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Budget [1990] - Press Report #2 [2]
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702259
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Budget [1990] - Press Report #2 [2]
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Records of the White House Office of the Chief of Staff to the President (George H. W. Bush Administration)
John Sununu Issues Files
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Originally Processed With FOIA(s):
FOIA Number:
1998-0004-F[1]; 1998-0251-F
S
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin:
Chief of Staff, White House Office of
Series:
Sununu, John, Files
Subseries:
Issues Files
OA/ID Number:
29140
Folder ID Number:
29140-006
Folder Title:
Budget [1990] - Press Report #2 [2]
Stack:
Row:
Section:
Shelf:
Position:
G
15
24
6
6
The Washington Times
THURSDAY,
OCTOBER
11,
1990
Conservatives,
mad at Sununu,
still value him
By Ralph Z. Hallow
don't want to lose Mr. Sununu.
THE WASHINGTON TIMES
"Conservatives will be making a
huge mistake if they participate in
Republicans in both houses of
the effort to bodily wound or oust
Congress say they know White
John Sununu," says Mr. Weber. He is
House Chief of Staff John Sununu
among a large group on the right
and he's no Jim Baker - or Don Re-
who believe you could shoot a can-
gan, for that matter.
nonball through the Bush White
Mr. Sununu, the former anti-tax
House and not hit a conservative -
governor of the anti-tax state of New
unless Mr. Sununu happened to be in
Hampshire, had
the building.
NEWS
to swallow hard
"He's better than either Baker or
last week - hard
Regan when they were chief of staff
ANALYSIS
enough to get
to Reagan," says Mr. Humphrey. "At
down a $134 bil-
least Sununu's a real conservative on
lion tax increase signed by his boss,
most issues."
President Bush.
Then why is he hard-balling con-
The jowly chief of staff got nasty
servatives on tax increases and what
with a lot of GOP lawmakers for gag-
they suspect are phony domestic
ging on the tax-increase compro-
spending cuts?
mise. It failed. The president was
"I can't explain it, but John is ob-
embarrassed and Mr. Sununu's own
viously saluting and following or-
folks in Congress were hopping mad
ders," says Mr. Humphrey.
at him for for his tactics.
"The old John Sununu has become
"I was elected by 2.6 million; who
the new Jim Baker," says Rep. Jim
elected him?" said Sen. Trent Lott,
Leach, a moderate-to-liberal Repub-
Mississippi Republican and a con-
lican from Iowa. "Sununu has be-
servative not to be trifled with.
come the symbol of making the
When Mr. Lott who, unlike Mr.
tough choices for a party of gover-
Sununu, does not get paid to eat the
nance."
president's words, refused to swal-
Conservatives like to point that
low the tax increase. Mr. Sununu's
any Republican who incorporates
response was: Sen. Lott has become
"tough choices" in his vocabulary is
an insignificant figure in this pro-
likely to be one who also supported
cess.
the $134 billion tax increase in last
This led other Republicans to con-
week's budget compromise.
trast Mr. Sununu with Secretary of
Unphased, Mr. Leach says, "By
State James A. Baker III. When he
definition, tough choices inevitably
was White House chief of staff in
alienate a chief of staff from move-
President Reagan's first term, Mr.
ment Republicans. It's counterfeit
Baker was often accused by such
conservatism not to be concerned
conservative GOP congressmen as
about the deficit, and Sununu has
Jack Kemp of New York and Newt
tough historical conservative roots,
Gingrich of Georgia of "not letting
which means concern for a balanced
Reagan be Reagan."
budget rather than the political
Now Republicans of the Gingrich-
gains of the me-generation move-
Kemp stripe are complaining that
ment in Republican politics."
Mr. Sununu's problem is that he is
Rep. Bob Walker of Pennsylvania
"letting Bush be Bush."
says fellow conservatives should
"I am as bitterly at odds with
understand Mr. Sununu has carried
Sununu on the budget as anyone else
a big load for them at the White
in Congress," says Rep. Vin Weber, a
House on many issues. "Some peple
conservative Minnesota Republi-
on Capitol Hill are using the budget
can. "Everybody thought Don Regan
circus as an excuse to bring out the
was aloof and arrogant. John
long knives." he says.
Sununu would help himself if he
Mr. Humphrey couldn't agree
were a bit more aloof."
more. "John is conservative not only
And less arrogant? "You said
in fiscal matters - as were Baker
that." says Mr. Weber.
and Regan - but on social issues,
"Sununu has been downright ob-
like aboriton." he says. "He is cer-
noxious in dealing with Congress in
tainly more conservative than the
this budget debate." says Gordon
president and is willing to play hard-
Humphrey, a conservative from Mr.
ball for conservative causes."
Sununu's home state. "His strong-
"When you have Sununu on your
arm tactics. his outbursts, those are
side, he is tough-minded, hard-
unacceptable and counter-pro- duc-
headed and effective. and when he's
tive when used against his own al-
against you, you say he is ruthless,
lies."
ham-handed and arrogant," says Mr.
But even injured conservatives
Weber:
The Washington Times
THURSDAY, OCTOBER 11, 1990
President
waffles
again on
tax swaps
By Paul Bedard
THE WASHINGTON TIMES
ATLANTA - The White House
House GOP leaders, Republican
continued to send confusing signals
members of the Ways and Means
to Congress yesterday on its willing-
Committee and the 71 Republicans
ness to accept higher tax rates for
who voted 'for the initial budget deal
that went down in flames.
the rich in return for a cut in the
capital gains tax.
The president, who met briefly
Just one day after they appeared
yesterday morning with House Ways
to back off such a deal under con-
and Means Committee Chairman
gressional GOP pressure, adminis-
Dan Rostenkowski, will begin
tration officials said the proposals
smoothing out relations with House
are once again "on the table."
Republicans today at morning, noon
At campaign appearances here, in
and evening meetings.
Raleigh, N.C., and St. Petersburg,
At 9:30 a.m., he meets with rank-
Fla., President Bush sidestepped the
ing GOP members of each House
issue, instead blaming Congress for
committee. At 1:30 p.m., he has in-
the budget stalemate and calling for
vited Republican members of the
a budget deal similar to the one that
Ways and Means-Committee to the
House conservative Republicans
White House. And at 5:30 p.m. there
and angry Democrats torpedoed last
will be a reception for some mem-
week.
bers of Congress - but no guest list
On Tuesday, Mr. Bush told report-
was released.
ers that raising tax rates was "on the
Mr. Bush will "listen, listen pa-
table, that's been talked about, and if
tiently" to the GOP proposals, said
it's proper, if it can be worked in
Mr. Fitzwater. He added that this is
proper balance between the capital
all the president did in Tuesday's
gains rate and income tax changes,
meeting with Mr. Packwood and
fine."
other GOP senators.
But hours later, outraged Repub-
At his first campaign stop yester-
licans told the president at a White
day, in Raleigh for Sen. Jesse Helms,
House meeting that they wouldn't
Mr. Bush said voters are "sick and
support such a deal. Sen. Robert
tired of this smoke-and-mirrors ap-
Packwood of Oregon, the senior Re-
proach to the fiscal policy of the
publican on the Finance Committee,
United States."
said Mr. Bush "just acquiesced" to
the Republicans' demand that he
Hours later at an outdoor rally for
Florida Gov. Bob Martinez, Mr. Bush
drop the deal.
said he wanted a budget deal "which
Mr. Bush refused to clarify his po-
spurs growth, opportunity and pros-
sition yesterday, telling reporters
perity - GOP - that has a nice
during a jog at a St. Petersburg base-
ring."
ball park to "read my hips."
Earlier he had called on Congress
While Mr. Bush said he didn't
to clear up the confusion on income
want to "assign blame" for the bud-
tax increases and cuts in the capital
get mess, he said voters "know that
gains tax rate:
Congress has the responsibility to
Spokesman Marlin Fitzwater
pass a budget and it's about time that
later said that "everything is on the
they met that responsibility."
table" but he, too, then backtracked.
His criticism of Congress was
Asked to clarify the conflicting
greeted with applause.
comments from Mr. Bush, Mr. Pack-
wood and other senior officials, Mr.
Fitzwater told reporters aboard Air
Force One: "I want to bob and weave
on this today.
People are going to
be claiming all kinds of statements
and attitudes, and we just want to try
to be careful and let the Congress
come up with a package."
Making Congress fully responsi-
ble for coming up with a budget deal
appears to be the latest White House
strategy.
Today Mr. Bush will meet with top
The Washington Times
THURSDAY, OCTOBER 11, 1990
Deficit battle isolates Bush
By Frank J. Murray
THE WASHINGTON TIMES
George Bush found himself both
That 3.5 percent difference was
Hindsight makes the dramatic
rained on and isolated yesterday
portrayed as the clincher that killed
change look less spontaneous. While
after the worst political thrashing of
the deal, but a lobbyist who tracked
Mr. Packwood let the cat out of the
his presidency.
budget negotiations said the White
bag to reporters, 40 business lobby-
Even friends who still support his
House simply missed the message
ists huddled in the Roosevelt Room
objectives wondered at "mixed mes-
that Republicans wouldn't buy any
with Mr. Sununu, Economic Adviser
sages from the White House" and
income tax increase.
Michael Boskin, Domestic Policy
said Mr. Bush increasingly appears
"Either the White House staff did
Adviser Roger Porter and Deputy
uncertain and indecisive. The presi-
not properly read what the Senate
Budget Director William Diefender-
dent tried to laugh it off.
Republicans were saying to them or
fer, who was Mr. Packwood's chief
"Read my hips," he told reporters
they just did not tell the president,"
aide on the Senate Finance Commit-
who had asked if he had thrown in
the lobbyist said.
tee.
the towel on his
On rare occasions when wires
"The swap is out," the lobbyists
NEWS
campaign pledge
crossed in the past, Mr. Bush ap-
were told.
to cut taxes on
peared a victim of miscalculation by
Yesterday, after House Ways and
ANALYSIS
capital gains. He
an earnest but generally inexperi-
Means Committee Chairman Dan
punctuated the
enced domestic staff.
Rostenkowski met Mr. Bush for cof-
jibe by pointing to his left buttock as
This time, Mr. Bush seemed to
fee at the White House, his commit-
he jogged with his son Jeb under
make big mistakes personally. Vot-
tee produced a bare-bones proposal
gathering clouds at St. Petersburg,
ers heard commentators emphasize
similar to the Sept. 30 bipartisan
Fla., but the storm broke and
that as NBC's Andrea Mitchell did in
deal with no tax-rate changes. It also
drenched him.
reporting his latest flip-flop on
had no growth incentives for busi-
It's been that kind of week.
swapping capital gains tax cuts for
ness and carried a raft of luxury and
The president's puzzling tactics
raising top marginal income tax
sin taxes.
throughout the deficit crisis have
rates: The Democrats feel very
While work on the Hill moved on,
undermined his Republican power
much tricked
As I started calling
administration communications re-
base, insulted those who resisted,
them, they said, 'You're kidding, he
mained mixed and Mr. Bush was
splintered conservatives who march
couldnt have said that.'
campaigning yesterday for Sen.
with Rep. Newt Gingrich, eroded
"This is an extraordinary episode
Jesse Helms, who opposed him on
super-high public popularity and
in leadership or lack of it," a business
the budget.
dissolved a coalition with Demo-
lobbyist said. "They don't do the
crats he courted fleetingly in a des-
easy things well in the way the Rea-
perate attempt to look like a winner.
gan administration could."
Although Mr. Bush's penchant for
miracles may still produce a budget
One Midwestern Republican sen-
package he can look in the eye, his
ator said Mr. Bush's press confer-
self-styled "Mr. Smooth" image has
ence promise on Tuesday to compro-
mise on tax rates, a 180-degree
suffered.
In the Los Angeles Times-Mirror
change from the GOP stance in bud-
poll, 55 percent approved of the job
get negotiations, left his party no
he is doing, down from 68 percent in
room to negotiate.
September and 76 percent in Au-
Six hours later Mr. Bush reversed
gust. An ABC-Washington Post poll
himself and ruled out such a com-
taken days earlier gave Mr. Bush a
promise.
job rating of 65 percent, down from
The bipartisan deal Mr. Bush en-
76 percent in August, but pres-
dorsed Sept. 30 would raise other
idential advisers point out that the
taxes by $134 billion, but the White
same poll said most Americans
House calls that consistent because
blame the budget mess on Congress.
Mr. Bush long ago abandoned his
In his shifting policy and off-the-
"Read my lips: No new taxes!"
cuff remarks, Mr. Bush seems al-
pledge.
most to be writing political ads for
The deal he liked went down in
Democrats seeking to block GOP
flames. Rank-and-file Republicans
gains in Congress on Nov. 6 and
with longer memories and elections
those who will lay plans for a pres-
four weeks away revolted against the
idential contest in 1992 if they can
higher taxes. Non-leadership Demo-
only find a candidate.
crats balked at hitting the poor with
"The Democrats are playing this
a $60 billion swipe at Medicare and
whole thing like a violin," said one
higher taxes on on home heating oil.
Washington anti-tax activist close to
the budget debate.
Now the original deal, with some
Senate Majority Leader George
tweaking to help Democrats swallow
Mitchell, who has goaded Mr. Bush
it, lives again in the strategy of White
with some success, made sure ev-
House Chief of Staff John Sununu
eryone got the point yesterday.
and Budget Director Richard Dar-
"In view of the apparent reversal
man. They reacted quickly when
of position by the president, we will
ranking Republicans on 14 Senate
now have to reconsider," Mr. Mitchell
committees rebelled. Led by. Sen.
said. "We thought until last night
Bob Packwood of the Finance Com-
that the [plan] would be acceptable."
mittee, the GOP senators came in
Not all the confusion could be laid
force to the White House and de-
on the White House doorstep. A Sen-
manded Mr. Bush stop all talk of a
ate Finance Committee aide mud-
swap.
died the waters by saying the Demo-
Depending on whom you trust,
crats' capital gains cut used "the
Mr. Bush instantly "acquiesced" or
president's proposal." It indeed ap-
"agreed" or said nothing. Unac-
plied a 30 percent reduction, but to
countably, whatever he did was done
a proposed 33 percent top marginal
on the spot without clearing the
rate instead of the real effective rate
move with loyal House Republican
of 28 percent. That would tax invest-
leader Bob Michel or courtesy calls
ment profits at 23.1 percent, not 19.6
to House Speaker Thomas Foley or
percent as Mr. Bush proposed.
Senate Majority Leader Mitchell.
The Washington Times
THURSDAY, OCTOBER 11, 1990
Larry, Curly and Moe'
struggle with budget
By Karen Riley and Major Garrett
1:1E WASHINGTON TIMES
party caucuses after President
Bush's tax flip-flop.
Congressional tax-writers were in
Finance Committee chairman
disarray yesterday as Republicans
Lloyd Bentsen, Texas Democrat, had
and Democrats struggled to resolve
prepared a plan that would raise the
bitter differences over increased tax
individual top tax rate to 33 percent
rates amid confusion over President
in exchange for a capital gains tax
Bush's position on higher taxes.
cut.
Mr. Bush flip-flopped Tuesday,
"I had the deal all worked out until
saying first he would support higher
the president changed his position
taxes on the wealthy in exchange for
on taxes," said Mr. Bentsen.
a lower capital gains tax. But GOP
Democrats in the Senate claim
senators and officials said later the
they have been trying to craft a pack-
president had rejected the tradeoff.
age that not only reduces the deficit
The House Ways and Means Com-
by $500 billion over five years but
mittee sought a safe political middle
also makes the wealthy pay a larger
ground yesterday, passing by voice
share of the nation's tax burden.
vote and with little enthusiasm a
But Senate Minority Leader Rob-
"bare bones" tax and spending bill
ert Dole of Kansas said Democrats
for 1991 that skirts the issue.
are pushing for higher taxes rates
It cuts out things that were "to-
"because they want more money to
tally obnoxious" in the budget sum-
spend." He said both a lower capital
mit agreement, said committee
gains tax and higher rates on the
chairman, Rep. Dan Rostenkowski,
wealthy should be excluded from the
Illinois Democrat.
package.
The Ways and Means proposal
"They've become sort of a tar
now goes to the House Budget Com-
baby," he said.
mittee where it will be reconciled
Mr. Bush tried to divorce himself
with proposals from 13 other com-
from the Capitol Hill squabbles yes-
mittees before the final package
terday.
goes to the House floor.
"Let Congress clear it up," he told
Ways and Means members also
reporters.
agreed that Democrats and Republi-
But Mr. Bush still kept a hand in
cans would be able to propose sep-
behind-the-scenes negotiations, con-
arate tax packages on the floor.
sulting with key members of the
The committee's bill thus would
Ways and Means panel.
be a fallback provision if the Demo-
He talked on the phone Tuesday
cratic and Republican versions
should fail.
night with Rep. Bill Archer, the
ranking Ways and Means Republi-
"It's Larry, Curly and Moe," said
can, and met early yesterday for cof-
Rep. Thomas Downey, New York
fee with Mr. Rostenkowski, before
Democrat.
departing on a campaign trip to
House Democrats said their pack-
North Carolina and Florida.
age likely would contain both lower
"We're delighted to have White
taxes on capital gains - a center-
House input," said Rep. Mickey Ed-
piece of Mr. Bush's 1988 campaign
wards, Oklahoma Republican and a
- and a top tax rate of 33 percent.
leader of the GOP conservatives.
House Republicans rallied
"We're not looking to the White
around an alternate budget package
House for leadership."
that slashes capital gains taxes,
The Ways and Means bill em-
raises income taxes on the wealthy,
braces most of the tax and spending
and seeks deeper cuts in social
proposals in the bipartisan budget
spending.
deal rejected by the House last Fri-
The plan seeks to reduce capital
day. It scaled back Medicare spend-
gains taxes from 33 percent to 15
ing reductions from $60 billion to
percent and raise income tax rates
$50 billion, scrapped the 2-cent tax
for upper-income Americans from
on home heating oil, required a two-
28 percent to 31 percent. It also
week delay for unemployment
eliminates the gasoline tax and the
checks and provided $12 billion in
2-cent tax on home heating oil.
economic incentives for business.
Retained from the bipartisan bud-
Rep. John Kasich, Ohio Republi-
get deal are higher taxes on ciga-
can and co-author of the proposal,
rettes, beer, wine, and distilled spir-
said Vice President Dan Quayle,
its, and a 10 percent tax on luxury
Budget Director Richard Darman
goods.
and White House Chief of Staff John
The proposed tax increase on mo-
Sununu voiced their "strong sup-
tor fuel would be 9-cents-a-gallon
port."
after July 1 of next year, a penny less
Meanwhile, the Senate Finance
than offered in the previous budget
Committee cancelled a scheduled
package.
closed-door drafting session yester-
Both panels are working against
day and met to regroup in late night
an October 19th deadline set by a
stopgap emergency funding bill en-
acted early Monday.
The Washington Times
THURSDAY, OCTOBER 11, 1990
Budget bill wordsmiths face
weekend duty
By Major Garrett
"You probably won't be able to lift
least one Republican alternative.
THE WASHINGTON TIMES
the whole thing," said one committee
Oct. 17-19: Following House ac-
staffer.
tion, the Senate debates the budget
Congress is playing beat the clock
Of all the committees, the House
reconciliation bill. Senate rules al-
with the federal budget.
Ways and Means Committee has the
low 20 hours of debate split equally
Committees are hustling to draft
most influence and power. It has ju-
between Democrats and Republi-
the bills that will put bite in the here-
risdiction over tax policy and domes-
cans. It also allows amendments, as
tofore toothless budget agreement
tic entitlements, such as Medicare.
long as they don't cut spending more
and help transform it into law.
Chairman Dan Rostenkowski, Illi-
than the bill calls for or raise taxes
In all likelihood, "sin" and energy
nois Democrat, met with President
above the bill's agreed-upon levels.
taxes will be raised and such entitle-
Bush yesterday to discuss the bill.
ments as Medicare and farm sub-
Details of the session were not re-
Several amendments could be of-
sidies will be cut. Maybe marginal
vealed.
fered, delaying consideration. If the
income tax rates will be raised and
Here's a rough outline of the re-
bill is changed, it must go to a House-
capital gains taxes will be cut.
maining legislative schedule for the
Senate conference committee to
It's a mystery until the commit-
national budget:
work out the differences. If the con-
tees finish.
Oct. 12-15: House committees
ference reaches agreement and both
The bills have to be drafted over
draft bills implementing the budget
chambers approve, the bill goes to
the weekend to meet a tentative
resolution.
President Bush, becoming law when
schedule outlined by Rep. Leon
Oct. 15: House Budget Committee
he signs it.
Panetta, California Democrat and
begins bundling the 13 spending
Without a budget reconciliation
chairman of the Budget Committee.
bills into the budget reconciliation,
bill, more than $105 billion in across-
He has asked all committees to fin-
including a bill to extend the long-
the-board government spending
ish work on their bills by Friday, but
term debt ceiling, which expires
cuts take effect at 12:01 a.m. on Oct.
will accept them as late as Monday,
Oct. 19.
a spokesman said.
20. The nation's air transportation
Oct. 15 or 16: Budget reconcili-
system clogs, health services are de-
Once that's done, the Budget Com-
ation bill moved to Rules Committee
layed, some law enforcement per-
mittee then bundles all 13 bills into
and, possibly, to the House floor.
sonnel are idled and a sizable num-
a behemoth omnibus spending bill,
Oct. 16-19: House floor debate on
called a budget reconciliation bill.
ber of meat inspectors are kept off
the committee bill and probably at
the job.
The Washington Times
THURSDAY, OCTOBER 11, 1990
The 103 percent problem
ive months and scores of missed budget dead-
the Japanese, throwing elderly folks into the snow and
F
lines since President Bush first began nudging
basically bringing Life As We Know It to an end. The
lawmakers toward a budget agreement, Con-
administration, unfortunately, has busily played up this
gress is right back where it started. Demo-
sky-is-falling scenario.
cratic Party committee leaders, charged with finding
But as any housewife could tell her lawmaker, as-
ways to extract more money from taxpayers as part of
suming he would actually listen to a constituent, the
yet another midnight budget deal, must now do in 10
choice is not higher taxes or Chicken Little. Families
days what they haven't been able to do since April.
in fiscal straits try spending less or at least not quite
Brace yourself for "hard choices," Beltway-style.
