Opinion> Molly Ivins> Molly Ivins January 11 1998 01 11

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Molly Ivins January 11

AUSTIN -- Our Man Gramm was out giving good sound bite the other day anent the president's plan to expand Medicare (at no cost to us, he claims) by letting 62-year-olds buy into the program: "When your mother is on the Titanic and it's sinking, your first preoccupation ought not be getting more people on the Titanic," quoth our senior senator. It was such a timely allusion to the big, new film that the sound bite wound up all over the networks.

Help, Mom's on the Titanic, and Clinton wants to load more passengers! You have to admit that Phil Gramm is an unlikely substitute for Leonardo DiCaprio.

Whe-ell, as Ronald Reagan used to say, if Medicare is sinking, how come the Republicans are so keen to put another gash in the other side of the ship by cutting taxes? Let's keep our metaphor in order here. If, indeed, Medicare and Social Security face ballooning deficits as a result of the baby boom generation coming up for retirement, how does cutting taxes do anything to help?

Speaking of icebergs (seven-eighths of the problem is under water), let's take a look at the effects of the tax cuts that the Republicans put in place just last year.

As we all know, the tax cuts, in addition to being limited to the very wealthy, were (as they say in Washington) "backloaded." What that means is that the tax cuts, like Medicare, will balloon in the future, costing the Treasury more each year. When the budget was passed last August, many claimed that it was a balanced package of social spending and tax cuts. Increased funding for child health insurance, job training and restoring some benefits to elderly, legal immigrants who had been cut off by welfare "reform" supposedly balanced cuts in the capital gains tax, estate taxes and the corporate alternative minimum tax. (If you have a problem with the notion of balancing new spending by cutting taxes, speak to the bozos in D.C. -- it's not my job to explain such thinking.)

But the Center on Budget and Policy Priorities, an outfit whose work has been right on the money for some time, points out this little hitch in the getalong: "Within a few years, tax cuts targeted primarily on very high-income individuals will far exceed the combined cost of all the program initiatives in the new legislation. For example, by 2007, the estate tax reductions alone -- which will benefit the heirs only of the wealthiest 2 percent of individuals who have died -- will cost more than all the social program initiatives combined."

Turns out that the social spending in the new budget is cleverly set up to decline over time -- from $46.7 billion in the first five years to $39 billion in the second five years.

"By contrast," reports the Budget Center, "the tax cuts targeted primarily on wealthy individuals expand substantially as the years go by. Three major tax provisions focus the lion's share of their benefits on the top 5 percent -- and especially on the top 1 percent -- of the population. These are the capital gains and estate tax cuts and the reduction in the corporate alternative minimum tax. These provisions lost $14.4 billion in revenue in the years through 2002, but $61.1 billion in the five years after that. Looked at on an annual basis, these tax cuts lose just $1.7 billion in fiscal year 1999. By 2007, they lose $15.7 billion, more than seven times their 1999 level, after adjustment for inflation. Their cost continues to rise significantly after 2007."

What we have here is another good reason not to cut taxes; the old budget will not be in the old balance for 10 minutes at this rate. Especially not since -- contrary to all the yammering we have been listening to for years now -- the old balanced budget is producing zipola in the way of economic growth.

We finally get a balanced budget, and what happens? The Congressional Budget Office announces that economic growth, which was 3.9 percent last year, will slide to a yearly average of 2.3 percent for the next decade.

All those old deficit hawks who kept telling us a balanced budget would lead to boom times are now eating crow. Economist Charles L. Schultze of the Brookings Institution, former chairman of the White House Council of Economic Advisers, endearingly admitted to the Newhouse News Service that proponents of a balanced budget "oversold it, myself included."

On the conservative side, economist Bruce Bartlett of the National Center for Policy Analysis told Newhouse, "There's no question the politicians greatly oversold this." Yeah.

What is particularly unhelpful at a time like this is the old jeer: "Ah, you liberals just love taxes -- you just like to increase taxes." Speaking for myself, I can safely say that I have never evinced any fondness for taxes. This is not about some silly, partisan or ideological nonsense about who "likes taxes" -- these are crucial questions about how to allocate resources wisely at a time when icebergs are visible ahead. Now let's see how responsibly the Republican Congress responds.

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