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Nation & World 1/27/03
BY GLORIA BORGER
Trading places

It's January 1995. Republicans are the newly minted House majority, and they're red hot about their "Contract With America." It's full of promises–about decreasing the size of government, cutting taxes, and balancing the budget. And not just balancing the budget for a year or two but passing a constitutional amendment to codify the idea for posterity. "You've got to have the discipline which comes from the balanced budget amendment before anything else is done," implored then House Majority Whip Tom DeLay on ABC News. "We've tried it their [the Democrats'] way for 40 years. Try it our way for a while."

Our way?




Fast-forward to George W. Bush's new economic package of tax cuts, a $674 billion deficit-producing behemoth. Never mind that it would cause the red ink to balloon to more than $300 billion next year. And that's without counting the hefty price tag of an upcoming war. Or the cost of all those baby boomers who will start collecting Social Security before long. If the economy is strong, the White House now says, the deficits will vanish. So now, it seems, deficits don't matter. "It reminds me of the movie Trading Places," says former Sen. Warren Rudman, a die-hard deficit hawk. "Everybody has gone through a role change."

Suddenly, the tax-cutting right wing of the Republican Party is talking like the deficits-be-damned left wing of the Democratic Party. The two ends of the circle have met. One small problem: Lots of moderate Republicans and Democrats have been left out of the picture entirely. One of the truly good things that Bill Clinton–along with his Treasury Secretary Bob Rubin–did was recenter the party's thinking about deficits. During the 1990s, Clinton Democrats came to believe that in the long term, more money would be available for social programs if the nation was kept largely in fiscal balance. "I could just cry," one high-level GOP Senate staffer told me. "It took 20 years to finally get the Democrats to where we wanted them on fiscal responsibility, and then the White House goes and proposes this package."

Reaganesque? Maybe George W. Bush thought it was Reaganesque. After all, Ronald Reagan's 1981 tax cuts have been cheered by conservatives for two decades. And Democrats supported Reagan in droves. But here's the difference: The tax system needed correcting. Top marginal rates were up to 70 percent. Tax brackets were not adjusted for inflation. In fact, the call for reform was a middle-class argument. If it had been just about the rich, it wouldn't have gone anywhere. What's more, Reagan wasn't facing a war, he wasn't worried about aging baby boomers, and he wasn't adding a massive new Department of Homeland Security to his cabinet. But what began as Reagan's serious piece of public policy has now morphed into something less justifiable–a convenient governing Republican theology. No matter what.

Let's even stipulate that the elimination of the double taxation on stock dividends is a good idea in theory. Why not try reducing it gradually as part of some future tax reform proposal? Is there any real stimulative reason to shell out $364 billion on the idea right now? "I wouldn't have chosen the elements the president put in this package," Republican Sen. Susan Collins of Maine told me. "You can make an intellectual case about reducing stock dividends . . . but I question whether it belongs in a stimulus package." In fact, she can't figure out whether this is a stimulus package. Join the club.

And just who benefits from this plan? According to the Urban-Brookings Tax Policy Center, 64 percent of the benefits from eliminating taxes on stock dividends go to the wealthiest 5 percent of taxpayers. "Let's face it," says one GOP House staffer, "the distribution tables look like crap." So just who is playing class warfare here? Isn't it more than a tad hypocritical for the same White House folks who put these tax cuts on the table to then turn around and call the Democrats class warriors?

Meantime, the deficit swells. Whatever happened to Newt Gingrich's revolution, when Republicans were riding high, pledging allegiance to that constitutional amendment to balance the budget? "You have to have discipline first," Tom DeLay lectured Sam Donaldson eight years ago. Today, DeLay seems a changed man, praising the president's proposal. "I look at the Bush plan as a floor, not a ceiling," he says.

As the deficit goes through the roof.