"Tonight we reap the bitter harvest of 10 years of
so much. A Heritage Foundation "4 percent solution,"
backed by Rep. Dick Armey and some 40 co-sponsors
self-indulgence," intoned Senate Majority Leader
in the House and by Montana Republican Conrad
George Mitchell. The senator was no doubt referring
to Reagan administration attempts to reduce individ-
Burns in the Senate, would do just that. By holding
non-defense domestic spending to 4 percent annual
ual tax burdens. When all else fails, blame the tax cuts.
increases, roughly the rate of inflation, and defense to
But we have a different sort of "self-indulgence" in
no increase, says Heritage analyst Scott A. Hodge, the
mind, one that can also be measured over a 10-year
federal budget could be balanced by 1994 without any
period. In 1980, U.S. taxpayers forked over $517.1 bil-
increase in taxes at all. Some programs could get
lion to the federal government, a figure that more than
doubled to an estimated $1.073 trillion in 1990. Trouble
bigger increases, some could get correspondingly
smaller ones, as long as the overall rate was 4 percent
is, federal spending rose from $590.9 billion in 1980 to
or less. Lawmakers could make those hard choices.
an estimated $1.197 trillion this year. That's a 103 per-
Democratic Rep. Charles Stenholm has floated an un-
cent increase in outlays. It took Congress 200-odd years
related 4 percent plan that would cap discretionary
to get to $590 billion and just 10 more to double it.
A businessman who continually outspent his rev-
domestic spending programs in conjunction with some
tax hikes.
enues. would end up in jail or the poorhouse. A law-
maker who does so ends up making the rounds of TV
Unfortunately, neither congressional leaders nor
talk shows, swapping sound bites about "hard choices"
the administration has yet signed on to these plans.
with Beltway pundits. Indeed, even as congressional
Nor, under the current summit blueprint, does it ap-
budgeteers chat about the need for budget discipline,
pear they will. But locking out common-sense spend-
the Democratic budget now taking shape would raise
ing limitations and locking in tax hikes has its risks,
federal spending in the current fiscal year an esti-
both to Mr. Bush's plummeting popularity ratings and
mated $70 billion over the last. Only in Washington
to congressional re-election campaigns. Voters may
could this be considered discipline. But the alternative,
find that hard choices Nov. 6 are really pretty easy
we are told, is selling off the Washington Monument to
after all.
The Washington Time
THURSDAY, OCTOBER 11, 1990
WARREN BROOKES
Why the tax revolt lives
hen President
W
Bush discovered
ashington pundits who
what a turkey his
budget advisers
W
depend on big govern-
ment for their livelihood
had cooked up for
tend to scorn that mes-
him, he should
sage, arguing that most federal
have sent it back to the kitchen. In-
spending is on publicly popular pro-
stead, he went on national television
grams that can't be cut.
to invite taxpayers to dine with him
While there is some truth to that
and call their congressmen.
argument it should come as no sur-
Capitol Hill was so besieged with
prise that a very large share of gov-
negative phone calls, at least one ma-
ernment spending does not go for
jor phone system was temporarily
benefits but for overhead. How
gridlocked. That outpouring of tax-
much?
payer fury over $178 billion in higher
Rep. Lamar Smith, a Republican
taxes and fees fueled the stunning
from San Antonio, Texas, decided to
75-vote margin of rejection last Fri-
try and find out. It wasn't easy. "The
1990
1989
1987
1985
1981
1977
1973
day morning.
information is available," he told us,
After more than a year of self-
"but it is not published anywhere in
delusion about America's alleged
a form that we can make use of it. So
willingness to accept higher taxes in
we assigned two staff aides to go
return for fiscal sanity, Washington
over to the Office of Management
woke up to discover a truth: The tax
and Budget. They spent a month or
revolt is alive and well and not just
more combing all of the accounts
in Massachusetts or New Jersey.
that go into general overhead ex-
Even though the U.S. tax burden,
penses, agency by agency.
the total of both federal and other
"We found that indirect costs,
taxes, has remained remarkably
those incurred in things like agency
constant at about 38 percent of in-
Source: Department of Commerce Bureau of Economic Analysis
1973-1990 INCOME
travel and transportation, rental and
come over the last 20 years or so and
is in fact fractionally lower in 1990
lease payments, communications
than it was in 1981 (Table I), the pub-
(telephones, faxes, etc.), utilities and
lic perception is of a government out
miscellaneous, printing and repro-
of control. The $150 billion savings-
duction of documents, office sup-
and-loan scandal and other assorted
plies and materials, altogether
insults have reinforced that image.
added up to nearly $270 billion, not
It does no good for Washington's
counting research and develop-
23.92
23.64
24.13
24.45
25.36
23.89
23.94
Percent
Federal
ment."
denizens in media and government
TAX BURDEN ON U.S. PERSONAL
to rail against the "selfishness" of
That's about a 25 percent over-
American taxpayers. It is very clear
head cost, which Mr. Smith argues
that those taxpayers think 38 per-
should not be difficult or painful to
cent of their income going to taxes
the public to cut by 10 percent, and
The Washington Times
38.24
37.79
38.78
38.22
38.76
38.36
38.09
Percent
Total
is entirely enough, thank you. They
thus save $27 billion a year, or about
also understand that even with the
$135 billion over five years.
so-called "deficit reduction," federal
"Ironically, and we didn't plan it
spending will grow another $225 bil-
that way, that turns out to be the size
lion or so by 1995.
of the tax increase rejected. last
This is why there is growing sup-
week," which Mr. Smith (a stalwart
port for something called "Taxpay-
Bush supporter) voted against.
er's Action Day," on Oct. 27, spon-
Mr. Smith has tried unsuccess-
sored by the Council for Citizens
fully to get the Office of Manage-
Against Government Waste, an out-
ment and Budget and various bud-
growth of the Grace Commission,
get conferees to consider his
headed by Alan Keyes, a former
proposal, which would involve es-
deputy secretary of state in the Rea-
sentially telling every government
gan administration and a Maryland
agency to take somewhat fewer
nominee for the U.S. Senate in 1988.
trips, print slightly fewer doc-
Mr. Keyes has gained the support
uments, make fewer phone calls and
of the National Association of Radio
mailings.
Talk Show Hosts, with cooperating
programs in at least 28 major mar-
"So far, we have had real interest
kets, including Detroit, Los Angeles,
but no real takers." Mr. Smith admit-
Chicago, Washington, San Fran-
ted. In other words, cutting waste in
cisco, Portland, Boston, Dállas, Mi-
this way is not seen as useful be-
ami, Baltimore, St Louis, Denver,
cause it does not inflict pain. It is
Cleveland, New Orleans and Pitts-
therefore irrelevant to a Washington
burgh, all pushing the theme "It's
establishment that has decided to in-
Time For a Clean Sweep."
flict pain in order to make its point
about the need for higher taxes.
This drive in turn is an outgrowth
of the battle against the congres-
That's why we probably need a
"Taxpayer's Action Day."
sional pay raise in 1989. It will urge
taxpayers not only to vote against
taxer and spenders but to take to the
streets with brooms and placards to
produce a visual demonstration for
television.
While the goal is a media event,
the underlying message is anything
but frivolous: Government wastes
too much money to be given a carte
blanche, i.e. a tax increase to waste
still more.
The Washington Times
THURSDAY,
OCTOBER
11,
1990
CAL THOMAS
Trying
leadership potential. Confrontation
is what Ronald Reagan did effec-
tively. Reagan didn't avoid confron-
too hard
tation; he sought it."
In combat, as in politics, the
troops must have a commander will-
ing to fight. But time and time again,
to please
the president seemed to take tough
stands, only to negotiate away a win-
ning position when he faced strong
opposition. Instead of blaming Con-
he fiasco over the budget
gress for the impasse and calling on
T
and the rising level of invec-
the people to help him, as Mr. Rea-
tive against government offi-
gan did, Mr. Bush backpedals and
cials at all levels are proof
invites his ideological enemies in for
that President Bush's strategy of
coffee.
conciliation, compromise, kindness
Three months into the Bush pres-
and gentleness has failed.
idency, commentator William
As he watches his once vaunted
Schneider wrote, "Being seen as a
popularity decline (a CNN-Time
great compromiser tends to dimin-
Magazine poll showed it dropping
ish a president's stature. He may be
from a high of 74 percent in August
respected for his achievements, but
to 61 percent this week), Mr. Bush
he loses his standing as a popular
might consider a lesson from the
hero who inspires loyalty."
first Republican to live in the White
Mr. Schneider accurately pre-
House.
dicted, "It cannot be said with any
Abraham Lincoln said, "If once
certainty that conservatives will be
you forfeit the confidence of your
there for Bush when his back is to
fellow citizens, you can never regain
the wall - as they were for Reagan
their respect and esteem. It is true
during the 1982 recession and the
that you can fool all of the people
Iran-Contra scandal."
some of the time; you can even fool
Massachusetts Democrat Sen.
some of the people all of the time;
Edward Kennedy was right when he
but you can't fool all of the people all
told a Yale University audience in
of the time."
March 1989, "Ronald Reagan was a
Addressing the nation on televi-
successful candidate and an effec-
sion last week, Mr. Bush said, "This
tive president above all else because
is the first time in my presidency
he stood for a set of ideas. He stated
that I have made an appeal like this
them in 1980 - and it turned out that
to you, the American people. Tell
he meant them - and he wrote most
your congressmen and senators you
of them not only into public law, but
support this [budget] agreement."
into the national consciousness."
The calls came in, but they were
Mr. Bush is no Ronald Reagan. As
calls of protest, and this is where Mr.
a New York Times article noted last
Bush's strategy, so different from
spring, "People, not ideas, drive
Ronald Reagan's, proved flawed. The
[President Bush]." But ideas drive
pro-abortionists who were to be at-
people, and Mr. Bush is seen by
tracted into the new Republican "big
many conservatives to have aban-
tent" didn't rush to help the pres-
doned a core set of principles that
ident. Neither did the recipients of
are necessary to win their support.
National Endowment for the Arts
Public disapproval of Congress is SO
grants that Mr. Bush vowed to con-
high that a popular president ought
tinue.
to be able to make political chopped
Reaganite conservatives who had
liver out of members. Properly con-
supported Mr. Bush because he
ducted, an anti-Congress campaign
talked tough on crime, gun control,
by the president could benefit Re-
reduced government and other is-
publican conservatives and perhaps
sues dear to their hearts did not re-
win back a majority in one or both
spond either, except in derision.
houses. Failure to launch such a
Conservative fund-raiser Richard
campaign means that Mr. Bush will
Viguerie, who has been persona non
be set upon by the anti-government
grata at the Bush White House, de-
angel of death about to swoop down
nounced the now-defunct budget
on all of Washington.
agreement between Congress and
To avoid the public's wrath, Mr.
the White House in a letter to GOP
Bush must quickly undergo a com-
maverick Rep. Newt Gingrich of
plete transformation. He must aban-
Georgia: "The conservative move-
don the politics of conciliation,
ment is the adversary of anyone, in
which have failed and haul out the
Congress or the White House, who
heavy guns. He succeeded with such
would skewer the American people
a strategy in 1988 and he can suc-
with higher taxes. We will not affil-
ceed again, but there is precious lit-
iate ourselves with tax collectors for
tle time.
the welfare state."
If he should begin such a cam-
paign, he must this time convince
Republican Sen. William Arm-
the American people that he means
strong of Colorado told me that "by
what he says, because the voters are
trying to avoid confrontation, Pres-
going to want to read something
ident Bush undermined his own
more substantial than the presi-
dent's sometimes quivering lips.
The Washington Times
THURSDAY,
OCTOBER 11, 1990
MAX LERNER
Budget
When Mr. Lewis used a recent ar-
impasse
ticle of Mr. Kennedy's to push his
"decline thesis" on the current Gulf
crisis, an op-ed piece by Joseph Nye
Jr. deftly undercut him.
puzzle
There is a whole new school of
young American political thinkers
- Mr. Nye foremost among them -
who point out that "hard" military
OW does it happen that this
and economic power (and America
H
vaunted American sys-
has a measure of both) are today in
tem of ours has brought
a mix with "soft" power. Mr. Nye
on a characteristic do-
defines soft power as "the ability to
mestic fiscal crisis at the very mo-
co-opt rather than command." Mr.
ment when American world leader-
Lewis now is citing the budget crisis
ship is being displayed as rarely
as further proof that a declining
before?
America is not in a position for
The tempting, but silly, thing is to
"soundly addressing" (Mr. Nye's
resort to corridor gossip and media
phrase) the domestic issues that we
politico-babble, and put the blame on
are all wrestling with.
the "rudeness" of White House Chief
I share Mr. Nye's view of hard and
of Staff John Sununu, or the "in-
soft power and America's possession
triguing" of Budget Director Rich-
of both. But we are all in danger of
ard Darman, or upon any of the chief
omitting from our political/eco-
actors in the summit party "coali-
nomic discourse the seismic
tion." It diminishes the central im-
changes in science and technology
portance of the process itself to ask
that are transforming the world's
(as the talk shows do) who "won" and
landscape and that furnish the real
"lost," from President Bush down.
driving force of our new era.
But the personal whodunits of the
As it happens a fresh book
minimalists, which trivialize the
("Powershift" by Alvin Toffler, ex-
whole problem, come side-by-side
cerpted in Newsweek) sheds more
with the laments of the maximalists,
light on our economic and political
convulsions - domestic and global
- than either the minimalists or
maximalists.
The new
The information revolution he
techno-forces are
continues to explore in his books is
clearly leading to a decentralizing of
disintegrative. More
political power, as it is also doing to
wealth production, product distribu-
than ever we need a
tion, "niche markets" and media
new political
communication.
We can apply some of his leads to
discourse on what will
what is happening to the political
process, including budget-making.
again enable America
A strong science-driven informa-
tion/media revolution has laid bare
to cohere.
the skeleton of our already powerful
interest and pressure groups, and
sheds an intense light on the posi-
who inflate a budget impasse into a
tions their senators, congressmen
crisis of "decline" for the entire
and president take on what affects
American civilization.
them most. More than anything, it is
I cite Anthony Lewis, able and
their "niche" claims for power-
learned commentator, who sees in
sharing in the budget process that
the budget melee nothing less than
have brought it to a sharp halt. And
the validation of Paul Kennedy's
alas, they found in America's age-old
hefty tome on "The Rise and Fall of
system of divided presidential/
the Great Powers" and his thesis of
congressional powers an ally for
America's "imperial overstretch."
their power bid.
The phrase, incidentally, goes
This doesn't mean we must scrap
back to Walter Lippmann. It had real
the system for an even faultier "par-
meaning when applied to Lyndon
liamentary" one that would move
Johnson's disastrous effort to arrest
even further toward what alienates
the "falling dominoes" in Vietnam
the people from government. It does
and the Pacific Rim. But even then,
mean that the new techno-forces are
the folly of the overstretch did not lie
anti-cohesive and disintegrative.
in America's lack of an economic
More than ever we need a new politi-
base for the Viet Nam War. There
cal discourse on what will again en-
able America to cohere.
was economic strength enough for
both guns and butter. The fatal weak-
ness lay in the lack of a base in
America's ethos, with a resulting po-
Max Lerner is a nationally syndi-
rous home-front support for the men
cated columnist.
who faced death.
The New York Times
THURSDAY, OCTOBER 11, 1990
Bush, Leaving G.O.P. Rift in Capital,
Begins a Campaign Swing in South
By MAUREEN DOWD
chairman of the House Ways and
such confusion, "Confused?"
Special to The New York Times
Means Committee.
When Mr. Bush is under pressure, it,
ATLANTA, Oct. 10 - Jesse Helms
Marlin Fitzwater, Mr. Bush's spokes-
is often reflected in a Presidential syn-
has not been very supportive of his
man, said the President did more
tax more fractured than usual. At the
President this year. The conservative
fence-mending on Tuesday night, call-
Martinez rally, Mr. Bush offered this
Republican Senator has crossed
ing Representative Bill Archer of
explanation of what he had done sofar:
swords with President Bush on an
Texas, the ranking Republican on the
"Last Friday night, with no budget
education bill, a textile bill, the Clean
Ways and Means panel, after his frac-
agreement, I vetoed that thing - they
Air Act, a hate-crimes bill and several
tious session with Republican Senators.
call it the continuing resolution. And
foreign service appointments.
Mr. Bush made no note, in his
that keeps the Government - to go if
On Monday, Mr. Helms voted against
speeches, of the chaos he had left in
they signed that, and I had signed it,
the budget outline that cleared the way
Washington by his reversal on taxes, or
that would have just kept the operating
for the President to sign a stopgap fi-
of the rupture in the Republican Party.
of the Government just day in and day
nancing measure to reopen the Gov-
Rather, he acted as though everything
out the same old way. Well, I vetoed
ernment. The Senator called the meas-
was grand in the party.
that. The veto was sustained, and I kept
ure "a turkey," noting acerbically that
"If recent events have shown any-
the pressure on. And to make the point,
he was "opposed to any - read my
thing at all, it is that we need more Re-
no more business as usual."
lips: any - tax increase.'
publicans in Congress," he said at the
Giving up the elliptical President, re-
Mr. Helms was also present at the
Helms fund-raising breakfast.
porters pressed Mr. Fitzwater, Mr.
meeting of Republican Senators at the
Later, at a rally in St. Petersburg,
Bush's spokesman, to clarify the Presi-
White House on Tuesday afternoon,
Fla., for Gov. Bob Martinez, Mr. Bush
dent's shift, which sent an aftershock
where Mr. Bush was told to stop wob-
said he hoped Congress sent him a
through Republicans in Congress al-
bling on taxes. On Wednesday Mr. Bush
budget agreement "which spurs
ready reeling from the budget debacle.
said for the first time that he might
growth, opportunity, and prosperity -
First, Mr. Fitzwater replied: "As
agree to an increase in income tax
G.O.P. that has a nice ring."
they say at the State Department, I
rates for wealthy Americans as part of
Although Mr. Bush knows that polls
have nothing for you on that."
a budget compromise, but he later
Pressed for an answer, he said:
abandoned that position under strong
"We're looking for a common ground.
pressure from Republican senators.
It's up to the committees. We're not
But politics is politics. And even
Helms's attacks
taking a position on any specific item
though Mr. Bush has just suffered the
except to say the original budget pack-
most humiliating week of his Presi-
don't keep Bush
age is what we preferred. We think it's
dency because of the defection of law-
a good one."
makers in his own party, he hit the trail
He said that Republican Senators
today to praise the North Carolinian as
from stumping.
told Mr. Bush on Tuesday that they
well as other Republican candidates in
thought they could come up with a new
Georgia and Florida.
deal "pretty close" to the one that was
In Praise of Helms
defeated.
show the public is disgusted with the
White House officials said on Tues-
At a fund-raising breakfast today in
President and Congress, he tried to
nudge some more of the blame over to
day that Mr. Bush had silently acqui-
Raleigh, N.C., before a polite but sub-
Capital Hill.
esced in the assessment of Republican;
dued audience, the President called
Mr. Helms "a champion of conviction."
At the Martinez rally at Vinoy Park,
Senators, that he must drop any idea of
he said it was "about time" that Con-
a trade on the top tax rate in return for
He praised his "true grit," "independ-
ence," "candor," "courage," "tenaci-
gress "met that responsibility" to pass
a cut in capital gains. But today, Mr.
a budget. His tone was one of outrage,
Fitzwater did more elaborate bobbing
ty," "compassion," "commitment"
and "mainstream values." He called
but it sounded somewhat forced, as it
and weaving that showed that no one
seemed to know where the President
him the embodiment of "God-fearing
often did during his own campaign.
good citizens who believe, as I do, in re-
"I got a little heat for closing the
stood - and if the President did, he
Washington Monument," he said. "And
was not saying. The spokesman
turning voluntary prayer to our na-
I would apologize if there are any of
reversed the White House position and
tion's classrooms."
those Boy Scouts or Girl Scouts here
said that the President just listened to
For his part, Mr. Helms, in a tight
race against the Democratic chal-
from Florida that went up there. But I
the Senators and did not necessarily
lenger, Mayor Harvey Gantt of Char-
know that if I hadn't taken that action,
acquiese.
lotte, called Mr. Bush "a thoroughbred
Congressmen would have all headed
"Everything is on the table," the
gentleman." It was the best he could do
home, marched out in the front of the
spokesman said, talking to reporters in
under the circumstances.
Columbus Day parade all over the
St. Petersburg. A moment later, he
country, telling people what good they
backtracked, observing, "I'm not say-
What was not clear was how much
were doing, instead of staying in Wash-
ing where it is." Alluding to Congress,
lobbying Mr. Bush was doing on the
ington and solving the deficit prob-
he said, "It's their shot."
telephone and behind the scenes as he
caromed around the South.
lem."
In his final appearance of the day,
Conservatives are in a fury over
Mr. Bush spoke at a fund-raising recep-
Churning Up Confusion
tion for Johnny Isakson, the Republi-
what they call the politics of appease-
The White House continued in its
can candidate for Governor of Georgia,
ment practiced by Mr. Bush and his
inarticulate and confused mode.
in Atlanta.
chief of staff. John H. Sununu, once but
Asked, when he arrived in St. Peters-
"Right now, the Federal budget pro-
no longer the trusted messenger to the
burg, if he could clear up the confusion
cess is like a huge Rube Goldberg ma-
right.
An opinion poll published today in
over his wavering position on taxes, the
chine, out of control - producing noise,
The News and Observer of Raleigh,
President replied shortly, "Let Con-
smoke, heat and no light," Mr. Bush
gress clear it up."
said.
N:C., said that a majority of North
Carolina voters gave the President low
Later, jogging in the rain at the Al
"We've had a few days for the smoke
marks on domestic issues, with 52 per-
Lang Baseball Park, where the St.
to clear. Now it's time to move for-
cent rating his performance "fair" or
Louis Cardinals conduct spring train-
ward."
ing, Mr. Bush was asked if he was
"poor."
The staunchly Republican crowd
ready to throw in the towel on a capital-
that gathered to meet Mr. Bush recep-
Campaign Swing in South
gains tax cut. "Read my hips," the
tion expressed steadfast support for
Before he left for his three-state
President said, pointing to that portion
the President.
Southern swing today, Mr. Bush
of his anatomy.
"In my book, he's 100 percent on both
squeezed in a 15-minute meeting in the
Asked, as he continued to jog, about
the budget and Iraq," said Gordon
Oval Office with Representative Dan
raising taxes on the wealthy, he said,
Sawyer, an advertising company exec-
Rostenkowski. Democrat of Illinois, the
seeming grimly pleased about causing
utive from Gainesville, Ga.
IMPASSE CONTINUES
Tuesday Meeting Pivotal
Then, on Tuesday afternoon, the
next week under a rule that would
President met with Republican sena-
allow two amendments, one to be de-
tors. Afterward, Senator Bob Pack-
vised by Democrats and the other.by
wood of Oregon announced that Mr.
Republicans.
Big Battles Seem Likely
Bush agreed with the senators that tax
The Capital Gains Factor
rates should not be increased at any
The Democratic amendment would
in House and Senate
price.
almost certainly raise the tax rate-on
Asked about that, Marlin Fitzwater,
wealthiest Americans at least to 33
the President's spokesman, said, "It's
percent. Whether it would give a break
Over Capital Gains
fair to say he acquiesced in their
to capital gains is unclear.
views."
The Republican amendment would
Tuesday night, John H. Sununu, the
surely contain a lower capital gains
President's chief of staff, told about 40
tax. Whether it would also raise the top
By DAVID E. ROSENBAUM
lobbyists for corporations and trade as-
income tax rate is not certain.
Special to The New York Times
sociations at the White House that a
Since Democrats control the House
WASHINGTON, Oct. 10 - The White
combination of lower capital gains
by a 3-to-2 margin, their amendment
House shifted course again today on
taxes and higher income taxes on the
will probably be adopted and become
tax policy, baffling the Congressional
wealthy would be opposed by the Presi-
part of the bill that will be sent to the
dent, according to one of the lobbyists,
Senate.
tax committees and leaving Congres-
Alan Kranowitz of the National Associ-
The issue between Republicans and
sional leaders confused about which
ation of Wholesaler-Distributors.
Democrats turns on this: Democrats
way to turn.
This morning, however, Mr. Bush
believe the top tax rate needs to be
With legions of lobbyists clogging the
met with Representative Dan Rosten-
higher so that the wealthy would bear
hallways, key lawmakers met in closed
kowski of Illinois, the influential chair-
more of the burden of deficit reduction
sessions throughout the Capitol in an
man of the Ways and Means Commit-
and the poor and middle class less. Re-
effort to make sense of the President's
tee, and afterward Mr. Fitzwater said:
publicans maintain that a low top rate
position and to attempt to write the
"Publicly, we're not taking a position
and a lower capital gains tax, while di-
on any specific items."
rectly most beneficial to the wealthy,
most important deficit-reduction legis-
lation in history. Ten days into the new
The situation was complicated by a:
would help all Americans by improving
fiscal year, the Government remained
split between Republicans in the Sen-;
the state of the economy.
without a detailed budget plan.
ate and House. Senate Republicans do
Even the most sophisticated students
not want to cut the capital gains rate if
of Congress are unwilling to predict
The latest developments left frozen
the price is a higher top income tax
how all this will work out. If, as seems
the issue that has divided the President
rate. House Republicans would accept
probable, Congress approves a tax-
and Congress all year: whether capital
a higher top rate in return for a lower
and-spending bill Mr. Bush does not
gains taxes should be lowered in ex-
capital gains rate.
like, there are two possibilities.
change for a higher income tax rate on
The confusion today was such that
He could sign the bill and then blame
the wealthiest taxpayers. At this point,
Senator Bentsen canceled the meeting
the Democrats in the remaining days
the issue of capital gains is likely to end
at which his Finance Committee was to
before the Nov. 6 election for raising
begin voting on a tax plan he offered
taxes and approving a budget with?in-
up as a free-for-all debate on the House
Tuesday that would have raised the top
sufficient incentives for economic
and Senate floors.
growth. He could also use that argu-
The House Ways and Means Com-
ment to deflect blame to Democrats in
mittee ducked that issue today, approv-
the event of an economic recession.
ing a budget plan that left capital gains
Congressional
Or, he could veto the measure and
unaddressed. The plan would raise the
force Congress to reconvene after the
gasoline tax and Medicare premiums,
election in a lame-duck session to
but in a way that seemed more palata-
tax panels are
tackle deficit reduction once again.
ble to the rank and file than the deficit-
baffled.
Who Will Be Helped?
reduction deal that the House rejected
Some Democrats, including the
last week.
House majority leader, Richard A.
On the Campaign Trail
income tax rate to 33 percent from 28
Gephardt of Missouri, believe the parti-
The bill was similar to one Senator
percent and lowered the capital gains
san nature of the budget battle will help
rate to 23 percent from 28 percent. The
Democrats in the election, enabling
Lloyd Bentsen, chairman of the Fi-
plan also would have raised the mini-
them to claim to be the party support-
nance Committee, suggested Tuesday
mum tax paid by the very wealthy to 25
ing fairness in the tax system.
but withdrew today because of the con-
percent from the current 21 percent.
But others, including Representative
fusion over President Bush's position.
"Frankly, I was ready to proceed
Robert T. Matsui of California, fear the
As uncertainty over Mr. Bush's shift-
this morning," Senator Bentsen said.
fight plays into the Republicans' hands
ing position on higher taxes slowed ef-
"But once they changed their position
by letting them portray themselves as
forts to work out a new budget agree-
on this, we had to redo our package."
the party of prosperity and the Demo-
crats as the party of higher taxes.
ment, the President hit the campaign
Democrats Chart Course
The measure approved by the House
trail for a series of events in behalf of
The Senate Democratic leader,
Ways and Means Committee this after-
Republican candidates in Raleigh,
George J. Mitchell of Maine, said after
noon followed the same framework as
N.C., St. Petersburg, Fla., and Atianta.
talking with Mr. Bentsen, "In view of
the agreement announced by President
[Page D22.]
the apparent reversal of position by the
Bush and Congressional leaders Sept.
By tonight, the White House stance
President, we will now have to recon-
30 and rejected last week by the House
was that President Bush had no public
sider what the appropriate course of
of Representatives.
position on whether taxes on the
action will be."
But the Rostenkowski bill stripped
wealthy should be raised in return for a
A spokesman for Mr. Bentsen said
from the agreement elements that the
the chairman was meeting tonight with
chairman said were "totally obnoxious
lower capital gains rate, and that he
Democratic colleagues and might put
to members on the floor of the House of
was willing to leaveithe matter to Con-
forth a new proposal Thursday.
Representatives." Among the eie-
gress to decide.
For his part, Mr. Rostenkowski
ments were these:
That represents a full-circle progres-
pushed through his committee today a
4A much higher monthly premium
sion from where the President stood
bill that was almost identical to the-one
and annual deductible for medical in
early Tuesday, when Congress ap-
Mr. Bentsen offered Tuesday, with one
surance covering doctors' bills under
proved the broad outlines of a five-year
main exception: it did not mention
Medicare.
Federal budget.
capital gains, income tax rates or the
9A two-week waiting period before a
minimum income tax.
Later Tuesday morning, Mr. Bush
person could receive unemployment
Both the Bentsen and the Rostenkow-
benefits.
told a news conference that if Congress
ski bills would raise the gasoline; in-
Nearly $20 billion worth of tax
agreed to the reduction in capital gains
crease taxes on alcoholic beverages,
breaks for small businesses.
taxes he has long sought, he would con-
tobacco and luxury items; raise the
CA 2-cent-a-galion tax on home heat-
sider higher income tax rates on the
premium and the deductible for Medi-
ing oil.
wealthy. It was the first time he had
care insurance, and over all cut the
The bill difiers slightly from the one
been other than inflexibly opposed to
deficit by $40 billion this year and $500
Senator Bentsen offered Tuesday
higher rates.
billion over five years.
Mr. Rostenkowski's intention is, to
bring this core bill to the House floor
Bush's Tax Stumble: The Capital
Can Hardly Believe Its Eyes
By R. W. APPLE Jr.
Special to The New York Times
WASHINGTON, Oct. 10 - The head-
far, but now he runs the risk that the
President's
said,
"The
next
lines around the country today used
evenhandedness that once looked like
thing
you
words like "flip-flop," "waffle,"
professionalism will look more like
know, they'll be saying Bush has been
"blink," "retreat," "zigzag" and "fick-
weakness.
Carterized." He argued that like
le" to describe George Bush's erratic
In addition, the Republican unity nur-
Jimmy Carter on his doomed energy
course on taxes none of
tured by Mr. Reagan has been frac-
bill, "our man hasn't told the American
tured in little more than a week. As of
people why deficits matter, and re-
News
them exactly calculated to
tonight, Representative Bill Archer of
member they've been conditioned by
Analysis
please the President, who
Texas, the top Republican on the House
eight years of Ronald Reagan to think
is as eager as his prede-
Ways and Means Committee, was
they don't matter, and they basically
cessors to be seen as a
backing a deal in which a cut in the
still think that."
strong leader.
capital gains tax would be paired with
With no real support from the public,
But the comments in the Washington
higher income tax rates for the
the friend said, Mr. Bush is twisting
political community were even tough-
wealthiest Americans, and Senator
and turning in search of some formula
er. A Republican strategist, as reluc-
Bob Packwood, the top Republican on
that will solve an important problem,
tant as other party leaders to be quoted:
the Senate Finance Commitee, was op-
but doing so in a way that makes him
posing it.
look like "the king of expediency."
at a time when the party line looks
more like a doodle, said, "We're really
Even with the President's energetic,
Robert S. Strauss, the Texas Demo-
getting slaughtered, because the Presi-
help, the Republican Congressional
crat who has formally or informally
dent looks indecisive and the Adminis-
leadership could not deliver a majority
advised the last three Presidents, said
in the House last week for Mr. Bush's
Mr. Bush's problems began when he al-
tration looks rudderless."
original budget package. Representa-
lowed Mr. Gingrich to escape without
Thomas Mann, a political scientist at
tive Newt Gingrich of Georgia, the Re-
penalty. "Presidents who let key peo-
the Brookings Institution, said the Bush
publican whip, defied the President
ple in their own parties go into business
Presidency was "threatening to disin-
with impunity. And Patrick J. Buchan-
for themselves look like nice guys, but
tegrate before our very eyes, because
an, a leading spokesman for Republi-
they eventually suffer a heavy penalty
he has completely abdicated his lead-
can right wing, announced in his syndi-
for it," Mr. Strauss said.
ership responsibilities."
cated column today that "Mr. Bush no
longer seems a sure bet for 1992."
"Now the President has major,
That Word Is Back
major problems," he went on, "and
Nor does there seem to be much
John Sununu, who's a very able man in
By giving the impression that he
unity in the White House. A former aide
many ways, doesn't know how to fix
could easily be pushed around - agree-
to Mr. Reagan said todav. "Thev're
them for him."
ing with one group one minute, another
setting a world record for mixed sig-
nals over at that building," and one of
the next - Mr. Bush revived talk of
the best-informed Republican lawmak-
him as a political wimp, a description
ers said he had not the slightest idea
he seemed to have shaken two years
what Mr. Bush really wanted.
ago.
Mr. Packwood insisted Tuesday
Shocked by what they are seeing and
night that the President had rejected
hearing, politicians here offer a spec-
the deal on capital gains and income
trum of explanations for what nearly
taxes that he seemed to embrace that
all see as a major stumble by a Presi-
morning, and the White House chief of
dent who had been highly successful: A
staff, John H. Sununu, told a group of
thin White House staff, with a weak
lobbyists the same thing. Bob Dole of
political operation and a dubious Capi-
Kansas, the Republican leader in the
Senate, said Mr. Bush had ruled noth-
tol Hill liaison team, that has neither
ing out, and Marlin Fitzwater, the
provided good information nor spoken
White House spokesman, who; had
with one voice. A President more com-
echoed Mr. Packwood on Tuesday,
fortable with foreign affairs than with
sounded a lot like MrsDole on Wednes-
the nitty-gritty of domestic policy. An
day.
Administration with no clear idea of
AS his credibility trickled away in
Washington, the President was cam-
where it wants to go and, as several
paigning in North Carolina for Senator
people suggested, an attack of feckless-
Jesse Helms, who had called the origi-
ness at a crucial time.
nal Bush budget deal "a turkey." And
"There's no plan," said Edward J.
when reporters asked him while he was
Rollins, co-chairman of the National
jogging what he planned to do to sort
Republican Congressional Committee.
out the mess, Mr. Bush replied, "Read
"They just wish this would go away SO
my hips."
they could deal with something easy
Stephen Hess, who has written two
like Saddam Hussein. But with four
books about the Presidency, said ne-
weeks left until Election Day, they're
gotiating with Congress on domestic
eroding the Republican voting base."
issues "was never going to be George
No Sun in the Bunker
Bush's forte, and it was never safe
ground for him." Mr. Hess once
Hunkered down at the worst moment
worked for Richard M. Nixon, and he
of the Bush Presidency, White House
said Mr. Bush resembled Mr. Nixon in
aides seemed too stunned to explain
his distaste for the complexity of do-
what had gone wrong, but many freely
mestic policy.
acknowledged their predicament. "Not
a' sunny day in the bunker," one of
'King of Expediency'
them said.
"You get an international problem,
All of this is potentially much more
you call in three people - Cheney,
damaging to this President than it Scowcroft, Baker, said Mr. Hess.
might have been to a Ronald Reagan or
"Budget problems, the table gets too
a Lyndon B. Johnson, because the pub-
large; things slip out of the President's
lic tends to identify Mr. Bush with control. You don't like that, unless
pragmatism rather than policies. Suc- you're basically a Capitol Hill man, a
cess has bred success for Mr. Bush so compromiser like Lyndon Johnson."
A close Republican friend of the
Face Up to the Fairness Issue
ignore at their peril the frustrated
By Jim Leach
demands for fairer burden sharing by
G.O.P. hurts
low- and middle-income Americans
WASHINGTON
on whom they depend for support.
he American people
Naïvely, White House operatives
T
voted in 1988 for a re-
itself - and
left the President vulnerable to the
duction in the rate of
Bush.
fairness challenge by standing stub-
growth of government
bornly by the views of legislators who
and taxes. They did not
would not stand by the President.
vote to mortgage their
Given conservative obduracy and
future to the whims of undisciplined
the resulting political gridlock, the
politicians. They did not vote for os-
that is, interest on the national debt?
President has little choice but to seek
trich politics and depression-inducing
In the savings and loan debacle,
a governing coalition with the Demo-
economics.
Congress learned that refusal to deal
crats in Congress, one in which cen-
At the root of the constitutional
with insolvency problems early cost
trist Republicans can be utilized to
crisis that is gripping Congress is a
far more later. The same with budget
avoid a stampede to the left. A center-
new "duck test" on fairness. While
deficits. The fairest budget of all
Democrat coalition has the potential
conservatives object to anything that
would appear to be a balanced
to save Republicans from themselves
quacks like a tax, liberals sense the
one.
on fairness issues, even though it
outrage of the public and demand
Twelve-figure deficits simply have
could lead to a deficit package with
sacrifices from the wealthy in any
no place on the economic agenda of
fewer new tax deductions and slightly
package that cuts benefits for the
either a true liberal or a true conser-
poor.
vative. Just as it is counterfeit liber-
greater spending authorizations.
The internal priorities of a five-
In a Congress of little leadership
alism to devalue the currency with
year, $500 billion deficit reduction
and less followership, the left and
living-for-the-moment spending, it is
counterfeit conservatism to object to
package are less important than its
right are mugging the middle, raising
the question whether the center can
deficit reduction of the nature
framework. The country cannot
contemplated in the bipartisan
stand the panic that would follow a
hold, whether government can gov-
ern.
package.
significant rundown in the stock mar-
Ironically, by refusing to engage
ket, run-away from Treasury bills
Amid the questions of fairness that
arose over the details of the budget
constructively in the budget summit
runup of interest rates.
package, largely overlooked were the
process and objecting bellicosely to
Deficits of the current gargantuan
unfair consequences that would re-
the initial agreement, conservatives
magnitude are sinkholes in the road
opted out of the governing coalition
to economic recovery. They jeopar-
sult if Congress failed to enact a
and ceded their seats at the bargain-
dize the President's program and the
deficit reduction package.
Would it be fair, for instance, to the
ing table to their adversaries. Their
Presidency itself.
young of America to add $300 billion
ideological rejection of the initial
Credible deficit reduction can only
to the national debt?
package may have been good short-
be achieved if the politics of fear give
Would it be fair to the elderly who
term politics, but it guaranteed the
way to the recognition that what is
would have to pay more for food and
passage of a more liberal alternative,
micro-politically jeopardizing for in-
medicine because of a refusal of Con-
jeopardizing the Reagan revolution.
dividual politicians is macro-econom-
gress to curb inflation?
By refusing to contemplate a
ically sound for the country; if liber-
Would it be fair to taxpayers who
change in the tax code to put high-
als develop a functioning spleen to go
would have to pay more for nothing,
income citizens in the same tax
with their heart; if conservatives re-
bracket as middle-class taxpayers
flect a greater judgment and sense of
Jim Leach. Republican of Iowa, is a
(breaking the so-called "bubble"),
equity to temper their convictions.
member of the House Banking Com-
even in exchange for capital gains
Me-generation citizens cannot af-
mittee.
reform, Congressional Republicans
ford me-generation politicians.
The New York Times
A Tax Cut That Deserves to Die
President Bush's obsessive campaign to cut the
economy doesn't amount to very much. But even
capital gains tax may finally have been buried by
$12 billion is a wildly inflated estimate.
his fellow Republicans.
Alan Auerbach, an economist at the University
He remains somewhere between flip and flop.
of Pennsylvania, provided Congress with compel-
First, he signaled Congress he would swallow a
ling evidence that the Administration plan would
deficit reduction package that linked a higher in-
cause output to rise by at most a billion a year and
come tax rate for the rich to a cut in the tax on
might well cause output to fall. A tax cut could spur
capital gains. The concession sent the Democratic
the economy only if it led to increased rates of
chairmen of the House and Senate tax-writing com-
capital investment. And that would happen only if
mittees off to work out a detailed proposal.
the tax cut caused savings to rise.
Then, only hours later and after heavy lobbying
Yet the tax cut would not affect foreign invest-
by House and Senate Republicans, Mr. Bush re-
ors or pension funds and other tax-exempt savers.
versed himself by agreeing to no such deal. Yester-
So the entire burst of savings would have to come
day he denied coming to any conclusion.
from domestic taxpayers who, according to Dr.
Whatever the reason for the President's flip-
Auerbach's estimate, would have to boost their
flops, the deal has been at least temporarily de-
savings by a preposterous 25 percent.
railed. That's welcome because it would have
The Administration's case is weaker still. The
wrecked the tax code and harmed the economy. It
tax cut would eventually widen the Federal deficit.
deserved to be buried, once and for all.
That means saving would fall, dragging down in-
The idea looks equitable. Capital gains are
vestment and productivity.
overwhelmingly earned by families with annual
The White House and its supporters have ar-
incomes above $150,000. By raising the top income
gued that a lower capital gains tax would free
tax rate and cutting the tax on capital gains, the rich
investors to sell old investments and reinvest. May-
pay for their own tax shelter. But the appearance is
be, but merely shuffling old assets creates nothing.
deceiving. At tax rates close to the levels Congress
In short, it is hard to take the Administration's
has in mind, the wealthy would come out way ahead.
claims seriously. If growth were really the goal, Mr.
Fairness is not the only problem. The Bush
Bush would have restricted his proposed cut to new
Administration has persistently exaggerated the
investment. By including old assets, he rewards his
potential benefits of cutting the capital gains rate
political supporters, not the economy.
below 20 percent, contending that economic output
The President scuttled the deal at least for now
would rise by $12 billion a year for the first five
because of a benighted campaign pledge not to raise
years. Frankly, a $12 billion boost to a $6 trillion
income taxes. Wrong reason. Right outcome.
The Washington Post
THURSDAY. OCTOBER 11. 1990
THE WASHINGTON POST
to me that it's the worst misjudg-
President's Stance
ment of his presidency, and he's
created a brand new opening for
the Democrats."
Seen Hurting GOP
Mann, a specialist on Congress
and congressional elections,
added:
Perceived Sympathy Toward Rich
"Until this week, I thought
Democrats would be afraid that if
Said to Put House Seats at Risk
there was no budget deal before
the election, they'd pay a price,
because voters would say, 'A pox
By Paul Taylor
on everybody's house,' and there
Washington Post Staff Writer
are more Democratic incumbents
than Republican. Now, I think
With fears of a recession growing, the widespread
they can play their 'fairness card'
media portrayal of President Bush as having sided with
and talk about how they couldn't
the wealthy in his budget negotiations with Congress
led election analysts yesterday to downgrade Repub-
get a deal because they are trying
.o get the president to tax the
lican prospects in next month's midterm elections.
"It's unfortunate tactically in terms of how this budget
rich and spare the elderly."
story has been played in the media that you have George
The headlines Mann referred to
Bush clinging to a capital gains tax cut and seeming to
summarized news reports that
favor the rich," said Bill McInturff, a Republican poll-
Bush had sent out conflicting sig-
ster. "That's not the hook you want on the story."
nals about whether he would sup-
"I'm afraid we're in a free fall," said a top GOP cam-
port an upper-income bracket tax
paign strategist who asked not to be identified. "With
rate increase as part of a budget
the president waffling on the tax issue, our base is erod-
deal that would also lower capital
ing and the Democrats' base, especially among senior
gains taxes. They included the
citizens, has a real chance to firm up."
lead front page headline in Wed-
For most of the year, pollsters have been warning of
nesday's USA Today that read,
voter frustration at politics as usual, but until now most
"Bush: Yes, then no on taxing
had concluded that the discontent had a bipartisan cast.
rich." In the Evening Sun of Bal-
But two polls released this week before the confusion
timore, it was, "Bush Flips, then
over Bush's position on taxes suggest that Republicans
Flops on Tax Rates for Rich." In
may be more at risk.
The Washington Post it was,
According to a survey taken by the Wirthlin Group
"Bush Wavers on Taxing Rich as
for the National Republican Congressional Committee
Senators Protest." In Hot Springs,
(NRCC), by 69 to 25 percent voters think the country is
Ark., the headline said he "Re-
heading in the wrong direction. Another survey for the
cants," in Hudson County, N.J., he
Los Angeles Times showed that Bush's approval rating
"Blinks," in Sioux Falls, S.D., he
is down to 55 percent, the lowest level of his presidency
"Backs Off."
and 21 points below where it had been in mid-August.
Mann said that before this week
The Wirthlin Group's "right direction/wrong track"
numbers are the lowest since the last months of Jimmy
he had been guessing that Repub-
Carter's presidency, when the Iran hostage crisis and
licans would lose only five seats in
runaway inflation and interest rates darkened the public
the House next month and per-
mood and helped elect Ronald Reagan.
haps gain a seat or two in the Sen-
ate, an excellent projected mid-
"When the numbers get to these
term showing for the party of an
levels, of course you're concerned,"
incumbent administration. Now,
said Marc Nuttle, political director
Mann predicted, unless Bush can
of the NRCC. "It's not the sort of
regain control of the chaotic bud-
environment where you want to be
get process, "Republicans could
identified with the administration in
lose as many as 15 to 20 House
power."
seats." That would mark their
Many analysts said these risks
worst congressional showing
for Republicans could be com-
since since 1982 when, in the
bounded by news reports of a
midst of a recession, the GOP lost
GOP president seeming to waffle
26 seats in the House.
on the issue of higher taxes for
Democrats delighted in the
the rich.
opening provided by Bush's per-
"The headlines around the
formance on the tax issue.
country today are devastating for
"George Bush has two Achilles'
Bush-I'm really stunned by the
heels-'rich' and 'wimp'-and he
way the president has handled
managed to expose both of them
this," agreed Thomas E. Mann,
on the same day," Democratic
director of government studies at
pollster Harrison Hickman said.
Brookings Institution. "It seems
Fed Board Wavers
prices begin to spread into the econ-
omy, inflating wages and prices of
other goods, the sources said.
On Interest Rate Cuts
Several members of the commit-
tee questioned whether it would be
appropriate to try to use monetary
policy to try to offset the economic
By John M. Berry
impact of a classic supply shock-an
Washington Post Staff Writer
actual or feared shortage of oil-to
Federal Reserve policy makers agreed last week to
the economy.
cut short-term interest rates slightly in response to a
For one thing, the group argued,
budget agreement, but they balked at commiting them-
the full impact of earlier cuts in
selves now to another cut to counteract any further dete-
short-term rates, some of which are
rioration in the economy, according to well-informed
nearly 2 percentage points lower
sources.
than they were in the spring of
The caution within by the Federal Open Market Com-
1988, has yet to show up in the
mittee (FOMC), the central bank's secretive top policy-
economy. The Fed last cut rates by
making body, not only underscored a deep concern about
a quarter of a point in mid-July.
a stubborn inflation rate but also reflected basic doubts
Other members were also worried
about how effective the Fed can be in reversing the cur-
that a drop in rates could further un-
rent economic slowdown by reducing interest rates.
dermine the value of the dollar,
which this week fell to a record low
The Bush administration, its own hands tied by the
compared with the German mark
budget deficit, has been calling on the Fed to cut interest
and is down more than 15 percent in
rates to avoid further economic damage.
recent months against the Japanese
Two days after the $500 billion federal budget deficit
yen. A cheaper dollar can help sales
package was reached last week, the members of the
of U.S. goods and services abroad,
FOMC agreed that the measures should trigger a cut of
but it also makes imported goods
a quarter of a percentage point in short-term rates as
more expensive and can add to infla-
soon as it became law, according to the sources.
tion.
Although there are growing signs of weakness in the
Balanced against these views is
U.S. economy, the FOMC did not go along with a sug-
the belief of many private econo-
gestion by Fed Chairman Alan Greenspan that it also ap:
mists that the economy is in a reces-
prove a second cut linked to signs of
sion-that is, that the nation's pro-
a further economic weakening, the
duction of goods and services is
sources said.
declining significantly-and that it
will continue to decline for some
As it happened, because the origi-
time to come.
nal deal was defeated, the promised;
initial rate cut also remains on hold.
Most of the recession forecasters;
Its implementation likely will depend
and many other economists who are
on how close the terms of any future
predicting very weak growth but not
deal are to the defeated measure.
an actual recession want the Fed to
With consumer and business confi-
cut interest rates to boost the econ-
dence slumping and with higher oil
omy.
prices cutting into spending power,
The day following the closed
the FOMC members doubted that
meeting, Greenspan endorsed the
lower short-term interest rates would
pending budget deal, saying it "ap-
actually give the economy much of an
pears to be a credible, enforceable
immediate boost. On the other hand,
reduction in the budget deficit,
pushing more money into the nation's
stretching over a number of years.
banking system at this point could
Failure to enact the agreement
worsen inflation later.
would, in my estimation, be a grave
Most of the committee expressed
mistake."
concern that a poorly timed cut
Members of the FOMC, who in-
could backfire if it increased investor
clude Greenspan and the other five
worries about future inflation.
members of the Fed board as well as
If inflation expectations rose,
five presidents of regional Fed
long-term interest rates-which af-
banks, did not believe that the deal
lect such key sectors as housing and
would produce anything like the
business investment-likely would
claimed cumulative $500 billion re-
go up. The Fed has little control
duction in the deficit over the next
over these rates.
five years, the sources said.
The committee majority, deeply
Too much of the savings appeared
concerned about an inflation rate
to be due to projections of rosy eco-
that appeared to have been headed
nomic growth and falling inflation
well above 5 percent even before
and interest rates in the later years.
the Iraqi invasion of Kuwait, does
But committee members still felt
not want to pump so much money in-
that many of the spending cuts and
to the economy that escalating oil
tax and fee increases would help re-
duce future deficits significantly and
therefore were prepared to cut rates
once the package passed.
House Member Backs S&L's
Cause After Contributions
By Joël Glenn Brenner
the way these mortgages are record-
Washington Post Staff Writer
ed on the S&L's books, making Stan-
dard Federal insolvent.
Officials of one of Maryland's larg-
Annunzio has said the regulations
est savings and loans, facing a pro-
would be a burden on the S&L indus-
posed federal rule that could force
their S&L out of business, contribut-
try because it would push thrifts "that
much closer to destruction." The
ed $12,000 to a senior Democrat on
the House Banking Committee, who
FDIC says the change in accounting is
later became the champion of their
needed to protect the insurance fund
cause in opposing the rule.
against the risks associated with
The contributions by 14 officials of
mortgage servicing.
Gaithersburg-based Standard Federal
Shortly after the FDIC proposed
Savings Bank, the state's third-larg-
the rule, Standard Federal officials
est S&L, were made in February,
began donating money to Annunzio,
March and April to Rep. Frank An-
the banking committee's No. 2 Demo-
nunzio (D-III.), who later called a
crat and chairman of the House bank-
hearing on the proposed rule, spoke
ing subcommittee that oversees fi-
out against it and asked for a General
nancial institution regulation.
Accounting Office inquiry into the
During February and March, four
rule's effects.
Standard Federal officials, including
Annunzio did not initially disclose
Chairman Allan Lang and his son
the connection between the contribu-
Marvin, who is vice chairman, gave
tors and the S&L in his campaign fi-
$1,000 apiece to Annunzio's reelec-
nancing reports. Under federal law, a
tion effort. Annunzio's reports to the
congressional campaign is expected
FEC provided some information on
to disclose the occupation and em-
the donors' occupations, but none of
ployer of anyone who gives more than
them was identified as working for
$200 in an election cycle.
Standard Federal.
Annunzio said he is amending his
In contrast, when Marvin Lang
filings to reflect the occupations of
contributed to other campaigns this
the Standard Federal officials. The
year, including donations to Rep. Jim
Federal Election Commission (FEC)
Saxton (R-N.J.) and Rep. Steny Hoyer
is questioning Annunzio's initial lack
(D-Md.), he was identified in cam-
of disclosure, which was first report-
paign reports as a Standard Federal
ed by the National Journal.
employee. It's unclear whether Lang
According to FEC reports, a dozen
identified himself or whether those
other S&L executives also donated
fund-raisers sought out his affiliation.
money to Annunzio in the first half of
At about the same time as the
the year. The contributions come at a
time when many in Congress are re-
Langs' contributions, Annunzio's
fusing to accept money from S&Ls-
campaign received separate $200
and when some are even giving con-
contributions from 10 other Standard
tributions back-because of the per-
Federal officials and their spouses.
The 20 contributors, who included
ception that S&L campaign contribu-
Standard Federal's president Emmett
tions helped create the current sav-
ings and loan debacle by influencing
R. Garlock and many of the S&L's
congressional decisions that were
top-level managers, gave another
part of a faulty regulatory environ-
round of $200 contributions in April.
In reports to the FEC, Annunzio list-
ment.
The proposed rule, which has
ed the donors' occupations as "un-
caused an uproar in the mortgage in-
known, to be obtained." The Standard
dustry, would place new restrictions
Federal officials were the only individ-
on S&Ls that service home mortgag-
ual contributors not identified by An-
es-that is, transferring monthly
nunzio in his FEC reports.
mortgage payments from homeown-
Following the initial campaign con-
ers to their lenders and handling oth-
tributions, a Standard Federal execu-
er administrative chores associated
tive also met with Curtis Prins, chief
with mortgage lending, such as pay-
counsel to Annunzio's subcommittee,
ments of property tax and insurance.
to discuss the rule. And another Stan-
Standard Federal services more
dard Federal executive testified
mortgages than any other thrift in the
against the rule at a March 28 hear-
nation, with $25.6 billion of mortgag-
ing before Annunzio's subcommittee.
es as of June 30. But the proposed
rule being considered by the Federal
Deposit Insurance Corp. would alter
Standard Federal officials declined to
one batch of which arrived prior to
ment in equipment and manpower
return repeated telephone calls.
March 30 and the second of which ar-
needed to service large mortgage
Prins said he became concerned
rived April 11-were made for a
portfolios.
about mortgage servicing before he
fund-raising dinner held April 23 at
The FDIC says the new restric-
met with Standard Federal's vice
the National Democratic Club.
tions on capital will protect the FDIC
chairman Marvin Lang. He said Lang
Tynan said it wasn't unusual for
fund against these risks.
was one of a number of thrift execu-
the 20 checks to arrive all on the
But if the new rule goes into effect
tives who had expressed concern over
same day.
as proposed, Standard Federal would
the proposal-concern that had been
"It could be that one person or a
need to raise more than $100 million
similarly expressed by other mem-
couple of people were gathering them
in cash to continue operating its huge
bers of Congress, particularly Rep.
and bundling them and sending them
mortgage servicing business. The
Barney Frank (D-Mass.). The Resolu-
to us," he said.
Maryland S&L already has been clas-
tion Trust Corp., the agency handling
Tynan said the missing identifica-
sified by thrift regulators as a "trou-
the cleanup of failed S&Ls, also has
tion of the donors "wasn't caught" by
bled institution" because it falls $54
come out against the rule, saying it
campaign workers until the day the
million short of the current minimum
would render $130 billion of mort-
FEC filings were due. He said that
capital requirements, and it is operat-
gage servicing contracts held by the
letters were subsequently sent to
ing under a supervisory agreement
RTC worthless overnight.
each of the individuals to ascertain
with S&L regulators.
"Long before any of these [thrift
their occupations and that Annunzio's
In its 1990 annual report, Standard
executives] came in, we had estab-
FEC filings are being amended to re-
Federal said it is "uncertain what im-
lished this was one of the areas we
flect the contributors' association
pact any final amendment [to the
wanted to look into," Prins said.
with Standard Federal.
rule] might have on the savings
He said the hearing on mortgage
Standard Federal has been lobby-
bank's future operations or its capital
servicing was requested by Frank and
ing intensely against the FDIC pro-
position."
other members of Congress, and was
posal, which was prompted by last
Federal regulators, who declined to
set up long before Phillip Bracken, a
year's savings and loan cleanup bill
be identified, said the rules would hit
Standard Federal senior vice presi-
that mandated new restrictions on an
Standard Federal hard, forcing the
dent, expressed interest in testifying.
S&L's capital-the amount of money
S&L into insolvency. Federal regula-
Bracken was asked by a group of
that thrift owners must reserve on
tors could then take control of the
thrift executives who have been lob-
the books to protect the FDIC fund
thrift or close it.
bying against the rule to speak at the
from potential losses.
"This ruling represents a life or
hearing on their behalf, Prins said.
The proposed rule would allow the
death situation for them," said an
"Had the campaign contributions
value of mortgage servicing contracts
FDIC attorney who asked not be iden-
been made or not made, it wouldn't
to count for only 25 percent of capi-
tified. "They've built their entire busi-
have affected the decision to hold
tal. In the past, S&Ls faced no such
ness around this-and quite frankly,
these hearings at all," Prins said. "I
restrictions and counted the entire
that's exactly the kind of thing that
didn't even realize that Bracken was
value of the contracts toward mini-
worries us."
affiliated with [Standard Federal]."
mum capital requirements.
The FDIC was supposed to make a
Prins also said he did not know that
But many questions have been
final ruling on its proposal in July.
Lang and other Standard Federal ex-
raised about the actual market value
However, the enormous debate sur-
ecutives had contributed to Annun-
of mortgage servicing contracts. In
rounding the proposal has forced it to
zio's campaign.
addition, there are a number of risks
delay the decision until the end of the
Kevin Tynan, Annunzio's campaign
associated with mortgage servicing,
year. Public comment on the rule is
manager, said the $200 donations—
including the risk of the large invest-
being extended through Nov. 13.
Uncertainty at White House
Leaves Tax Writers Confused
By John E. Yang
terday, Bush said, "The clock is run-
ident pulls his party together and
Washington Post Staff Writer
ning and it's going to keep on run-
speaks with one voice, it's very, very
ning and I'll veto it again if we don't
hard to do what we must do for the
Uncertainty over whether President Bush will accept
get a satisfactory deal."
sake of the country."
a higher income tax rate for the wealthiest Americans
The president had appeared to
Republicans, meanwhile, sought
in exchange for cutting capital gains taxes threw con-
clear the way to a quick agreement
to turn the tables on the Demo-
gressional tax writers into confusion yesterday, seri-
Tuesday by saying he would be will-
crats, who have argued that tax
ously diminishing prospects for a quick solution to the
ing to give up one 1988 campaign
rates for the wealthiest would have
months-long fiscal impasse.
promise, not to raise income tax
to be increased to offset the benefit
The House Ways and Means Committee approved a
rates, in order to win another, cut-
of a capital gains tax cut. "Some
stripped-down, five-year $145 billion tax package that
ting capital gains taxes. House
Democrats are now trying to force
puts off fights over higher income tax rates, capital
Ways and Means Committee Chair-
us to take capital gains in order to
gains tax cuts and tax breaks for other investments.
man Dan Rostenkowski (D-III.) and
get more money by raising tax
Administration officials, meanwhile, spent much of
Senate Finance Committee Chair-
rates," said Senate Minority Leader
yesterday shuttling across the Capitol, meeting with
man Lloyd Bentsen (D-Tex.) each
Robert J. Dole (R-Kan.).
anxious House and Senate Republicans in an attempt to
planned to propose both higher in-
calm them and clarify the president's position. Bush set
come taxes on the rich and lower
Treasury Secretary Nicholas F.
Brady and Office of Management
off the controversy Tuesday by first publicly suggesting
capital gains taxes, which in general
benefit the rich.
and Budget Director Richard G.
his willingness to accept a capital gains cut-income tax
Darman met with House and Senate
rate exchange and then giving a group of protesting
After a White House meeting with
GOP senators the impression he was backing off that
Bush early yesterday morning, Ros-
Republicans in the Capitol. Sources
said some House Republicans feel
position.
tenkowski devised a strategy of ap-
the administration has not given
Campaigning for Republican candidates in three
proving a bare-bones package of tax
them adequate attention through-
southern states yesterday, the president steadfastly
increases and benefit program sav-
out this process. Rep. Mickey Ed-
refused to clear up the confusion. Asked in St. Peters-
ings and then fighting out such issues
wards (Okla.), chairman of the
burg, Fla., if he would clarify his position on the tax
as higher taxes on the rich, lower
House Republican Policy Commit-
issue, Bush said, "Let Congress clear it up."
taxes on capital gains and Medicare
tee, arrived at the meeting room
White House press secretary Marlin Fitzwater made
savings on the House floor, accord-
just as Darman did. Edwards put
an effort to put a lid on the controversy, refusing to
ing to committee aides. One Dem-
out his hand and said, "Hi, I'm Mick-
clarify Bush's remarks, explain them or withdraw them.
ocrat on the committee called the
ey Edwards. Pleased to meet you."
By early last night, after being pressed a half-dozen
scheme "punting on first down."
House Republicans are expected
times on Bush's current position, Fitzwater said, "I
Meanwhile, the Senate Finance
to meet today with Bush at the
want to bob and weave on this today."
Committee twice postponed and then
White House.
Asked why, he said, "Because we want Congress to
canceled a meeting yesterday. "I had
The package the House Ways and
the deal all worked out until the
Means Committee approved by
come up with a package. We don't
president changed his position,"
voice vote after meeting behind
want to signal on any specific pro-
Bentsen said. Panel Democrats met
closed doors for nearly five hours
vision."
into last night trying to figure out
closely follows the tax and benefit
The disarray in the administration
how to proceed.
program provisions of the failed
and on Capitol Hill makes it increas-
Bentsen said he will meet with the
budget summit agreement.
ingly unlikely that lawmakers will be
full committee today to outline his
It would drop all the tax breaks,
able to meet their self-imposed dead-
plans. "We've got good options," he
including the contentious package of
line of Oct. 19 to settle details of tax
said. Asked if a capital gains tax cut
breaks for investments in new small
increases and spending cuts to meet
and income tax rate hike for the rich
companies, that were contained in
the budget resolution's goal of saving
would be among them, he said,
the original and rejected budget plan.
$500 billion over five years, $40.1
"That'll be one of the options."
The new plan also would raise fed-
billion of it in the fiscal year that be-
Democrats seized on the confusion
eral taxes on gasoline from 9 cents a
gan Oct. 1.
in an attempt to blame Republicans
gallon to 20 cents a gallon, rather
"It's not impossible," said House
for what could be an extension of the
than 21 cents a gallon as envisioned
Budget Committee Chairman Leon
already protracted budget deadlock.
in the budget agreement. It would
E. Panetta (D-Calif.). "But it will
"We Democrats are still trying to
exempt home heating oil from the
take a hell of a lot of cooperation."
negotiate, but we don't know who to
proposed 2-cents-a-gallon tax on re-
Bush has said he will not sign leg-
negotiate with," said Sen. Wyche
fined petroleum products.
islation that would continue to fund
Fowler Jr. (D-Ga.). "Until the pres-
After heavy lobbying by the truck-
the government on a short-term ba-
ing industry, the plan also would ap-
sis beyond Oct. 19 unless lawmakers
ply a 9-cents-a-gallon fuel tax to rail-
have fully implemented the deficit-
roads, the first time that industry has
cutting deal by then. In Atlanta yes-
been covered by such a tax.
Rostenkowski also restored the
The Washington Post
THURSDAY, OCTOBER 11, 1990
Years Late,
U.S. Apology
Is Still Sweet
By Carlos Sanchez
Washington Post Staff Writer
The beam from the policeman's flashlight awak-
REPARATIONS, From D1
The young Okura couple, along
ened K. Patrick Okura in his bedroom and made
with their mothers and siblings-
Okura and his wife, Lily, both
him realize, on that December night 49 years ago,
the fathers remained separated
retired, spent most of their first
that his American citizenship meant nothing.
from them for three years-lived in
year of marriage living in a tempo-
His father was arrested that night; Okura and
horse stables for the next nine
rary internment camp on the
his new bride were spared.
months, witnessing the arrival of
grounds of Santa Anita raceway,
: Earlier that day, Japanese war planes had at-
19,000 others in that location
near Los Angeles.
tacked Pearl Harbor, drawing the United States
Okura, the highest-ranking Jap-
alone, and experiencing one of the
into World War II and ushering in an era of preju-
most blatant breaches of civil lib-
anese American working for the
dice and hysteria against people of Japanese de-
City of Los Angeles, was accused of
erties in U.S. history.
scent.
plotting against the government.
"It was a very sad time," Okura
"It was terrifying," Okura said of the period be-
A syndicated newspaper columnist
said, describing an encampment
ing recalled this week as the U.S. government be-
said the American-born psychologist,
where he and his wife lived in an 8-
gins fulfilling its commitment under the 1988 Civil
who earned a master's degree at
by-8-foot tack room that smelled of
Liberties Act-to officially apologize to more than
UCLA, was trying to pass as Irish by
horses. They considered themselves
60,000 surviving Japanese-Americans who were
spelling his name O'Kura.
lucky because they had privacy.
interned during the war.
The column said Okura had re-
Okura and his wife were allowed
An estimated 3,000 of the 5,000 Japanese
cruited 50 Japanese Americans into
to leave the internment camp when
Americans living in the Washington metropolitan
city service, and was leading a plot
a Catholic priest in Omaha spon-
area were taken from their homes, and qualify to
to sabotage the city's water and
sored them and six other families
receive a monetary award.
power plants. Twice, the mayor
for jobs in the Boys Town youth
Okura, 79, of Bethesda, recalled that the hys-
asked him to resign after the false
home. One of his younger brothers
teria against his people began almost immediately
allegation was published and twice
got out of the camp by volunteering
on the day of the attack, Dec. 7, 1941. The FBI,
he refused, Okura said.
for the all Japanese American
aided by federally deputized police officers, ar-
Years later, after requesting his
442nd Regimental Combat team,
rested more than 2,000 community leaders of Jap-
FBI file through the Freedom of
and was killed in action.
anese descent along the West Coast-including
Information Act, Okura found out
"This is a very significant histor-
Okura's father and fäther-in-law.
the mayor had labeled him the most
ical event in our lives," Okura said
For Okura, among the first group of 23,000
dangerous Japanese in the city, and
of the reparation program, the cul-
Japanese Americans scheduled to receive a
ordered the police department to
mination of more than a dozen years
$20,000 check and a written apology from Pres-
investigate him.
of heated lobbying efforts. Okura
ident Bush, this federal atonement is a long-
Okura and his family were among
and his wife said they intend to do-
awaited validation that democracy works.
the first 7,000 Japanese Americans
nate their $40,000 to the Okura
"Despite the injustices that may exist in our
to receive notices from the War De-
Trust Fund. which he established
system of democracy, if you stick to it, if the cause
partment in March 1942 that they
with $25,000 two years ago. The
is right, then you do have a chance of righting the
were being interned as threats to
fund gives stipends to Asian Amer-
wrong," he said.
national security. They were ordered
icans for leadership training in the
This redress, estimated to cost $1.25 billion,
to report to the race track for a two-
human services field.
comes 48 years after President Roosevelt signed
to three-week stay, until permanent
Despite the indignities he expe-
Executive Order 9066, which resulted in the in-
facilities were built in remote sites in
rienced, Okura said he is not bitter.
ternment of more than 120,000 Japanese Amer-
11 states. Not a single incident of
"How one handles hardships makes
sicans, 70 percent of whom were U.S. citizens.
espionage involving Japanese Amer-
"Not only the authorities. but the public was un-
you a better person," he said. "You
icans was ever documented.
friendly. Hostile. Nasty," he said.
accept it and make the best of it."
See REPARATIONS, D5, Col. 1
Senate Shelves Cuts
In Social Security Tax
Moynihan Bill Scuttled by GOP Maneuver
Moynihan created a stir late last
By Helen Dewar
Washington Post Staff Writer
year when he proposed the Social
Security tax rollback as a way of
The Senate yesterday shelved a
eliminating huge surpluses in the
proposal by Sen. Daniel Patrick
retirement trust fund that he said
Moynihan (D-N.Y.) to cut Social Se-
were being used to mask the true
curity payroll tax rates after Repub-
size of the federal budget deficit.
licans succeeded in blocking consid-
In a modified version of the pro-
eration of the measure on grounds
posal, Moynihan recommended
it violated congressional rules
scaling back the payroll tax for So-
against budget-busting.
cial Security, exclusive of Medicare,
The Senate voted 54 to 44 in fa-
from 6.2 percent to 5.1 percent
vor of the waiving the rules, falling
over the next six years. For the
short of the 60 votes needed to con-
same period, he proposed to in-
sider a bill that exceeds revenue or
crease the amount of wages subject
spending limits. The vote apparent-
to the tax, raising the wage level to
ly doomed the proposal for this
$85,500 by 1996 instead of:
year.
$70,500.
Scuttled along with Moynihan's
In invoking budget rules to block
proposal were amendments to re-
consideration of the proposal, Sen.
peal the current limitation on earn-
Ted Stevens (R-Alaska) contended
ings by Social Security recipients
that proposing such a tax rollback
and to increase payments to Social
without saying how it would be paid
Security beneficiaries born between
for amounted to "demagoguery." Ei-
1917 and 1926, the so-called "notch
ther the Social Security trust fund
babies" for whom benefits were re-
would be undermined or other taxes
duced in a 1977 formula change.
would have to be increased, he ar-
Altogether, the proposals would
gued.
have cost nearly $170 billion over
Claiming a moral victory because
five years, threatening to put a big
a majority of the Senate indicated
hole in the five-year, $500 billion
approval of his proposal, Moynihan
deficit-reduction package that Con-
vowed to bring it up for a vote ev-
gress is attempting to pass before it
ery year until it passes.
adjourns this month. Election-year
Sens. Paul S. Sarbanes (D-Md.)
politics appeared to play as big a
and Barbara A. Mikulski (D-Md.)
role as budget considerations in the
voted to waive the budget rules to
outcome, as Republicans scrambled
allow consideration of the bill, while:
to find a way to scuttle the measure
Sens. Charles S. Robb (D-Va.) and
without having to vote directly
John W. Warner (R-Va.) voted
against it.
against doing so.
Tax Confusion and a Party Divided
Amid Conflicting Strategies, Many in GOP Still Unsure of Bush's Aims
By Dan Balz
proper, if it can be worked in proper
lican senators, aided by anonymous
Washington Post Staff Writer
balance between the capital gains
White House aides, to slam it shut
rate and income tax changes, fine."
hours later after a meeting at the
The confusion over President
Watching the performance on
White House.
Bush's stand on higher tax rates for
television, one administration offi-
Yesterday morning, after seeing
wealthy taxpayers, which played
cial said, "I almost fell off my chair"
the portraits of confusion on tele-
out Tuesday in an embarrassing and
because what Bush said "went well
vision and in the newspapers, Re-
politically damaging sequence, re-
beyond what we thought was the
publicans attempted a partial re-
flects deep divisions inside the ad-
position."
treat from the apparent flip-flop.
ministration over budget strategy
A senior administration official
"He didn't make any decisions
and sharply conflicting approaches
said the confusing events that fol-
[Tuesday]," Senate Minority Lead-
favored by House and Senate Re-
lowed were "just a replay of the ar-
er Robert J. Dole (R-Kan.) said of
publicans.
gument we have been having within
Bush's reaction to the GOP sena-
Scrambling to maintain Repub-
the administration for the past 36
tors' recommendation that he take
lican unity in the face of the Dem-
hours."
the issue off the table. "He listened
ocratic majority in Congress, the
Sununu, Darman and Treasury
to us. He didn't announce his posi-
White House has found itself mired
Secretary Nicholas F. Brady "want
tion at all. He didn't acquiesce."
in disagreement with no clear way
to close the deal and believe any
Seventeen senators visited the
out. Many loyal Republicans, in and
reopening of these problems you
White House late Tuesday after-
out of the administration, say they
couldn't solve over weeks and
noon. There are conflicting reports
are uncertain what the administra-
weeks will make sure you can't
about how they ended up there.
tion is trying to do now. Bush said it
close the deal at all unless it is on
One account said Dole and Pack-
was up to Congress to clear up the
straight. Democratic terms," the
wood decided they wanted Bush to
confusion.
official added.
know of opposition among Senate
Bush reportedly was not happy
But complicating White House
Republicans. Another account said
with the way events unfolded Tues-
strategy-making was the conflict
that Sununu and Darman, knowing
day. But White House Chief of Staff
between senior Senate Republicans,
the senators' views, wanted Bush to
John H. Sununu and Office of Man-
who fear Bush cannot strike a good
hear them firsthand in an effort to
agement and Budget Director Rich-
deal with the Democrats, and many
push him back from his morning
ard G. Darman continued to work to
House Republicans, who once op-
statement.
block any new agreement that
posed increasing tax rates but are
Some White House aides backed
strays too far from the package
now talking about being willing to
up Packwood's statement, with
soundly rejected by the House last
do so.
Sununu telling a business group
week.
What happened Tuesday? The
that higher rates were off the table.
White House officials said they
simplest explanation may be that
The White House divisions,
had agreed that Bush's message
Bush went farther than intended
which are more tactical than ideo-
during his news conference Tues-
during his news conference and
logical, grow out of the administra-
day was that he was not ruling out
then backed off less than Sen. Bob
tion's desire to bring back into the
or in any specific provision and that
Packwood (R-Ore.) suggested when
fold House Republicans who voted
all issues were on the table in the
he told reporters that Bush had "ac-
against Bush and the package last
new round of budget negotiations
quiesced" to the Senate Republi-
week. What has astounded White
with Congress. Instead, when asked
cans.
House officials is that many of those
if he were now willing to accept
Bush opened the door to a rate
same Republicans, including House
higher rates to get a capital gains
hike in exchange for a cut in capital
Minority Whip Newt Gingrich (R-
cut, he replied: "That's on the table.
gains taxes Tuesday morning, then
Ga.), have been talking up a new
That's been talked about. And if it's
appeared to allow a group of Repub-
compromise that would include
higher rates in exchange for capital
gains.
One official said that those who
now favor striking a deal believe
that the top rate on the richiest tax-
payers eventually will be increased
and that it behooves the Republi-
cans to get something for it, such as
capital gains tax cuts, when they
can.
Vice President Quayle in partic-
ular has sided with House Repub-
licans, largely to build unity.'
But the administration now faces
a difficult strategic decision. Senate
Republicans, because of their num-
bers, are a potent force in the ne-
gotiations. They have the votes to
sustain a presidential veto of any
final package that Bush dislikes.
House Republicans, far more a mi-
nority, are seeking a role in the ac-
tion in the House, which is domi-
nated by Democrats.
One Democrat said Bush's only
real hope is to negotiate with Dem-
ocrats in the House and a bipartisan
coalition in the Senate.
White House officials also fear
that some of the House Republicans
now favoring a deal on higher rates
may be using it to appear reason-
able but ultimately want to derail
the negotiations and turn the fight
into a partisan battle.
Bush has said privately that he
still fears political damage if he
bows to higher rates, although po-
litical advisers have told him "it's no
big deal." He also has been told that
the Democrats already have won
the argument because the president
is now seen as defending the rich.
The current Sununu-Darman
strategy appears to be aimed at
persuading House Republicans, who
have been invited to the White
House today in waves, to abandon
their talk of raising tax rates in or-
der to unify the party in both cham-
bers and then hang tough. What
was unclear yesterday was where
Bush now stands.
Michael Kinsley
Capital Gains Dementia
We have reached a nadir of dishonesty in
vestments held when you die escape tax
the budget debate when some Republicans
completely-a $5 billion annual loophole.
justify their opposition to cuts in Medicare
To index capital gains for inflation-another
benefits by defining such cuts as a "tax
frequent suggestion-would increase the bias
increase on the elderly." We also have
against other forms of investment. Like a capi-
reached a nadir of illogic when Democrats
tal gain, interest income is partly compensation
propose to exchange higher top-bracket tax
for the erosion of your principal. And if you
rates for a cut in the capital gains tax.
start indexing the tax on profits, you also should
Although the rich should certainly pay more
index the deduction for borrowing costs. Part of
taxes, there is nothing wonderful about higher
the interest paid on debts also merely compen-
tax rates as such. Higher tax rates do discour-
sates for the erosion of principal. If people can
age economic activity. There are plenty of
borrow money and deduct all the interest, then
ways to sock the rich without raising marginal
invest it but pay tax only on the profit above
rates-by closing loopholes instead. Sen. Lloyd
inflation, they are going to screw up the econo-
Bentsen's idea of raising the "alternative mini-
my and the federal treasury but good.
mum tax"-the tax you pay if you take too
Some people-most notably the editors of
many deductions-is a good technique for
The Wall Street Journal-argue that the limit
doing this through the back door.
on deducting capital losses makes the tax on
To raise marginal rates and then give back
capital gains unfair. Here we reach the farthest
the money through a capital gains break is
shores of capital gains dementia. Watch closely.
doubly crazy. Fairness aside, the problem
Capital losses are fully deductible each year
with a capital gains break is that it violates
against capital gains of the same year. Beyond
the principle of tax neutrality: letting the
that, you can deduct up to $3,000 a year of
market, rather than tax considerations, dic-
capital losses against your ordinary income.
tate economic decisions. Neutrality is a good
And you can "carry forward" any losses beyond
capitalist notion: it holds that the free market
$3,000 for use in future years.
knows better than the government how re-
So ask yourself: Who is hurt by the limit on
sources can be used most efficiently.
capital losses? Two groups come to mind.
First there are those who, year after year,
Raising the ordinary tax rate while cutting
lose more than $3,000 on their investments.
the capital gains rate makes the distortion
Such people are surely to be pitied. But they
even worse. The bigger the gap, the bigger
are hardly the key to a thriving economy. And
the opportunity to create tax shelters. Many
the capital loss obsessives seem remarkably
of the Democratic Party's contributors and
well-dressed to pass for such losers.
fundraisers are in exactly the lines of busi-
In truth the capital loss limitation affects a
ness-real estate, oil and gas, entertain-
ment-that would benefit most from the
larger and more prosperous group: those who
can arrange their affairs to generate capital
combination of a higher top tax rate and a
losses while actually doing quite well, thank
new capital gains break. I say no more.
you. The key point about capital gains and
The New York Times advocates "a tax cut
losses is that you can choose when to take
that is limited to new investment in venture
them. With no limit on capital losses, it would
capital and other risky start-up companies."
be easy to create transactions that generate
Many others are tempted by the idea of
huge gains and losses in roughly equal
sorting out the "new" or "risky" investments
amounts. You take the loss (thereby reducing
and only giving a tax break to these. But the
the tax on your other income) and postpone
problems of definition-and the certainty that
the gain-perhaps indefinitely. Et voila!
clever lawyers will bend them out of shape-
In one of its recent screeds on this subject,
merely illustrate the conceptual fallacy. Why
The Journal gave this game away. "If you
give a break to a new company but not to an
allowed full deduction of losses, the capital
established firm that wishes to branch out
gains tax probably wouldn't raise any revenue
into a new product line? And so on.
and might as well be abolished," it sneered.
The tax code already gives a big break to
But surely The Journal does not envision an
capital gains compared with other forms of
economy with no net capital profits. That
investment income. Capital gains accrue tax-
would be an ironic result of taking. The Wall
free until you choose to liquidate the invest-
Street Journal's advice. What The Journal
ment. By contrast, you pay tax on interest
actually envisions is an economy with lots of
income every year. For an investment yield-
profits, but no tax on them. There's nothing
ing 10 percent annually and held for 20 years,
wrong with profits, but there's nothing wrong
the after-tax profit on a capital gain is almost
with taxing them either.
50 percent larger. And capital gains on in-
© 1990. UFS/The New Republic Inc.
George F. Will
Deals and Delusions
This was the week when the real George
plank (assuming billions to be gained from
Bush stood up, and a bipartisan chorus told
improved enforcement of the revenue
him to sit down until he has learned his
code;) and some Republican socialism (tax
lines.
shelters called "incentives" to subsidize in-
One morning he said trading higher taxes
vestment in certain supposedly private en-
on the rich for a lower capital gains tax rate
terprises).
might be "fine." That afternoon, after some
The proposed 1991 tax increases and
Republican senators told him otherwise, he
spending cuts amounted to only 0.7 percent
indicated he would not touch such a smelly
of GNP; all the taxes would have reduced
trade with tongs. An impertinent Democrat
Americans' after-tax income about one per-
wondered what Bush would think on the
cent. And the stumbling block in the budget
morrow; some Republican senators said he
negotiations has been the Republican insis-
had not said what some other Republicans
tence on a capital-gains cut that the presi-
said he said.
dent's own economists predict would in-
Does it matter? It is all only words, and in
crease the annual growth rate just 0.06
Washington today words are like chips in a
percent. That amount is too tiny to forecast
casino-plastic parts of a game.
meaningfully.
Evidence that Washington is, strictly
speaking, deranged-literally disconnected
BUDGET
When numbers, supposedly instruments
of precision, are instead used for propagan-
from reality-includes Richard Darman's
da, then the cavalier use of words, as in
statement on Sunday television that Bush
Darman's gloss on Bush's speech, is unsur-
did not do what the nation saw him do.
prising. If all this were purely cynical, it
Darman, the budget director, said the presi-
would be less alarming than the weird
dent, in his television speech concerning
sincerity of people who have been striking
the budget deal, "wasn't actually asking the
deals with each other for so long they really
public to support this."
think deals determine reality. They think
This is what Bush said: "Tell your con-
the meaning of numbers and words is "on
gressman and senators you support this.
the table," part of the "package." Partisan
Urge them to stand with the president.
meanings are asserted, differences get split
Urge them to do what the bipartisan
and reality is expected to conform to the
leadership has done.
Urge them to
"deal."
stand with their congressional leaders.
Participants in the budget marathon are
BY
ELEANOR MILL
Ask them to fight for the future of your kids
exhausted and genuinely indignant when it
by supporting this budget agreement.
is suggested that the numbers they are
Darman insists the president actually
wanted to be left alone and elected just the
dealing with are small compared to the
said "in effect, to congressmen, not the
president to perform that nonfunction, a
problem as it already is, before recession.
American people, to congressmen, 'I'm tell-
president who believes in bipartisanship,
The best face that can be put on all this is
ing your constituents this is a hard vote for
put by Sen. Phil Gramm (R-Tex.), who says
you.' Oh. The president goes on three
domestic summits, the blurring of party
this:
differences.
networks to address 535 people 16 blocks
The day Gramm-Rudman was passed,
away? Apparently even when using the
But now, out of the blue, as it were, he
federal spending was 23.9 percent of GNP.
mass media, Washington talks only to itself.
tells the nation that if we go on piling up
Today it is 22.6 percent. If something with
This is Washington solipsism: Nothing but
deficits as we have done during the 10
the net configuration of the deal just reject-
us exists.
Reagan-Bush years, we will not "survive,"
ed is finally adopted and enforced, then five
Trying to trigger public support, the
because deficits are like "cancer." However,
years from now spending will be 18.3 per-
president on TV triggered the public's op-
this life-threatening disease calls for noth-
cent of GNP. The only new entitlement
position, and this question: How can a
ing radical-no political equivalent of sur-
enacted in the Gramm-Rudman era was the
president so popular be so powerless? The
gery, chemotherapy, radiation. More like
catastrophic health insurance program,
answer is lurking in the question: He is
half an aspirin.
which was a political catastrophe because
popular because he makes minimal use of
The rejected summit package was a pas-
people hate socialism that comes with a
power.
tiche of cooked assumptions (about growth
price tag.
He ran a blue-skies campaign and even
and interest rates), dribs and drabs of little
So, chuckleheaded as everyone here may
just 8 1/2 months ago said he saw in the sky a
taxes (a tax code painted by Jackson Pol-
seem to everyone out there, it is possible to
deficit (now projected at about $300 billion)
lock;) spending "caps" that may be only as
believe that progress is being made. But the
of only $64 billion. After the polarizing
binding as the Gramm-Rudman deficit-re-
way it is being made is deepening the
conflicts of the Reagan years. the country
duction requirements, a Dukakis campaign
public's misanthropic mood.
Republicans us. Republicans
N THE budget, the daily shifts and convul-
leaders also lost in the House last week. To
sions within the Republican Party are
create the kinder, gentler budget they think can
more interesting and probably more im-
pass, they have decided to ease the cuts that they
portant than the related feuding between the
and the president were supporting in Medicare
Republicans and Democrats. Rarely does it hap-
and agriculture, abandon the ghoulish idea of
pen that an otherwise popular president is twice
limiting unemployment compensation on the eve
shot down by members of his own party on more
of a recession and reduce the energy tax increas-
or less the same major issue but from different
es to which they had earlier agreed.
directions in less than a week. But on the defining
To finance this they suggested they would drop
question of taxes, President Bush was first re-
some business tax incentives on which the admin-
buffed last week by House Republicans when he
istration had earlier insisted and set up a front-
proposed to zig, then coshed again the other day
loaded trade of a higher top income tax rate for a
by Senate Republicans when he proposed to zag.
cut in the tax on capital gains. The higher rate
The party looks to be foundering, and in a
would be felt well in advance of the gains cut.
sense it is. The elastic math of the past 10 years
That is the deal toward which the president
has finally caught up with it. No, you cannot cut
seemed to be slipping at his news conference
taxes yet balance the budget if you are no more
Tuesday morning-he'd make the trade if there
willing or able than the Democrats even to name,
could be a "proper balance" between the increase
let alone subscribe to, the specific spending cuts
and the cut-and from which the Senate Republi-
that those contradictory goals require. But it's
cans unceremoniously pulled him back Tuesday
possible to argue-we would-that for the Re-
afternoon. No rate increase, they said.
publicans and the country generally this could be
But that doesn't take the talks all the way back
at least as much a liberating as a crippling set of
to their starting point. The arguments now have
events. The president seems to be trying to
to do not with whether to raise taxes or cut
move himself and the party back from fiscal
entitlements but with which taxes and which
Disneyland to fiscal reality. The process isn't
entitlements. A lot of steps that a few months
pretty, but that doesn't mean it is unhealthy.
ago were politically unthinkable have been legiti-
The budget talks may also be in a healthier
mized by leaders on both sides, and both parties
state than current rhetoric suggests. though here
now have a political investment in deficit reduc-
we are not so optimistic; the pattern in recent
tion that they did not before. There's still a
years has been to disappoint. The Democratic
chance.
THE
SUN
THURSDAY
OCTOBER 11, 1990
Bush's shifts leave budg
in confusion
The finance panel's counterpart.
Congress befuddled
turned increasingly to the Democrats
the House Ways and Means Commit-
to provide him his margin of victory.
by vacillations
tee, found its job similarly complicat-
Aides say the president has
ed by the president's vacillations.
adopted the pragmatic view that
on tax provisions
Chairman Dan Rostenkowski, D-
with only three weeks remaining be-
III., also had planned to propose a cut
fore the fall elections, the objective is
in the tax rate imposed on profits
to come up with tax and spending
By Karen Hosler
from the sale of such assets as
legislation that accomplishes his
and Peter Osterlund
stocks, bonds and real estate -
basic goal of cutting the deficit but
Washington Bureau of The Sun
known as capital gains. Mr. Rosten-
still attracts enough support to pass.
skowski's version would have ex-
"We are seeing the price we pay
WASHINGTON - President
empted from taxation that part of an
for divided government." observed
Bush continued yesterday to send
asset's increased value caused by an
Sen. Warren B. Rudman, R-N.H. He
conflicting signals on whether he
increase in inflation. He had intend-
warned that, despite the Democratic
would accept an income tax rate in-
ed to couple that change with an in-
majority in Congress, Mr. Bush
crease for high-income Americans,
crease in the top tax rate.
doesn't dare turn his back on his
further befuddling lawmakers trying
After meeting with Mr. Bush yes-
own party interests without risking
to draft into law the provisions of last
terday morning, however, Mr. Ros-
his re-election prospects in 1992.
weekend's budget agreement.
tenkowski dropped all mention of
Mr. Bush, who said Tuesday
capital gains and income tax rates.
morning that he might agree to such
Instead, he drafted a "bare-bones"
an increase in return for a tax break
tax plan that resembled parts of the
on capital gains - only to back
original budget summit agreement
away from that stand later in the day
rejected last week by the House and
- refused to clarify his position
eliminated some of the original
when quizzed yesterday morning.
agreement's elements.
"Let Congress clear It up," he told
The Rostenkowski plan. which
reporters while on a campaign swing
the full Ways and Means Committee
through the South.
agreed last night to send on to the
Meanwhile, presidential aides,
Budget Committee for further action,
who initially confirmed reports from
would reduce cuts in Medicare bene-
Republican senators claiming to
fits to about $50 billion. from the
have persuaded Mr. Bush on Tues-
S60 billion proposed in the summit
day afternoon not to support any
agreement.
rate increase. reversed themselves
It also would exempt home heat-
as well.
ing oil, manufacturing processes
that use petroleum as well as petro-
"Our position is we're looking for
leum used in the production of live-
common ground.' White House press
stock feed from the proposed 2 per-
secretary Marlin Fitzwater told re-
cent tax on refined petroleum prod-
porters traveling with the president
ucts.
aboard Air Force One. "We're talking
It would trim the proposed gaso-
to various members (of Congress].
line tax rise to 9 cents per gallon
We aren't going to say what our posi-
from 10 cents. And the list of luxury
tion is on any specific item."
items to be subjected to a 10 percent
The president's public indecisive-
surtax would be expanded to include
ness clearly irritated Democratic
airplanes.
leaders - and even left a few Re-
In order to make up the loss of
publicans privately rolling their eyes.
revenue from these changes, the
"We don't know who to deal
Ways and Means Committee plan
with." said Sen. Wyche Fowler Jr.,
would drop the business tax incen-
D-Ga., referring to the Democrats
tives that had been the president's
now hastily trying to fashion tax and
favorite part of the package.
spending bills that can be enacted
In the midst of the general confu-
into law by Oct. 19.
sion yesterday, some observers said
"Until the president pulls his
they were astonished by the presi-
party together. it's going to be very
dent's inability to get his message
difficult to do anything," he said.
across.
The Senate Finance Committee
A lobbyist with close ties to the
canceled yesterday's session when
White House said that the vivid im-
its reportedly furious chairman, Sen.
age of a gang that couldn't talk
Lloyd Bentsen, D-Texas, tried to fig-
straight "looks awful."
ure out what to do next. He had de-
"This town can stand scoundrels
cided to scrap plans to increase the
and thieves, but it can't stand in-
top tax rate in exchange for a cut in
competence," he said.
the capital gains tax rate - but little
After being rebuffed by House Re-
else, it seemed, was certain.
publicans on the initial budget agree-
"I had the deal all worked out un-
ment the president reached with
til the president changed his position
congressional leaders, Mr. Bush has
on this," said an obviously irritated
Mr. Bentsen.
Diagnosing Cancer, Dr. Bush
Prescribes an Aspirin
Washington.
ing billions to be gained from im-
E
VIDENCE that Washington is,
proved enforcement of the revenue
strictly speaking, deranged
code); and some Republican social-
literally disconnected from re-
ism (tax shelters, called "incen-
ality - includes Richard Darman's
tives," to subsidize investment in
statement on Sunday television that
certain supposedly private enter-
President Bush did not do what the
prises).
nation saw him do. Mr. Darman,
The proposed 1991 tax increases
the budget director, said the presi-
and spending cuts amounted to only
0.7 percent of GNP; all the taxes
would have reduced Americans' af-
By George F. Will
ter-tax income about 1 percent. And
the stumbling block in the budget
negotiations has been the Republi-
dent, in his television speech con-
can insistence on a capital-gains cut
cerning the budget deal, "wasn't ac-
which the president's own econo-
tually asking the public to support
mists predict would Increase the an-
this:
nual growth rate just 0.06 percent.
This is what Mr. Bush said: "Tell
That amount is too tiny to forecast
your congressman and senators you
meaningfully.
support this.
Urge them to stand
When numbers, supposedly in-
with the president.
Urge them to
struments of precision, are instead
do what the bipartisan leadership
used for propaganda, then the cava-
has done.
Urge them to stand
lier use of words, as in Mr. Dar-
with their congressional leaders.
man's gloss on President Bush's
Ask them to fight for the future of
speech, is unsurprising. If all this
your kids by supporting this budget
were purely cynical, It would be less
agreement.
alarming than the weird sincerity of
Mr. Darman insists the president
people who have been striking deals
actually said "in effect. to congress-
with each other for so long they
men, not the American people, to
really think deals determine reality.
congressmen, T'm telling your con-
They think the meaning of numbers
stituents this is a hard vote for
and words is "on the table," part of
you. Oh. The president goes on
three networks to address 535 peo-
ple 16 blocks away? Apparently
even when using the mass media,
Pure cynicism would
Washington talks only to Itself. This
Is Washington solipsism: Nothing
be less alarming than
but us exists.
Trying to trigger public support,
the weird sincerity of
the president on television triggered
the public's opposition, and this
people who expect re-
question: How can a president so
popular be SO powerless? The an-
ality to bow to a 'deal.'
swer is lurking in the question: He is
popular because he makes minimal
use of power.
He ran a blue-skies campaign
the "package." Partisan meanings
and even just eight and a half
are asserted, differences get split,
months ago said he saw in the sky a
and reality is expected to conform to
deficit (now projected at about $300
the "deal."
billion) of only $64 billion. After the
Participants in the budget mara-
polarizing conflicts of the Reagan
thon are exhausted and genuinely
years, the country wanted to be left
indignant when it is suggested that
alone and elected just the president
the numbers they are dealing with
to perform that nonfunction, a pres-
are small compared to the problem
ident who believes in bipartisan-
as it already is, before recession.
ship, domestic summits, the blur-
The best face that can be put on all
ring of party differences.
this is put by Sen. Phil Gramm, R-
But now, out of the blue, as It
Texas, who says this:
were, he tells the nation that If we
The day Gramm-Rudman was
go on piling up deficits as we have
passed, federal spending was 23.9
done during the ten Reagan-Bush
percent of GNP. Today it is 22.6 per-
years, we will not "survive" be-
cent. If something with the net con-
cause deficits are like "cancer."
figuration of the deal just rejected Is
However, this life-threatening dis-
finally adopted and enforced. then
ease calls for nothing radical - no
five years from now spending will
political equivalent of surgery,
be 18.3 percent of GNP. The only
chemotherapy, radiation. More like
new entitlement enacted in the
half an aspirin.
Gramm-Rudman era was the cata-
The rejected summit package
strophic health-insurance program,
was a pastiche of cooked assump-
which was a political catastrophe
tions (about growth and interest
because people hate socialism that
rates). dribs and drabs of little taxes
comes with a price tag.
(a tax code painted by Jackson Pol-
So, chuckleheaded as everyone
lock); spending "caps" that may be
here may seem to everyone out
only as binding as the Gramm-Rud-
there, It is possible to believe that
man deficit-reduction requirements;
progress is being made. But the way
a Dukakis campaign plank (assum-
it is being made is deepening the
public's misanthropic mood.
Debate centers on wisdom
of bursting the tax 'bubble'
Knight-Ridder News Service
In 1990, for example, the 15 per-
WASHINGTON - The tax "bub-
cent rate applies to the first $19,450
ble," one of the more exquisitely con-
of income for single filers and the
voluted provisions of the income tax
first $32,450 for a married couple
code, has suddenly taken center
filing jointly.
stage in the budget debate.
After the benefit of the lower rate
Democrats and some Republicans
is "recaptured" by the bubble at the
seeking a budget compromise have
33 percent rate, the rate drops back
proposed eliminating the bubble in
to 28 percent. The effect of the bub-
exchange for a capital gains tax cut.
ble is to tax all income of taxpayers
For a while, It looked as though Pres-
in that bracket at 28 percent.
ident Bush might go along with the
In 1990, a married couple filing
idea.
jointly would enter the 33 percent
Is the bubble, as some Democrats
bubble at $78,400 of income, ac-
claim, a loophole benefiting the rich?
cording to the Internal Revenue
Or as Sen. Bob Dole. R-Kan., says,
Service. Their tax rate would drop
are complaints about its lack of fair-
back to 28 percent after $185,730.
ness "a bubble of hot air?"
Single filers would enter the bub-
Here is how "the bubble" works:
ble at $47,050 of income. Their rate
The bubble is a 5 percent surtax
would drop back to 28 percent after
on higher-income taxpayers that
$109,100.
looks like a step up and down in tax
"Many people believe - incor-
rates when displayed in a graph.
rectly - that taxpayers [now] sub-
Those taxpayers who are "in the
ject to the 33 percent rate are being
bubble" pay a 33 percent rate on the
treated unfairly compared to higher-
portion of their income that falls
income taxpayers whose top margin-
within a set range.
al rate is 28 percent," said Sen. Bill
The 1986 tax reform established
Bradley, D-N.J., who helped write
two basic income tax rates - one at
the bubble into law.
15 percent. the other at 28 percent
"In fact." he added, "the bubble
that one pays on income above a
does not reward the rich. It enhances
set level.
the tax system's progressivity."
The bubble was designed to elimi-
Democratic proposals to eliminate
nate the benefit that wealthier tax-
the bubble would extend the 33 per-
payers would get from paying the 15
cent rate beyond the point where
percent rate on the first part of their
now drops back to 28 percent. That
income and to strip away the benefit
would increase taxes paid by the na-
of the personal exemption for those
tion's 600,000 richest taxpayers.
taxpayers.
Since the budget summit agree.
ment included hefty excise tax in
creases that hit the lower and middle
classes disproportionately hard."
Democrats argue that It is only fatr to
raise income taxes on the rich.
Said Mr. Dole: "The bubble may
be the first major tax provision ever
repealed because people don't under-
stand it."
'Stand firm'
on the budget,
Bush tells GOP
President tours
South for candidates
ST. PETERSBURG. Fla. (AP) -
President Bush urged Republicans to
"stand firm for the best budget deal
possible" as he campaigned yester-
day for Southern GOP candidates,
dismissing differences with one of
them on that very issue.
The president said he wielded the
appropriations veto that led to a par-
tial government shutdown because
Congress would otherwise have tak-
en last weekend off.
"I kept the pressure on, and to
make the point - no more business
as usual," Mr. Bush told a rally for
Florida Gov. Bob Martinez.
"I didn't come down here to assign
blame. but you know, I've seen these
surveys," Mr. Bush said. "The Ameri-
can people are pretty smart. They
know where the action is. And they
know that Congress has the respon-
sibility to pass a budget. And it's
about time that they met that re-
sponsibility."
Earlier. Mr. Bush said in Raleigh,
N.C., that if the rest of Congress were:
as careful with federal spending as
Sen. Jesse Helms. there wouldn't be
a budget crisis to begin with.
Mr. Helms denounced one budget
deal Mr. Bush endorsed and voted
against a temporary settlement the
Senate finally approved to avertvan
governmental shutdown Tuesday
"Of course there are going to be
differences." Mr. Bush said at ascam
paign breakfast for Mr. Helms, add-
ing that differences with the North
Carolina senator "on one issue or an-
other" were beside the point.
"The point is that If we had more
senators like him, we wouldn't be
trying to solve some of these prob.
lems that should have been solved
months ago, years ago," Mr. Bush
said.
Republican defections, especially
in the House, have been a major
problem for the president and con-
gressional leaders in their efforts to
strike a budget deal to cut the deficit
by $40 billion this year and by a total
of $500 billion over the next five
years.
Mr. Bush's final campaign stop of
the day was in Atlanta, home territo-
ry of Representative Newt Gingrich,
the leader of conservatives who re-
belled against the budget deal. The
president was appearing there to
raise campaign funds for Johnny
Isakson. the Republican candidate
for governor of Georgia.
Mr. Isakson is rated a long shot
against Democratic Lt. Gov. Zell-
Miller.
"Right now, the federal budget
process is like a huge Rube Goldberg
machine, out of control - producing
noise, smoke, heat and no light," Mr.
Bush said at a fund-raising reception
for Mr. Isakson.
"Sucking up more and more tax
dollars on one end and churning,
them into spending programs with-
out end."
But he said he is confident Con-
gress can pass a sound budget.
"We've had a few days now./for
the smoke to clear," President Bush
said.
"Now it's time to move forward.
LOS ANGELES TIMES THURSDAY, OCTOBER 11, 1990
Congress Starts Again on Budget
By WILLIAM J. EATON and DAVID LAUTER, TIMES STAFF WRITERS
WASHINGTON-Jolted by President Bush's puzzling remarks about a
budget trade-off involving capital gains and a top-bracket rate increase,
Congress began work Wednesday on crafting a new $500-billion deficit
reduction package to replace a summit agreement that was repudiated by
the House.
Acting by voice vote, the House
legislation that would continue to
support for a budget trade-off that
Ways and Means Committee
fund the government on a short-
would include his cherished capital
cleared a package of tax increases
term basis beyond Oct. 19 unless
gains tax cut touched off a storm of
and spending cuts that would jetti-
lawmakers have fully implemented
criticism from Democrats and
son some of the most unpopular
the deficit-cutting deal by then.
forced recalculations by key com-
"The clock is running and it's going
mittees.
provisions of the original budget
accord and lower red-ink spending
to keep on running and I'll veto it
Without the President's support,
by $197 billion over the next five
again if we don't get a satisfactory
the trade-off appeared dead, even
deal," he said.
though White House Press Secre-
years.
This bare-bones package, how-
But the President reached out to
tary Marlin Fitzwater told report-
ever, is not expected to survive
Republican supporters in the
ers aboard Air Force One that the
House in preparation for a new
President's mind was not com-
intact, since Democratic and Re-
publican leaders are likely to draft
round in the budget crisis, schedul-
pletely closed on the issue.
substitute packages with additional
ing three separate meetings today
Senate Majority Leader George
revenue-losing "sweeteners," then
with GOP congressional leaders,
J. Mitchell (D-Me.) said the Presi-
GOP members of the Ways and
dent's turnabout would make it
fight it out on the House floor.
Other committees will propose
Means Committee and the 71 Re-
more difficult to put together a
spending reductions for defense,
publicans who voted early last
budget package that would get
federal benefit programs and sav-
Friday for the package that had
bipartisan backing.
ings on interest to bring total
been crafted by congressional
Sen. Lloyd Bentsen (D-Tex.),
savings to $500 billion.
leaders and White House officials.
chairman of the Finance Commit-
The House, already in disarray,
In another development, the
tee, had planned to include an
seemed to unravel even a bit more
House GOP Policy Committee en-
as the complexities of revising the
dorsed an alternative deficit-cut-
increase in top tax rates and a
reduction in capital gains taxes as
summit agreement became more
ting package that would make
part of his revised budget package,
apparent. Instead of presenting a
bigger cuts in domestic programs,
but Bush's reversal sent him back
united front on the difficult deficit
reduce the capital gains tax and
to the drafting table.
reduction issue, leaders of both
eliminate proposed taxes on gaso-
"I had the deal all worked out
parties virtually gave up on a
line and refined petroleum prod-
until the President changed his
bipartisan approach, and, at least in
ucts. This proposal also would.
the House, a sharp confrontation
reduce Medicare cuts to $50 billion
position on taxes," Bentsen said.
Democrats on the Finance panel
along political lines appeared ever
instead of the original agreement
met privately most of Wednesday
more likely.
for $60 billion and would raise the
afternoon to revise Bentsen's origi-
In the Senate, Finance Commit-
top-bracket rate to 31% from the
nal plan in view of the President's
tee members met behind closed
current 28%.
House Majority Leader Richard
announced opposition after he met
doors to draft a new plan in the
with a group of Senate Republi-
wake of Bush's apparent retreat
Gephardt (D-Mo.) told report-
cans.
from a compromise that would
ers that Democrats may have to
The Ways and Means Commit-
have cut the capital gains tax in
provide the majority of votes for a
exchange for an increase in the top
$econd-time-around budget pack-
tee, meeting behind closed doors,
sent its package of tax increases to
income tax rates.
age that may or may not include
the House Budget Committee. Al-
Bush, who triggered a wave of
the capital gains compromise.
though the measure was consid-
Democratic criticism for backing
"I think we're going to get a
ered to be largely a "plug" to meet
away from his news conference
package done," Gephardt said.
the panel's obligations, Democrats
remarks that he might accept the
Asked whether any such legisla-
and Republicans were likely to use
capital gains compromise, re-
tion could get House approval so
many of its provisions as building
mained silent about the apparent
close to the November elections,
blocks in drafting their own alter-
reversal on a campaign swing in
however, he replied: "I don't-know
natives before a House showdown,
the answer right now.
the South.
possibly as early as next week.
"Things are still in a state of flux
"Let Congress clear it up," the
after what the President said. At
The committee's package, how-
President snapped to reporters as
this point it's impossible to say
ever, dropped several parts of the
he entered his limousine in St.
whether we can get a majority in
Petersburg, Fla.
both houses and have the Presi-
And Wednesday night at a polit-
dent sign the bill."
ical fund-raiser in Atlanta, Bush
Bush's apparent agreement to
declared that he will not sign
withdraw his statement of possible
budget agreement worked out by
icare issue, the Ways and Means.
White House and congressional
package would soften the impact
negotiators and rejected by the
on elderly beneficiaries.
House last week. Rep. Dan Rosten-
For example, the committee
kowski (D-III.), chairman of the
package would raise the Part B
panel, said the dropped provisions
insurance premium for doctor bills
were "totally obnoxious" to the
from the current $28.60 a month to
House.
$32.40 next year, and to a high of
Dropped were a 2-cent-per-gal-
$46.50 in 1995. By contrast, the
lon tax on home heating oil, a plan
budget deal worked out by the
to make jobless people wait an
White House and congressional
extra week for unemployment
negotiators would have raised the
benefits, a $12-billion package of
premium to $33.50 next year and a
incentives for investment in new
peak of $54.30 five years from now.
small businesses and other reve-
The committee package also
nue-losing tax breaks for business.
proposed a Part B deductible of
A proposed 10-cent-a-gallon in-
$100 in 1991 and $125 thereafter,
crease in gasoline taxes was re-
compared to the earlier proposal's
duced to 9 cents in the committee
plan for raising the current $75
package, but other recommended
deductible to $100 next year, $125
levies on alcohol, beer, wine, ciga-
in 1991 and $150 after 1993.
rettes and luxury goods were re-
Opposition to the proposed $60-
tained.
billion cut in Medicare in the
In another change clearly aimed
original package was regarded as a
at Senate Minority Leader Bob
key factor in its defeat by a
Dole (R-Kan.), the committee
combination of conservative Re-
added a luxury tax on private
publicans and liberal Democrats on
airplanes costing more than
a 254-179 roll-call vote, despite the
$100,000-a provision that would
best efforts of the President and
pick up $800 million in revenue
bipartisan leaders in the House.
between now and 1995. Dole,
Since the accord failed, however,
whose district includes private air-
there have been strong differences
plane manufacturers, had a similar
among Republican and Democratic
provision removed from the reject-
leaders on how to revise the sum-
ed agreement.
mit agreement to get enough votes
On the politically sensitive Med-
to pass it.
WAFFLE: Bush Lacked Fallback Position
Bush's Waffling
Reflects Lack of
Fallback Stance
By DAVID LAUTER
TIMES STAFF WRITER
Wednesday at least for a
while the White House tried to
By contrast, most Senate Repub-
licans are traditional fiscal conser-
ATLANTA-President
once more, sending
vatives, who dislike high taxes but
Bush's conspicuous waf-
word that Bush still had an open
think high deficits are worse. (In
fling over tax issues this.
mind on the issue. "I'm leaving
the House, a large- percentage of
week reflects two funda-
everybody's comments out there,"
the GOP caucus, led by Rep. Newt
mental problems:
Press Secretary Marlin Fitzwater
Gingrich (R-Ga.), is made up of
First, there are sharply
Haid We're not taking a position
believers in supply-side theories,
conflicting pressures on
any specific item."
who say deficits are not nearly as
the chief executive in this
By midday, Bush seemed to have
bad for the economy as high taxes.)
area, even from his own
given entirely. "Let Congress
party.
clear it up, he said.
T
he problem may be compound-
Second, the White House
At the root of the confusion is
ed by a fact that Bush admitted
has not staked out any real
the defeat last week of the biparti-
during his press conference Tues-
fallback position in the
san budget agreement that Bush's
day that he is not particularly
wake of Congress' rejection
advisers-Budget Director Richard
interested in the entire issue of
of the bipartisan budget
G. Darman and Chief of Staff John
economic policy, preferring instead
agreement that negotiators
H. Sununu-had negotiated during
to concentrate on foreign affairs.
worked out during 41/2
months of talks with congressional
"When you get a problem with
months of talks.
leaders at a so-called budget sum-
the complexities that the Middle
"Confused?" the Presi-
mit.
East has now and the [Persian]
dent asked reporters as he
Darman had devised the summit
Gulf has now, I enjoy" working on
took a midafternoon jog
approach following the conven-
that, Bush said.
after a campaign rally in
tional wisdom in Washington that
"I can't say I just rejoice every
St. Petersburg, Fla., for
no budget agreement could ever be
time I go up and talk to Danny
Florida Gov. Bob Martinez,
reached in public because, by defi-
Rostenkowski, my dear friend,
what appeared to be as much an
nition, cutting the deficit requires
about what he's going to do on
answer as it was a question.
politically unpopular tax increases
taxes," he said, referring to the
The zigzagging has been a boon
and spending cuts.
Illinois Democrat who chairs the
to Democratic congressional lead-
If the leaders of both parties-
House Ways and Means Commit-
the President and Congress-
tee.
ers, who lost no time in declaring
that in view of the President's
agreed on a deal, Darman believed,
reversals, they now see no need to
everyone would be given enough
make difficult decisions of their
political cover for the accord to
own until Bush makes clear what
pass.
he wants.
But Darman and Sununu had
And it has highlighted the sharp
placed such faith in that theory
divisions within the GOP between
that they had neglected to prepare
those such as Senate Republicans,
a fallback plan. When conservative
who want foremost to reduce the
Republicans turned against the
deficit, and those who believe that
deal and liberal Democrats joined
the party can make hay by oppos-
them, Bush was left twisting, figu-
ing all tax increases-blaming the
ratively, in the wind.
-deficit on the Democrats later.
Since that defeat, last Friday,
he confusion became vividly
Senate Republican leaders, joined
T
public Tuesday and Wednes-
by Sununu and Darman, have ad-
vocated essentially resuscitating
day on a key budget question-
the bipartisan agreement.
whether. Bush would accept a
trade-off that would give him the
Their hope, Sen. Bob Packwood
(R-Ore.) said, is that members of
reduction he has been seeking in
Congress, having had a chance to
tax rates on capital gains in return
vote against the plan once, now
for a Democrat-sponsored tax hike
will vote for a close replica, seizing
on wealthy Americans.
on whatever small changes are
Throughout September and into
the first week of this month, Bush
made around the margins to justify
and his advisers said he would not
their change in position.
House Republican conserva-
accept a trade. Tuesday morning,
at a press conference, Bush
tives, joined by Vice President Dan
changed his mind, saying that the
Quayle and other Bush advisers
idea of tax-rate trade-off was on
who disliked the summit agree-
ment from the start, argue that
the table
Then, after protests from Senate
Bush should drop the bipartisan
Republicans who opposed the
approach and move to unite his
trade, Bushinvited the senators to
party by turning the budget into a
the White House for a meeting and
partisan issue.
told them that he was taking the
Idea off the table again.
COLUMN RIGHT/
CAL THOMAS
Bush Didn't
Learn From the
Master: Reagan
In combat, as in politics, the
troops must have a commander
willing to fight.
W
hat good is it having a Republican
President when he caves in to de-
mands by Democrats and allows them to
write a new budget in committees con-
trolled by their party? We can count on the
"Bush budget" resembling a Michael Du-
kakis budget, with the twin monsters of
higher taxes and higher spending imposed
on a population tired of both.
As he watches his popularity decline, (a
Times Mirror poll showed it dropping from
a high of 76% in August to 55% this week),
Bush might consider a lesson from Abra-
ham Lincoln: "If once you forfeit the
confidence of your fellow citizens, you can
never regain their respect and esteem."
Addressing the nation on television last
week, Bush said: "This is the first time in
my presidency that I have made an appeal
like this to you, the American people. Tell
your congressmen and senators you sup-
port this [budget] agreement."
The calls came in, but they were calls of
protest, and this is where Bush's strategy,
so different from Ronald Reagan's, proved
flawed. The pro-abortionists who were to
be attracted into the new Republican "big
tent" didn't rush to help the President.
Reaganite conservatives who had sup-
ported Bush because he talked tough on
crime, gun control, reduced government
and other issues dear to their hearts did not
respond either, except in derision. Conser-
vative fund-raiser Richard Viguerie, who
is persona non grata at the Bush White
House, denounced the now-defunct budget
agreement in a letter to GOP maverick
Rep. Newt Gingrich of Georgia: "The
conservative movement is the adversary of
anyone, in Congress or the White House,
who would skewer the American people
with higher taxes. We will not affiliate
ourselves with tax collectors for the wel-
fare state."
Sen. William Armstrong (R-Colo.) told
me that "by trying to avoid confrontation,
President Bush undermined his own lead-
ership potential. Confrontation is what
Ronald Reagan did effectively. Reagan
didn't avoid confrontation, he sought it."
In combat, as in politics, the troops must
have a commander willing to fight. But
time and time again, the President seemed
to take tough stands, only to negotiate
away a winning position when he faced
strong opposition. Instead of blaming Con-
gress for the impasse and calling on the
people to help him, as Reagan did, Bush
backpedals and invites his ideological ene-
mies in for coffee.
Many conservatives believe Bush aban-
doned a core set of principles necessary to
win their support. Public disapproval of
Congress is so high that a popular Presi-
dent ought to be able to make political
chopped liver out of its members. Properly
conducted, an anti-Congress campaign by
the President could benefit Republican
conservatives and perhaps win back a
majority in one or both houses. Failure to
launch such a campaign means that Bush
will be set upon by the anti-government
angel of death about to swoop down on all
of Washington.
Cal Thomas writes a syndicated column in
Washington.
ANOTHER VIEWPOINT/
GEORGE F. WILL
T
he proposed 1991 tax increases and
spending cuts amounted to only 0.7%
of gross national product; all the taxes
would have reduced Americans' after-tax
income about 1%. And the stumbling block
in the budget negotiations has been the
Republican insistence on a capital-gains
cut that the President's own economists
predict would increase the annual growth
rate just .06%. That amount is too tiny to
forecast meaningfully.
When numbers, supposedly instruments
of precision, are instead used for propagan-
da, then the cavalier use of words is
unsurprising. If all this were purely cyni-
cal, it would be less alarming. Witness the
weird sincerity of people who have been
striking deals with each other for so long
they really think deals determine reality.
They think the meaning of numbers and
words is "on the table," part of the
"package." Partisan meanings are assert-
ed, differences get split, and reality is
expected to conform to the "deal."
Participants in the budget marathon are
exhausted and genuinely indignant when it
is suggested that the numbers they are
dealing with are small compared to the
problem as it already is, before recession.
Sen. Phil Gramm (R-Tex.), who puts the
best face that can be put on all this, says:
The day the Gramm-Rudman spending
limit passed, federal spending was 23.9% of
GNP. Today it is 22.6%. If something with
the net configuration of the deal just
rejected is finally adopted and enforced,
then five years from now spending will be
18.3% of GNP. (The only new entitlement
enacted in the Gramm-Rudman era was
the catastrophic health-insurance pro-
gram, a political catastrophe because peo-
ple hate socialism with a price tag.)
So, chuckleheaded as everyone in
Washington may seem to everyone out
there, it is possible to believe progress is
being made. But the way it is being made is
deepening the public's misanthropic mood.
-From George F. Will's
syndicated Washington column.
THE WALL STREET JOURNAL THURSDAY, OCTOBER 11, 1990
The Tax vs. Expenditure Flap
is no reason in that case to prefer an in-
ture programs give that power and some
of this taking is probably also bad, depend-
crease in Medicare premiums, which is an
do not.
ing on the conditions. But what matters is
expenditure cut. over an increase in the
For example, the nearly $200 billion a
not whether the government is taking or
tax on beer. Suppose that your objective is
year, about 15% of total expenditures, that
paying, but what the conditions are. To put
to reduce the excessive allocation of the
goes for interest on the debt does not give
all tax increases in one pot as bad and all
gross national product to medical care.
that power. But neither do other programs,
expenditure cuts in one pot as good makes
There is no reason to prefer to do that by
like Social Security and Medicare, that ac-
no sense.
raising the Medicare deductible, which is
count for large chunks of the budget and
At least. it makes no sense objectively
an expenditure reduction, than by limiting
that provide for a very broad distribution
speaking. If you are the member of a
the deductibility of medical benefits pro-
of benefits, small for each recipient but en-
small minority that finds itself in danger of
vided by employers to their workers,
ormous in total, according to highly objec-
having its taxes raised, it is probably bet-
which is a tax increase.
tive rules.
ter tactics to ally yourself with the slogan
(I don't want to be interpreted as de-
The authority to buy, say, $20 billion of
of no tax increase at all rather than to ar-
fending Medicare benefits. I am in favor of
military aircraft gives the government
gue for your special immunity from taxa-
tion. This may explain why people who
have high incomes argue against all taxes,
Board of Contributors
including taxes on a plebeian item like
beer.
In our current efforts to draft a budget
Opposition to tax increases is often identified as a
plan there are three main requirements.
National consumption should be reduced,
"pro-growth" position. But can that explain opposition to
because the purpose of deficit reduction is
increasing the taxes on beer and cigarettes?
to increase national saving, and this should
be achieved with as little impact as possi-
ble on very poor people and as little ad-
cutting them as an unnecessary subsidy
power to reward or punish Long Island or
verse effect as possible on economic incen-
for people who are not poor. They are just
Southern California, Company X or Com-
tives and efficiency.
an especially clear example of the irrele-
pany Y. The authority to pay 10 times as
Spending and Consumption
vance of the distinction between cutting
much in Social Security benefits does not
Most of the consumption in this country
expenditures and raising taxes.)
give anything like that power. Similarly,
is private, some of it is done by state and
Opposition to tax increases is often
tax systems that involve fine distinctions
local governments, and a small fraction is
based on the proposition that taxes have
among taxpayers, and discretion in choos-
done by the federal government. Standard
adverse effects on incentives to work, save
ing which taxpayers to audit, give power to
national accounting usually considers de-
and invest. But is that a reason to oppose
government, whereas more general and
fense expenditures to be "consumption," a
an increase in the taxes on beer and ciga-
transparent systems do not. The important
rather misleading classification in my
rettes? Opposition to tax increases is often
difference is not between taxing and spend-
opinion. Federal consumption other than
identified as a "pro-growth" position. But
ing but between generality, objectivity and
for defense probably amounts to about 1%
can that explain opposition to increasing
openness on the one hand and discrimina-
of GNP, the biggest item being direct
the taxes on beer and cigarettes? Can any-
tion, discretion and covertness on the
health expenditures, as for veterans hospi-
one confidently say that the Rube Goldberg
other.
tals and medical research. Most federal
plan for throwing money at investors in
I believe that many people who have an
spending goes to finance private consump-
"small" corporations, considered a tax re-
allergic reaction to the idea of government
tion or investment, through transfer pay-
duction in the failed budget package,
spending think the government runs along
ments and interest payments.
would do more for growth than increasing
the lines of President Reagan's favorite
I can understand someone's having a
government expenditures on roads or edu-
story about the employee in the Bureau of
preference for reducing federal consump-
cation or research?
Indian Affairs. The employee is seen with
tion rather than private consumption, al-
Then there is the idea of being against
his head on his desk, sobbing uncontrolla-
though that seems another irrelevant dis-
tax increases and for expenditure reduc-
bly. When asked why, he says that his In-
tinction to me. But that would not be a
tions in order to limit the power of govern-
dian has died. The picture is of enormous
reason for preferring expenditure cuts to
ment and preserve the freedom of individ-
numbers of federal employees doing un-
tax increases, because most expenditure
uals. But the power of government and
necessary work very inefficiently and be-
cuts outside the field of defense are, like
its ability to limit the freedom of individ-
ing paid excessively for it.
tax increases, ways of reducing private
uals is not measured by the total of expen-
But that is not what the federal govern-
consumption. The division of a budget plan
ditures but depends on the character of the
ment is mainly about. The federal govern-
between tax increases and expenditure re-
expenditures.
ment is mainly a vast machine for paying
ductions throws no light on the appropri-
Governments derive power from pro-
out money to private people on some gen-
ateness of the plan for meeting any real
grams, whether expenditure programs or
eral conditions, like their age, marital
objectives.
tax programs, that give them the ability to
status and incomes, and taking money
discriminate among individuals and
from private people on some general con-
groups. rewarding some and punishing oth-
ditions, like their incomes, marital status
A former chairman of the president's
ers, especially if the discrimination can be
and age. Some of this paying, depending
Council of Economic Advisers, Mr. Stein is
done out of the public eye. Some expendi-
on the conditions. is probably bad. Some
an American Enterprise Institute fellow.
Senate Panel Clears Spending Measures
Totaling Over $217 Billion for Fiscal '91
By DAVID ROGERS
held in an effort to advance peace negotia-
Staff Reporter of THE WALL STREET JOURNAL
tions.
WASHINGTON-The Senate Appropria-
Concessions to Israel would permit the
tions Committee approved a rush of fiscal
Jerusalem government to draw down
1991 spending bills totaling more than S217
quickly on most of its $1.8 billion in prom-
billion and reallocating funds for foreign
ised military aid, and the bill effectively
aid and six major departments in line with
doubles to $200 million the level of U.S. re-
the proposed budget agreement.
serve military stocks available for transfer
The action touched an array of interests
to Israel this year.
from crop insurance for farmers to the
The third and largest of the measures
treatment of AIDS patients. This domestic
allocates as much as $183 billion for the
debate was set against a background of
Labor, Education, and Health and Human
new international commitments reflecting
Services departments. But it provoked an
the tension in the Mideast and including in-
emotional debate over the fate of a newly
creased contributions to the United Nations
authorized program of federal aid to cities,
and the forgiveness of Egypt's $6.7 billion
such as New York and San Francisco, that
military debt to the U.S.
have been hardest hit by the acquired im-
An estimated $19.37 billion was allo-
mune deficiency syndrome epidemic.
cated to the Commerce, Justice and State
Adopted this summer, the program
promised $150 million to ease the strain on
departments. U.S. contributions to interna-
tional organizations and peacekeeping
urban hospitals and public-health facilities,
but no new funding was provided when the
forces would grow to $902.6 million, an al-
most 30% increase from fiscal 1990, which
appropriations bill was first approved by a
subcommittee last month.
ended Sept. 30.
New restrictions would bar exports of
The decision touched off a strong lobby-
ing campaign by gay activists and other
supercomputer technology to nations such
as Brazil that are linked to the continued
advocates of the program. But when propo-
transfer of technical assistance to Iraq's
nents sought to find money by trimming
other accounts, that provoked a counterat-
weapons industry. And in a slap at Jordan,
tack by traditional allies in the health and
the committee let stand an amendment
that would withhold U.S. aid from any na-
education community. "All the sympathy
doesn't go to AIDS patients," said Sen.
tion that fails to comply with the trade em-
Harry Reid (D., Nev.). Alaska Sen. Ted
bargo against Baghdad.
Stevens, a senior Republican on the full
A total of $14.7 billion is provided in the
committee, likened the across-the-board
foreign-aid bill, which poses a series of ob-
stacles for the Bush administration even
cut to taking "a little piece off every kid
who's in the hospital."
though it promises the president the au-
thority he wants to cancel Egypt's military
Under the reallocations yesterday, an
debt. The measure denies any funding to
estimated $27 million in direct spending
was found for the program. But the debate
anti-Communist insurgents in Cambodia
and requires that 50% of any future U.S.
dramatized the choices facing the panel
within the limits set by the budget on do-
military assistance to El Salvador be with-
mestic spending. Midwestern senators wor-
ried aloud about cuts threatening the crop-
insurance program; adding to the tension
is the fact that the same agreement is seen
as increasing the funds available for the
military.
The action by the full committee came
as the Senate Defense Appropriations sub-
committee approved more than $268.2 bil-
lion for the Pentagon, including continued
funding for the production of the B-2
Stealth bomber. No money is provided for
the Milstar satellite program. in line with
the recommendations of the Senate Armed
Services Committee. and the bill would ter-
minate the Army's Air Defense Antitank
System being developed by Martin Mari-
etta Corp.
In secret accounts for the Central Intel-
ligence Agency. the bill provides continued
military aid for anti-government forces in
Afghanistan but at the reduced level of
about S200 million annually.
Half of this sum would be withheld until
further approval by the committee.
President's Hedging
Over Budget Issue
Is Hurting Image
*
*
*
'Let Congress Clear It Up,'
Says Bush on Question
Of Tax Rate Trade-Offs
By DAVID WESSEL
And GERALD F. SEIB
Staff Reporters of THE WALL STREET JOURNAL
happy-and. frankly, a touch cynical."
President Bush, struggling to bridge dif-
The confusion over the president's posi-
ferences among Republican lawmakers as
tion reflects the administration's continu-
well as his own advisers over taxes. is
ing difficulty in devising a budget strat-
jeopardizing his new-found image as a de-
egy.
cisive leader.
Several of Mr. Bush's top advisers, in-
Mr. Bush himself did nothing yesterday
cluding Mr. Sununu, Budget Director Rich-
to clear up lingering confusion over the ad-
ard Darman and Treasury Secretary Nich-
ministration's stance on trading higher in-
olas Brady, have been arguing internally
come-tax rates for a cut in taxes on capital
that it is impossible to find the combina-
gains as Democrats and some Republicans
tion of lower capital-gains tax rates and
propose. "Let Congress clear it up," he
higher income-tax rates that both parties
said.
can support, administration officials said.
And as the president was jogging in the
But Mr. Bush also has been talking to
rain in St. Petersburg, Fla., a reporter
others-from Sen. Bentsen to Vice Presi-
shouted: "Are you ready to throw in the
dent Quayle-who see the possibility for
towel on capital gains?" Mr. Bush replied:
such a trade. One reason that the president
"Read my hips."
is attracted to the exchange is that it
On Tuesday, Mr. Bush said at a morn-
might bring House Republicans who de-
ing news conference that he was willing to
serted him last week back to his side.
raise tax rates to get a capital-gains tax
Allies of Republican Whip Newt Gin-
break if "a proper balance" was struck.
grich of Georgia, previously foes of any
Republican senators protested and, after a
rate increase, favor raising the marginal
late afternoon meeting with the senators,
tax rate on the rich, now at 28%, to 31% or
administration officials and some senators
32% in exchange for the capital-gains tax
said the president had closed the door.
cut they want SO badly. White House offi-
But Senate Republican Leader Robert
cials figure that combination will never get
Dole of Kansas said yesterday that Mr.
Democratic backing.
Bush simply listened. "He didn't announce
Mr. Bush, hoping to find the bipartisan
his position at all," Sen. Dole insisted.
middle ground. seems to be wavering. "My
And White House spokesman Marlin
guess is that the president and Republi-
Fitzwater last night clouded the adminis-
cans. in general. have been torn. even in
tration's position. declaring that every-
their own minds," said Sen. John Danforth
thing is still on the table. "I want to bob
(R., Mo. ), the only Republican senator who
and weave on this today," he said. Asked
told the president yesterday he was willing
why, he replied that "we want Congress to
to make the trade.
come up with a package. We don't want to
"There are Republicans in both the
signal on any specific provision."
House and the Senate who believe that we
But the damage had been done. The
should draw extremely clear lines on the
flip-flop has dented the shiny public image
basis of party doctrine." Sen. Danforth
that Mr. Bush has created with his tough
said. "I don't think there is any political
stand against Iraq's Saddam Hussein. "It's
advantage in dressing up in a clown suit
perfect ammunition for those who had said
just to give a clear image of yourself." he
for some time that they wonder precisely
said.
what this president feels strongly about,"
Mr. Bush plans three more meetings
said Republican pollster Richard Reed of
today with Republican House members to
Market Opinion Research.
discuss the budget. Meanwhile. he expli-
Mr. Reed said that public confidence in
citly threatened in a speech at a political
Congress has been eroding to the point
fund-raiser in Atlanta last night to veto a
where anti-incumbent sentiment might
stopgap spending bill. as he did before. if it
help Republicans in elections this fall-
isn't accompanied with a broader budget
both because the GOP remains a minority
plan that adheres to the themes of the
in Congress and because the public hadn't
failed budget deal he negotiated with Dem-
previously targeted Mr. Bush. "I'm not
ocratic leaders.
sure that president remains as isolated
now," Mr. Reed said.
Even some Bush backers were uncom-
fortable. After White House Chief of Staff
John Sununu assured a group of business
lobbyists that Mr. Bush wasn't going to-
raise tax rates, Alan Kranowitz of the Na-
tional Association of Wholesaler-Distribu-
tors pronounced himself as "confused but
All told, the bill discarded $19 billion of
$100,000 and jewelry and furs that cost
House Panel
proposed tax breaks over five years. These
more than $5,000. Unlike the levy provided
included preferences for oil production and
for in the summit agreement, the tax
gasohol; credits for research spending and
would hit planes that cost more than $100,-
Approves Huge
low-income housing development; and tax
000, an apparent swipe at Senate Minority
exemptions for businesses that locate in
Leader Robert Dole (R., Kan. ). Many such
economically depressed areas.
planes are manufactured in his home
The debate about linking an increase in
Tax Rise Plan
state. The tax would be applied to prices
the top personal rate on wealthy individ-
over the threshold amounts.
uals with a capital-gains tax cut has a tor-
-Disallowing the deduction for interest
tured history. On Tuesday, President Bush
paid to the Internal Revenue Service at-
at first accepted such a trade-off, and then
Outline Shuns Rate Change;
rejected it after Senate Republicans com-
tributable to underpayment of corporate
taxes, beginning after Dec. 31, 1990. This
Democrats Are Likely
plained that raising the rate was too high a
price to pay for what they expected to be a
provision, much criticized by corporations,
To Propose Amendment
relatively shallow capital-gains reduction
would raise $3.9 billion over five years.
by the Democrats. The president and his
-Increasing taxes on the life insurance
industry by $8 billion over five years. The
spokesman continued sending ambiguous
chronic split between stock and mutual in-
signals yesterday.
By JEFFREY H. BIRNBAUM
The same issue will arise in the Senate,
surance companies is a major cause of the
Staff Reporter of THE WALL STREET JOURNAL
substantial increase.
WASHINGTON House Ways and
although the Finance Committee post-
The proposed limit on itemized deduc-
poned until at least today a scheduled
Means Committee passed a huge tax-in-
tions, which was part of the budget summit
drafting session on its version of the tax
crease bill that would raise levies on gaso-
agreement, would work this way: A couple
bill. Chairman Lloyd Bentsen (D., Texas)
line. cigarettes and alcoholic beverages
with an income of $200,000 wouldn't be per-
had said he would propose an increase to
and limit most itemized deductions for
mitted to deduct the first $3,000 (3% of the
33% from 28% in the top nominal tax rate
wealthy taxpayers.
difference between $200,000 and $100,000 of
on individuals and would effectively cut
The bill. put forward by Chairman Dan
their deductions. If their deductions
the capital-gains tax to 23.1% for assets
Rostenkowski (D., Ill. 1, would produce a
amounted to $50,000, they would be permit-
held three years.
net tax increase of about S145 billion over
ted to deduct $47,000.
But he and the Democrats on his panel
five years. making it one of the largest tax
In tallying deductions for this purpose,
were rethinking that plan yesterday in the
increases in history.
taxpayers wouldn't have to include medi-
face of President Bush's ambivalence. Sen.
The measure shuns any changes in tax
cal expenses or investment-related interest
Bentsen said yesterday that he will present
rates, reflecting a bitter debate between
payments. No taxpayer would lose more
his committee with the option of cutting
the political parties over whether to raise
than 80% of his or her total. deductions
capital-gains taxes.
the top tax rate on the nation's wealthiest
under the plan.
In the House, Democratic leaders were
individuals. But Democrats said they are
By dropping tax breaks. the Wavs and
hoping to amend the Ways and Means bill
likely to propose an amendment on the
with a plan that hits the wealthy, probably
Means Committee made the net tax ni
House floor to raise the top rate and per-
by raising the top personal rate. That ef-
crease on upper-income individuals higher
haps to cut capital-gains taxes.
fort, which will probably occurlater on the
than in the summit accord. And by reduc-
The bill approved yesterday adheres
House floor, could be coupled with a capi-
ing the gasoline tax increase by one cent
closely to the tax proposals contained in
tal-gains cut to tempt the support of Re-
compared with the pact, the committee re-
the bipartisan budget accord reached a
publicans and President Bush.
duced the size of the tax increase on lower-
week and a half ago by White House and
The major tax increases in the commit-
income people.
congressional negotiators. But it dropped
tee bill, which resemble provisions pro-
Still, the results didn't satisfy many
all of the accord's revenue-losing provis-
posed Tuesday by Sen. Bentsen. include:
Democrats, who had hoped to shift a
ions except one that benefited the poorest
-Increasing the motor-fuels tax by five
greater tax burden to the wealthy. The
taxpayers. The committee cleared the bill
on a voice vote but without a recommen-
cents a gallon on Dec. 1 and by four more
largest tax increase in percentage terms
dation.
cents next July 1. That alone would raise
would fall on taxpayers who earn less than
"We've improved the base and moved it
$40.9 billion over five years. An additional
$10,000 a year-6.9%, according to congres-
along," said Rep. Sander Levin (D.,
two-cent-a-gallon tax on all refined petro-
sional estimates. By contrast, the tax in-
Mich. 1. "But we'd like to improve it some
leum products would be imposed, but prod-
crease on Americans earning $200,000 a
ucts used for home heating oil, manufac-
year and over would be 2.4%
more."
The Ways and Means bill softened some
turing and feedstocks would be exempt.
of the most controversial elements of the
The panel yesterday approved an amend-
budget summit agreement. It exempted
ment by Rep. Rod Chandler (R., Wash. ) to
home heating oil from any tax increase;
apply the nine-cent motor-fuels tax in-
crease to railroad fuels.
dropped a five-year. $12 billion group of
small-business incentives: and eliminated
-Requiring state and local employees
a two-week delay before workers could re-
to pay Social Security and Medicare pay-
roll taxes to raise about $17.9 billion over
ceive unemployment compensation.
But the measure also included some
five years.
contentious tax increases. Likethe original
-Increasing beer. wine and liquor
accord. the package would raise $18 billion
taxes to raise $9.9 billion over five years.
over five years by limiting itemized deduc-
Beer taxes would be doubled to 32 cents a
tions for individuals or couples with in-
six-pack. Table-wine taxes would be in-
comes above $100,000. Under that plan, in-
creased by 22 cents a bottle to 25 cents.
dividuals and couples would reduce their
And whiskey taxes would be increased by
deductions by $300 for every $10,000 in ad-
$1.50 a proof gallon to $14. A proof gallon
justed gross income over $100,000, begin-
contains 50% alcohol by volume. Small
ning in 1991. The limits would cover mort-
breweries and wineries were exempted
gage interest costs, charitable contribu-
from the increase.
tions and tax payments to state and local
-Increasing tobacco taxes, now 16
governments. The legislation also would
cents a pack of cigarettes, by four cents a
raise the federal tax on gasoline by a total
pack in 1991 and another four cents in 1993
of 11 cents a gallon from the current nine
to raise $6 billion over five years.
cents.
A new tax on luxury items. The 10%
levy would apply to cars that cost more
than $30,000, boats that cost more than
Medicare Plan Cleared by House Panel
Would Save $50 Billion Over 5 Years
ratory costs, currently provided free under
By KENNETH H. BACON
Medicare. The Ways and Means Commit-
Staff Reporter of THE WALL STREET JOURNAL
tee dropped this idea from the earlier $60
WASHINGTON-The House Ways and
billion savings proposal. In addition, some
Means Committee approved Medicare
senators were proposing income-related
changes that would save about $50 billion
premiums that would be higher for
over five years and would raise the 33 mil-
wealthy beneficiaries. Many Democrats,
lion beneficiaries' costs by about $7 billion
fearing opposition from well-organized se-
more than senior citizen groups have said
niors, object to this idea.
they can accept.
In its meeting yesterday, the Ways and
The plan would raise the current $75 an-
Means panel adopted a $50 billion plan
nual deductible for doctors' services to
crafted by Chairman Dan Rostenkowski
$100 next year and $125 in 1992 and would
(D., III. ) rather than a $40 billion proposal
increase the $28.60 monthly premium to
the senior citizen groups had rallied
$32.40 on Jan. 1 and to $46.50 by 1995.
around. The $40 billion plan, by Rep. Fort-
In addition, the committee proposed to
ney Stark (D., Calif. ), would have raised
collect $13 billion in additional revenue
the deductible by $25 next year instead of
over five years by raising to $73,000 from
$50 over two years and figured premium
$51,300 the amount of salary on which the
increases in a way that would have cost se-
hospital insurance payroll tax is imposed.
niors about $7 billion over five years. The
The tax is 1.45% each on workers and em-
premium increases adopted by the com-
ployers.
mittee will cost seniors $12.6 billion.
The proposed five-year savings of about
The Stark proposal would have kept
$50 billion is smaller than the $60 billion
premiums at 25% of the cost of Medicare
savings-$30 billion in higher payments by
Part B, which covers doctor bills. By con-
beneficiaries and $30 billion in lower Medi-
trast, the committee set specific pre-
care payments to hospitals and doctors-
miums, some of which will be higher than
provided for in a budget plan that Con-
25% of Part B costs.
gress rejected last week in the face of
Overall, the Stark proposal would have
strong opposition from elderly citizens.
increased beneficiary payments by about
The new plan, however, doesn't meet the
$10 billion, compared with $17.2 billion in
demands by a coalition of 30 senior citizen
the version the committee is sending to
groups, who insisted that Congress shrink
the House floor.
the earlier package by $20 billion.
