Martin Walker in Washington
President Bill Clinton stepped back from a blanket vow against raising taxes this week, and began the uphill process of trying to discredit the Republican proposal for a huge $550-billion tax cut.
“Smoke and mirrors,” said Clinton. “This is irresponsible, playing havoc with America’s future.”
But taxes are becoming the most vibrant issue of the campaign, in which Clinton is offering his own more modest targeted tax cuts of $110-billion, aimed mainly at families with children and subsidising college fees.
“If we can turn this into an argument between whether or not we have a 15% tax cut — with Clinton on the No side and the Republicans on the Yes side — this election can be won,” said Pat Buchanan.
Taxes are now the theme each politician wants to address. Ross Perot of the Reform Party tore into the Republican tax cuts. “Remember we tried this in the 1980s, this trickle-down economics. Even Republicans like Dole called it voodoo economics. It caused the debt to go through the roof. We can’t have that happen again.
“This is Washington at its worst. It’s not rational. It’s not based on logical planning and decision- making,” said the Texan billionaire, having just made his own rational decision to take an offered $30-million of federal election funds, at the price of limiting his personal contribution to $50 000.
Unabashed by the criticism, the Republicans were pressing even further the tax-cutting theme which has proved a success on the campaign trail. The biggest cheers for Dole come when he promises “the end of the Internal Revenue Service as we know it”.
Jack Kemp, Dole’s vice-presidential candidate, is promising the tax cut is “just the first step on our plan for a radical overhaul of the tax system to make it fairer and flatter”.
The Clinton campaign team are scrambling to respond. They are running television advertisements that attack the tax cut as a ridiculous giveaway, and another that quotes Senator Alfonse D’Amato, a Dole campaign chairman, saying they will have to finance the tax cuts from the Medicare and social security budgets.
But the prospect of $1 500 in tax cuts for a family of four on an average income of $35 000 is proving to be a winner. The Republican proposals include a 15% cut in income taxes for all, a halving of the capital gains tax to 14%, a $500-per-child tax credit and the eradication of Clinton’s taxes on the social security receipts of wealthier retirees.
It has something for everyone, but rather more for the wealthy and the entrepreneurial.
Even allowing for the rosy Republican assumptions about the extra growth and lower interest rates this expansionist policy will deliver, the cuts will have to be financed either by more debt or by the wholesale eradication of chunks of the federal budget.
Dole insists he will not touch Medicare, social security or repayments on the national debt, and promises to spend more on defence.
His savings will therefore have to come from “domestic discretionary spending”, just $230-billion a year, or 15% of the $1,5-billion annual budget.