaign agenda. The left-leaning Republican maverick wants most of the nearly $2 trillion in non-Social Security tax surpluses that will flow into Washington over the coming decade to be used to pay down the $3.6 trillion public debt.
The growing debt movement within the GOP has the party's tax-cutting supply-siders pulling their hair in anguish and frustration. It is as if the party has learned nothing from Mr. Reagan's economic expansion policies.
House Republican leaders no longer talk about cutting tax rates or even rolling back the Clinton tax increases of 1993. Mr. McCain's tax plan would in fact actually raise taxes on businesses to close so-called "loopholes."
"This takes the Reagan agenda and turns it upside down. It points the party toward Herbert Hoover (who proposed fighting the depression by reducing the deficit) rather than Ronald Reagan," said Jack Kemp who was the chief architect of Mr. Reagan's across-the-board tax rate cuts.
"John McCain's obsession with debt makes him a danger to the economy," Mr. Kemp told me. "This poses a real threat to the Republican Party."
There is nothing wrong with debt reduction per se. We are doing that now. By law, the non-Social Security surplus goes to debt reduction. And the $3.6 trillion public debt (not to be confused with the internal debt and IOUs the government owes to Social Security) is being cut each year. It is smaller in dollar terms, and is dramatically smaller as a share of the nation's fast-growing economy.
In other words, we are shrinking the debt by increasing our wealth. It's like having a $50,000 mortgage on a $30,000 annual income. Double or triple your income, and that mortgage becomes relatively smaller and, obviously, much easier to handle.
Should the debt be paid off immediately at the expense of investing in future growth to keep this expansion going? Supply-siders like Mr. Kemp and George W. Bush do not think so. Neither do I.
We should continue paying down the debt in a sensible way, which we are doing, while reinvesting a major portion of the tax surpluses back into our economy by cutting tax rates to grow the economy even faster.
We can do both at the same time.
Who says so? None other than Vin Weber, a former congressman from Minnesota who is one of Mr. McCain's senior campaign advisers. Mr. Weber was one of the principal supply-side champions of Mr. Reagan's tax-cut revolution.
Mr. Weber backs Mr. McCain's tax plan, though he thinks his $237 billion in tax cuts should be expanded a little to accommodate the bigger surpluses announced last week by the Congressional Budget Office.
When I asked Mr. Weber if he could support Mr. Bush's much more aggressive and more growth-oriented tax cut plan, which Mr. McCain says is too big and gives too much money to the rich, he told me "That's a very difficult question to answer." But then, after a pause, he said, "If I were in the Congress, and a Republican president presented it, I would vote for it."
Mr. Weber thinks Mr. Bush's $483 billion, five-year tax cut is a little too big for his tastes, but he correctly says unlike Mr. McCain that "we can do both, reduce the debt and cut taxes."
And that is Mr. Bush's position, too. When he presented his tax-cut plan, which would cost $1 trillion over 10 years, Mr. McCain charged it would not leave one dollar of the surplus for saving Social Security or Medicare.
Mr. Bush denied that charge, saying the surpluses were growing at such a fast rate that there would be more than enough money to do both. Then the CBO announced that there would be close to another $1 trillion in tax surpluses within this decade just as Mr. Bush had predicted.
"McCain's charge was false then and it is $1 trillion more false now," said former Fed Gov. Larry Lindsey, Mr. Bush's chief economic adviser. Mr. Lindsey says the combined surpluses will total $5 trillion over the next dozen years and will be more than enough to finance Mr. Bush's tax cuts and his entitlement reforms.
Mr. McCain pessimistically thinks that we can't do both, that the economy can't grow any faster, and that reducing debt should be the heart and soul of economic policy.
Mr. Bush, like Mr. Reagan and Mr. Kemp, believes that freeing up capital for higher investment and growth must be at the heart of U.S. economic policy. Cut taxes and, as the economy expands, more people will work and pay more taxes to reduce debt and meet the government's other obligations.
Americans voted for this hopeful growth policy in the 1980 presidential elections and they are going to buy into it again in 2000 to ensure that the United States remains prosperous in the 21st century.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide