The Week

As part of his crackdown on domestic terrorism, President Clinton is considering a five-day waiting period for the purchase of radios.

Critics like to say the tax-cut talk is a simple way to appeal to the electorate’s base instinct for fatter pocketbooks. They obviously haven’t talked to Pete Domenici recently. The Senate Budget Committee chairman is constructing a Rube Goldberg device for effecting tax cuts. His idea is that getting to a balanced budget by 2002 will dampen interest rates, thereby boosting economic growth and reducing what the government has to pay to service the debt. So, a balanced budget brings a “bonus” of some $170 billion in additional revenue over seven years, which can pay for tax cuts. This is a variant of the supply-sider’s “dynamic scoring,” albeit in the service of an assumption —that lower deficits mean lower interest rates—that supply-siders tend to reject. The problem is that most of the bonus revenues come in later years. Over five years Domenici’s bonus amounts only to about $80 billion, a number that bears greater resemblance to the White House tax proposal ($69 billion over five years) than to the House-passed package ($189 billion). And this is before nervous senators begin raiding the bonus fund to avoid deeper cuts in programs like Medicare. Don’t believe in these tax cuts until you see them.

Featured Tags

As part of his crackdown on domestic terrorism, President Clinton is considering a five-day waiting period for the purchase of radios.

Critics like to say the tax-cut talk is a simple way to appeal to the electorate’s base instinct for fatter pocketbooks. They obviously haven’t talked to Pete Domenici recently. The Senate Budget Committee chairman is constructing a Rube Goldberg device for effecting tax cuts. His idea is that getting to a balanced budget by 2002 will dampen interest rates, thereby boosting economic growth and reducing what the government has to pay to service the debt. So, a balanced budget brings a “bonus” of some $170 billion in additional revenue over seven years, which can pay for tax cuts. This is a variant of the supply-sider’s “dynamic scoring,” albeit in the service of an assumption —that lower deficits mean lower interest rates—that supply-siders tend to reject. The problem is that most of the bonus revenues come in later years. Over five years Domenici’s bonus amounts only to about $80 billion, a number that bears greater resemblance to the White House tax proposal ($69 billion over five years) than to the House-passed package ($189 billion). And this is before nervous senators begin raiding the bonus fund to avoid deeper cuts in programs like Medicare. Don’t believe in these tax cuts until you see them.