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Jewish World Review August 5, 1999 /23 Av, 5759

Mort Zuckerman

Mort Zuckerman
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Squandering the surplus -- THE POT OF GOLD at the end of the political rainbow is in sight, an estimated $6 trillion budget surplus over the next 15 years. Only Washington politicians could figure out ways to squander this good fortune. House Republicans have voted away some $792 billion for tax cuts, and Senate Republicans have signed on for a similar amount. It does not make sense.

President Clinton's approach is to use the money to reduce the national debt and thereby shelter Social Security and Medicare. These programs face difficulties because the number of people over 65 will more than double by the year 2040 while the proportion of Americans paying into the Social Security system will fall by more than a third. The president's proposal sounds conservative but is actually disingenuous: Not only does he want to use the general revenues for these programs but he is unwilling to face the hard question of how much we should subsidize millions of aging baby boomers.

Should we tax younger and perhaps poorer people to cover benefits for older and sometimes wealthier Americans? Or should we raise the eligibility ages for future retirees, given how much the health of the elderly has improved? Clinton wants to cushion the baby boomers at the expense of their children, and he even proposes to add $25 billion in new benefits for widows and a subsidy for prescription drugs. Medicare and Social Security are a fiscal time bomb. By the year 2040, they will be running a combined deficit of $800 billion a year, and the one third of the budget we now spend on the elderly will rise to 80 percent. The Republicans' program will make the bomb bigger. Their $792 billion tax cut in the next decade will explode to a $3 trillion loss of revenue in the decade beginning in 2010, just when the baby boomers begin drawing their government benefits. It is financially reckless–and politically foolish.

The rich get richer. The across-the-board, 10 percent tax cut approved by the House does not benefit the 48 million poorest households, which pay no income taxes as it is. The average taxpayer would get a rebate of about $99, and the top 1 percent, whose incomes average $900,000 a year, would get over $20,000. Add cuts in capital gains and the gradual elimination of inheritance taxes (now paid only by the wealthiest 2 percent of the population), and it's easy to see that Republicans stand to get skewered by the Democrats.

Having already ignored overwhelming public opinion by pushing impeachment instead of censure, and then failing to enact tighter gun control after the killings in Littleton, does the GOP want to be seen deep-sixing prescription drugs for the elderly and risking Medicare for the sake of a tax cut that benefits those who have gained the most in the 1990s? Barely 5 percent of Americans think that cutting taxes is more important than supporting health care, Social Security, education, Medicare, and Medicaid, or cutting the national debt. The populist appeal of tax reductions has waned at a time when most Americans don't feel overtaxed–and for good reason. According to the U.S. Treasury, tax burdens are at their lowest level in over 25 years for middle- income households.

A wiser policy for the Republicans would be to follow the advice of Federal Reserve Chairman Alan Greenspan and to insist on using the surplus to reduce the national debt, thus producing lower real interest rates and releasing funds for investment in the future. This is the only way that the economy will, over the next 30 years, sustain the growth necessary to support the baby boomers' retirement. Not only will cutting the national debt erase more than $200 billion of annual interest payments but it will almost surely enable the government to borrow again to cover the Social Security shortfall as the baby boomers retire. As for tax cuts, let's follow Greenspan's counsel and use them to reignite the economy if the country slips into recession. Sadly, the House Republicans increasingly resemble the royal family of the Bourbons, of whom it was said that they had forgotten everything and learned nothing. it.

JWR contributor Mort Zuckerman is editor-in-chief and publisher of U.S. News and World Report. Send your comments to him by clicking here.


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©1999, Mortimer Zuckerman