As Congress struggles to produce a
Thus, the Medicare plan is likely to face
budget, the House Energy and Commerce
continuing opposition as it goes to the full
Committee is considering proposals to
House as part of a five-year plan to cut the
soften the blow of the premium increases
federal deficit by $500 billion. In addition,
for beneficiaries near the poverty level.
the House plan could differ significantly
The budget agreement allocates $2 billion
from the Senate's Medicare plan. As of last
for such income protection. However, the
night, Republicans on the Senate Finance
Senate Finance Committee is considering a
Committee were insisting on a package
proposal that would water down the in-
that would cost seniors more than the
come-protection measure by diverting
House measure.
some of the money to raise the amount So-
Senate Republicans are considering re-
cial Security beneficiaries can earn with-
quiring a 20% copayment on clinical labo-
out losing some of their benefits. A change
in the so-called Social Security retirement
test would tend to benefit affluent se-
niors.
DAILY
NEWS
Thursday, October 11, 1990
Bush flip a flop
with pols
By JEROME CAHILL
to pay for a modified capital
News Washington Bureau
gains tax cut with revenue to
WASHINGTON - Presi-
spare.
dent Bush's apparent flip-
Without the extra revenue
flop on a tax rate increase for
collected by bursting the top
America's wealthiest families
rate "bubble," sources said
yesterday sent lawmakers
the lawmakers might have to
scurrying for other sources of
take another look at propos-
revenue and revived fears
als to restrict tax deductions.
that tax deductions impor-
The House Wavs and
tant to New Yorkers may be
Means Committee yesterday
cut back.
was working on a draft tax
"We're redoing the pack-
bill that would put new limits
age," said Sen. Lloyd Bentsen
on deductions for state and
(D-Tex.), chairman of the
local taxes paid by high-in-
Senate Finance Committee.
come people. Similar limits
On Tuesday, Bentsen un-
were part of the White
veiled a plan to repeal the so-
House-Congress budget
called tax rate bubble that
agreement defeated last
taxes the super-rich at a 28%
week.
rate while others with less in-
come pay at a 33% rate. Bush
That proposal, denounced
indicated at a nationally tele-
by Gov. Cuomo and the New
vised news conference he
York congressional delega-
might accept the higher rate
tion, would take away deduc-
in return for a cut in the capi-
tions amounting to 3% of a
tal gains tax. But Republican
taxpayer's income over
senators, led by Oregon's Bob
$100,000. For example, a tax-
Packwood, said Bush re-
payer with $150,000 in in-
versed himself after they ob-
come would lose $1,500 in de-
jected to the arrangement.
ductions.
The confusion deepened
Brad Johnson, Cuomo's
yesterday when Senate Mi-
Washington representative,
nority Leader Bob Dole (R-
said, "It would be a tragedy if
Kan.) contradicted Packwood
the President's flip-flop re-
and said Bush had not ruled
sults in a partial repeal of de-
out a tax rate raise.
ductions." He urged Demo-
Bush yesterday did little to
crats to ignore the White
set matters straight as he
House and draw up their own
campaigned for GOP candi-
tax bill. "The Republicans
dates in the South, saying,
don't know what they are do-
"Let Congress clear it up."
ing," he said.
The confusion slowed ef-
forts on Capitol Hill to flesh
out a budget agreement call-
ing for $500 billion in tax in-
creases and spending cuts
over five years.
Bentsen's plan would hit
the nation's wealthiest tax-
payers with a $50 billion tax
boost over five years, enough
Senate KOs Social Security tax cut
By SUSAN MILLIGAN
bill taken off the floor on procedural
News Washington Bureau
grounds.
A vote for the measure would have
WASHINGTON - The Senate yesterday
meant finding money to make up for the
shot down a proposal by Sen. Daniel Moy-
revenue loss. Any senator voting against
nihan (D-N.Y.) to cut Social Security taxes.
the measure would be on record opposing
Moynihan said his proposal would save a
a tax cut.
worker as much as $76 a year in 1991 and
The Senate refused to waive a budget
$775 a year by 1996.
law requiring that any tax cut be offset by
Opponents said the bill would add $150
spending reductions or an increase in oth-
billion to the federal deficit over five years
er taxes. The 54-to-44 vote refusing the
and would force Congress to raise other
waiver put the Moynihan bill on ice.
taxes to make up for it.
One of Moynihan's aims was to eliminate
"This is just another excuse to tax, tax,
the big surplus in Social Security funds
tax and spend, spend, spend," shouted
that, he said, is being used to obscure the
Sen. Ted Stevens (R-Alaska), who got the
true size of the federal deficit.
NATION'S NEWSPAPER
USA
TODAY
PUBLISHED GANNETT
THURSDAY,
OCTOBER 11, 1990
Confusion
clouds work
on tax deal
By Richard Wolf
USA TODAY
Congress began searching
for an elusive consensus on
whose taxes to raise and whose
to cut - with just nine days be-
fore its next deadline.
But faced with conflicting
signals from the White House,
lawmakers went off in differ-
ent directions.
Democrats revised plans to
trade higher income taxes on
the rich for lower taxes on cap-
ital gains - toward a plan
President Bush could accept.
House Republicans unveiled
their own version of a trade.
Bush endorsed, then backed
away Tuesday from accepting
the swap. On Wednesday, how-
ever, Republicans said it was
still on the table.
"He didn't make any deci-
sion," said Senate Minority
Leader Robert Dole, R-Kan.
Bush, on a campaign swing,
did little to end the confusion:
"Let Congress clear it up."
Said Senate Majority Leader
George Mitchell, D-Maine:
"We will now have to reconsid-
er what the appropriate course
of action will be."
Democrats postponed ef-
forts to extend the top tax rate
to 33% for the wealthy and cut
the top capital gains rate to
23.1%, but didn't rule out such
a deal by next week.
Congress' fiscal committees
worked on alternate plans in-
tended to cut the deficit by
$500 billion over five years:
The House Ways and
Means Committee reported out
a version cutting Medicare by
$50 billion - instead of $60 bil-
lion - and dropping provisions
Chairman Dan Rostenkowski,
D-III., calls "totally obnoxious."
Among them: about $15 bil-
lion in business tax breaks, a 2
cents-per-gallon hike on home
heating oil and a two-week de-
lay in unemployment benefits.
Democrats on the Senate
Finance Committee crafted a
package that omits the trade.
Flap over
"Our uniform position was that we will
not go up on the rates, no matter what,"
flip-flop may
said Packwood, ranking Republican on
the Senate Finance Committee.
Did Bush then flip-flop - acquiesce to
the pressure, and drop the tax idea?
hurt in '92
Packwood and others say yes.
But on the day after, some Republi-
cans wonder whether Bush really closed
the door on an income tax hike.
'It hurts us
By Richard Benedetto
Senate Minority Leader Robert Dole,
USA TODAY
R-Kan., says Bush listened, but never said
all to have
where he stands. And GOP National
"Flip-flop."
Committee spokesman Charles Black
weak and
An apt phrase when you're
says the tax question is "on the table."
talking about hooked fish,
Asked to explain. White House press
wavering
flapjacks or gymnastics.
secretary Marlin Fitzwater said, "I want
But when a politician does
leadership in a
to bob and weave on this today."
it, as President Bush did Tues-
Such exchanges sound to friends and
day on tax hikes for the
budget crisis'
critics uncomfortably close to the budget
wealthy, disaster can follow.
script played out melodramatically in
Bush had to look no further
Congress this month - a budget show
than Wednesday's headlines
that was not funny to voters.
to realize his meeting with Senate Republicans has bought
Now Bush's role in the budget brouha-
political trouble:
ha has people talking about what only
"Democrats offer trade on taxes; Bush flip-flops" -
two months ago was considered a fore-
The Boston Globe.
gone conclusion - his chances for re-
"Bush: Yes, then no, on taxing rich" - USA TODAY.
election in 1992.
"Bush switches sides on tax tradeoff - twice" - The
Some conservative Republicans, feel-
Kansas City Star.
ing abandoned on the tax issue, are even
"Bush alters tax stand, backs off" - Los Angeles
making noises about putting someone up
Times.
against Bush in the primaries.
Republican Party leaders began damage control - call-
"Looking down the road, it makes
ing it "sensational reporting" - even denying Bush had
Bush enormously vulnerable in 1992,"
folded to senators opposed to higher taxes for the rich.
says Democratic National Committee
But the White House did little to clear up the confusion.
chairman Ron Brown.
By the end of the day, the most widely quoted soundbite
Wishful thinking, says Charles Black:
was Bush's joke while jogging: "Read my hips," he said,
"Bush's fortunes depend on what ulti-
when asked where he stood on taxes.
mately comes out of the budget package.
That left media and analysts sticking to the theme
The goal is to get a fair agreement with
Wednesday: The president was firmly a player in the bi-
enforceable deficit reduction. In the
zarre budget soap opera he and aides had been trying fever-
short term, if he gets that, he's vindicat-
ishly to blame on Democrats in Congress.
ed. And in the long term, if the econo-
Even Republicans spoke out: "I wish
my's healthy, the president's healthy."
he'd stuck by his guns and said 'read my
The gulf crisis, so far a plus for the ad-
lips again, no new taxes,' says Sen. Jesse
ministration, has begun to sap some of
Helms, a Republican for whom Bush was
Bush's strength in the polls. The outcome
campaigning in North Carolina.
in the gulf, all agree, will likely overshad-
It's been that kind of month for Bush.
OW any budget story now, particularly if
His political stock has been falling fast-
the result is a negotiated settlement or
er than the stock market since attention
quick military victory.
turned from the Persian Gulf to the budg-
"Before Iraq invaded Kuwait, all for-
et crisis. Polls that showed near 80% ap-
eign policy news was a plus for Bush, and
proval in mid-August - the height of the
it still could come back and boost him,"
gulf crisis - now find him in the 55% to
says analyst Merle Black.
65% range.
Nonetheless, Bush's setbacks in the
His TV plea for public support on the
budget fight have many wondering if the
painful budget deal he hammered out
man who was called a "wimp" during the
with the Democratic congressional lead-
1988 presidential camapign is beginning
ership went unheeded. He was even un-
to emerge again.
able to rally support for the deal from
"He seems to be following, or at best
members of his own party.
participating, rather than leading," says
Bush has suffered a rapid-fire series of
Stephen Wayne, Georgetown University
public-relations disasters on the budget
presidential scholar.
that has raised old questions about his
The derision has caused some to ask if
strength, forcefulness and ability to lead.
Bush could have avoided all this if he had
And it comes at a time when even the
his street-smart, hard-nosed strategist,
perception of a weakened Bush at home
Lee Atwater, at his side. Atwater, the
could undercut the strong stance he's tak-
GOP National Committee chairman who
en abroad during the Persian Gulf crisis.
help engineer Bush's 1988 victory, is
"We're seeing a president scramble.
fighting a brain tumor.
He's looking a little bit like the George
Atwater is said to be talking daily by
Bush who campaigned in Iowa in 1988,"
phone with White House operatives and
says Merle Black, Emory University po-
frequently with Bush. However, some
litical scientist.
Republican operatives admit privately
"Nobody's going to make the mistake
that they miss Atwater's "gut feel" for
of calling him 'Mr. October,' says Dem-
day-to-day politics.
ocratic pollster Peter Hart.
Recovery is possible, most analysts
The perception of a bleeding Bush has
agree. GOP strategist Eddie Mahe Jr. of-
Democrats on Capitol Hill sensing
fers a formula heard often Wednesday:
they're back in the driver's seat.
"Bush has to be typical Bush. Very
"I'm having trouble reading his lips
open, very upfront. He's got to say what
these days," says Sen. Albert Gore Jr., D-
he will do, and what he won't do, and
Tenn. "It hurts us all to have weak and
then stay there."
wavering leadership in a budget crisis."
But Republicans - many still smart-
Contributing: Jessica Lee and Lee Mi-
ing from Bush's abandonment last June
chael Katz
of his no-new-taxes pledge - are giving
the president the hardest time.
It was Sen. Robert Packwood, R-Ore.,
who triggered the flip-flop reports. He led
GOP senators to the White House to pro-
test Bush's apparent willingness to bar-
gain away long-held opposition to a hike
in income tax rates for the wealthy in ex-
change for a capital gains cut.
Deficit plans proliferate;
support is sparse
By Richard Wolf
USA TODAY
Nearly everyone in Con-
gress has a plan for cutting the
deficit. But virtually no one has
a plan that can pass.
That was the key concern
expressed Wednesday as fiscal
committees began piecing to-
gether unpopular tax increases
and spending cuts.
"We're trying to find where
the center of gravity is," said
Rep. Robert Matsui, D-Calif.
"Neither party wants to raise
taxes by themselves."
when Committee The House dilemma Ways Chairman was and exposed Means Dan
Rostenkowski, proposals rates of each position President a veto. house also on may Getting raises the to Bush's D-III., override emerge. key the two-thirds amorphous issue said possibility him of three tax of is
next to impossible.
"There isn't going to be any
taxes raised in this country
without the signature of the
president," said House Speaker
Thomas Foley, D-Wash.
Wednesday's action:
The Ways and Means
Committee reported "without
recommendation" a revised
budget plan that restores $10
billion to Medicare, raises gas-
oline taxes by 9 cents, not 10
cents, and eliminates business
tax breaks, home heating oil
tax boosts and a two-week de-
lay in unemployment benefits.
Chances: Fair; but Demo-
crats lean toward taxing the
wealthy, Republicans want to
provide growth-oriented tax in-
centives for business.
The Senate Finance Com-
mittee postponed acting on a
plan by chairman Lloyd Bent-
sen, D-Texas, to raise the top
income tax rate from 28% to
33% in trade for Bush's propos-
al to cut the average tax rate on
capital gains - profits on sale
of assets, like property or
stocks - from 28% to 19.6%.
Chances: Poor, unless Bush
again reverses himself on the
trade and agrees to consider it.
Democrats, who control the
panel 11-9, may lack the votes
to send it to the Senate.
House Republicans want
to freeze domestic spending,
have no gas tax hike, and trade
a 31% top income tax rate for
a 15% capital gains tax rate.
Chances: Negligible; GOP is
outnumbered 258-176 in the
House and 55-45 in the Senate.
"As I look to the future," said
Rep. Thomas Downey, D-N.Y.,
"there is only darkness at the
end of this tunnel."
Make budget pact
fair for everyone
The USA has to balance its books, and everyone has to
help shoulder the load.
For a decade. that load has fallen too heavily on the poor-
est 20% among us. And it's rested too lightly on the top 5%.
For a few hours Tuesday, it looked like President Bush
was ready to distribute the load more fairly. After signing a
budget agreement wrung out in the wee small hours, Bush
said that he might be willing to raise income taxes on the
top tier in exchange for a capital gains tax cut.
The mood passed quickly. A few balky Republican sena-
tors sought to persuade Bush that any tax hike on even the
richest taxpayers was unthinkable. They vowed "no deal" if
raising that tax was part of it.
So much for compromise.
This is no time for any of our leaders to bei saying "no
deals" on the deficit. Especially if they're talking about rais-
ing the top tax rate. That deal has been too sweet for the
well-to-do for way too long.
It works by taxing the wealthiest at a lower marginal rate
than the not-wealthy.
So, a person with a $1 million income who was lucky
enough to win a $10,000 lottery would pay $2,800 in addi-
tional federal income tax - a 28% tax rate. Someone earn-
ing $50,000 wouldn't be quite SO lucky - he or she would
pay $3,300 on that $10,000, a 33% rate.
This sweet deal has helped widen the chasm between
rich and poor. It's helped the wealthiest 10% pay $93 billion
less in taxes this past year than they would have in 1978,
even though everybody else pays more, according to Citi-
zens for Tax Justice.
So much for fairness.
People like the writer across the page apparently believe
that the rich make such a valuable contribution to our econ-
omy that they shouldn't be restrained by paying any more
income taxes. And he wants to give them another break by
lowering the capital gains tax rate.
In these troubled times, it's troubling to be talking about
letting the wealthiest off the hook. But doing what's neces-
sary to cut the deficit will hurt all of us.
Drivers should have to ride out a hike in the gas tax.
Smokers should have to inhale more cigarette taxes.
Drinkers should have to swallow higher alcohol taxes.
Those who buy yachts and other big-ticket items should
have to luxuriate in higher taxes on those, too.
The spending cuts that must be part of any responsible
deficit-reduction package will hurt many of our nation's
poor, aged and middle class.
Raising the top tax rate must be part of that package, too.
It would bring in billions, and we need the money. And we
need to make the tax system fairer.
Giving investors a break on capital gains isn't a bad idea,
but too many proposals have been badly conceived - full
of gimmicks that make them look like they'll diminish the
deficit when they'll actually add to it, too generous to people
who already escape their fair share of the tax burden.
Bringing the federal deficit down is a heavy job. It's a job
that needs the hearts and hands of every citizen to get done.
Rich as well as poor.
DAVID HOBBS
An opposing view
This budget 'fairness'
will hurt everyone
LEWISVILLE, Texas - A self-granted two-week reprieve has
yet to bring Congress any closer to real spending cuts, but it has
resurrected a seemingly appealing compromise to trade higher
personal income tax rates for a lower capital gains tax rate. This
idea had to originate in Washington, the only place where trading
something good for the nation for something bad constitutes a
good deal.
Purveyors of the myth that a lower capital gains rate is a tax
break for the rich ignore the increased income earned by lower
and middle-class workers and the wealth of jobs created because
more capital is available for investment. A
study by the Institute for Policy Innovation
shows that the capital gains proposal that
passed the House last year would have cre-
ated an additional 750,000 new jobs, over
five years. The empirical evidence is also
clear: Since 1922, raising the capital gains
rate has reduced federal revenue and low-
ering the rate has increased revenue.
Since a higher capital gains rate flunks
the test of economic prudence - it costs
jobs, reduces federal revenues and impedes
economic growth - what about the test of
David Hobbs is
fairness? Nearly 80% of all capital gains are
president of the
the result of inflation. Every year, one out of
Institute for Poli-
three elderly Americans realizes a capital
cy Innovation.
gain. Is it fair for them to pay higher taxes
on the inflated value of their retirement savings? Should the mid-
dle-aged pay higher taxes on the inflated value of their home or
for cashing in investments to send their children to college? In our
current slow-growth environment, is it fair to sacrifice jobs for
misleading but politically appealing sound bites?
This trade-off is even more troubling when the true costs of
raising the personal income tax rate are considered. Raising the
top personal tax rate from 28% to 33% would have an adverse
effect on economic growth, the average taxpayer's pocketbook
and federal revenues. Even though Congress and the administra-
tion have concocted an accounting system that assumes that peo-
ple won't change their behavior if taxes are raised, rational indi-
viduals and businesses aren't likely to abide by these rigid and
historically inaccurate assumptions.
Another of our reports examined the consequences of increas-
ing the top tax rate to 33%, factoring in behavioral responses to
increased taxes. It concluded that over 10 years this tax increase
would cost $518 billion in lost economic growth and 377,000 jobs.
Because it reduces economic growth, it would also cause com-
bined federal, state and local tax revenues to be hundreds of bil-
lions of dollars less than Congress' projections.
Lowering the capital gains rate is a good idea that would benefit
everyone. Those who would tie this pro-growth policy to a wither-
ing tax increase are selling the nation and the economy short. On
economic and fairness grounds, this seemingly appealing political
compromise is a raw deal for everyone.
DIANE C. ARKINS
Guest columnist
But my capital is not gaining
OLYMPIA VILLAGE, III. - I'm a trifle con-
"six-week recess," the Cap-
cerned about how the '90s are shaping up for the
itol Hill clan should reac-
average American's pocketbook.
quaint itself with some old-
We're only 10 months into this new decade
fashioned, tried-and-true
and already gas station attendants have forsak-
spending concepts like
en the catch phrase, "Fill 'er up?" in favor of,
"common sense" and "ac-
"Stick 'em up!" In addition to producing mam-
countability."
moth IOUs, the savings and loan crisis has
You'd have thought the
spawned spot shortages of mattresses and piggy
feds would have learned
banks. And when the economists cry "Depres-
Diane C. Ar-
everything they needed to
sion!" they're quite accurately echoing the way I
kins is a free-
know about balancing
feel these days when I see the bottom line of my
lance writer.
budgets in the financier's
bank account. Any way you look at it, my capital
version of kindergarten -
is definitely not gaining.
Economics 101. For those with short memories,
Sometimes it seems that running the U.S. gov-
here's a quick refresher course:
ernment is far too important to be left to the rep-
Look before you leap. Before the pols ax
resentatives we've duly elected to do the job. Af-
any programs of human relevance, let's check to
ter all, these are the very same folks who felt
see if we're still generously funding research
that the federal coffers could better withstand
projects like "The Effects of Elvis Sightings on
the recent short-lived layoffs of $5-per-hour
the Mating Habits of Gerbils."
Smithsonian guards whilst keeping $45.65-per-
There is no such thing as a free lunch.
hour congresspersons ever active on the payroll.
Here's my vote for supplying every politician
I just don't think the politicians have captured
with a bumper sticker that reads, "How Am I
the essence of how I'd like my hard-earned tax
Spending?" along with his/her mother's tele-
dollars to be spent when they make use of a gen-
phone number.
erous postage allowance to flood my mailbox
You can't have your cake and eat it, too.
with photo features of their meeting with the lo-
The flashy appeal of any out-of-this-world, star-
cal Boy Scout troop on its trip to Washington.
wars-type budget commitment needs to wait un-
In lieu of relying on congressional cliches like
til things balance out first here at ground level.
VOICES/Who do you blame for the budget deficit?
Arthur Laffer, 50
Betty P. Stephenson, 63
Edward Goldman, 44
Paula J. Macllwaine, 49
Former pres. adviser
Anesthesiologist
Machinist
County commissioner
San Diego, Calif.
Houston, Texas
Long Branch, N.J.
Dayton, Ohio
The budget deficit is
I don't think you can
I blame Congress.
The American people
not the problem. The
place the blame on any
They're giving each oth-
are to blame because
problem is taxes and the
one entity. This is some-
er pay raises and don't
we've gotten so accus-
inability to control spend-
thing that we've gotten
care about the people.
tomed to being a credit-
ing. I have never heard
ourselves into - sort of
The president shares
card society. We don't
of a country that can tax
the pie in the sky that's
some of the blame, but
want to pay our bills, and
itself into prosperity, and
catching up with us, and
not as much as Congress.
when they're due, we
it just makes no sense
we're figuring out how
I can't afford to pay any
look to blame someone.
what Congress is propos-
we're going to pay for it.
more taxes. The whole
We've worked ourselves
ing with the budget. What
Physicians and every cit-
country is going to have
into this mess, and we're
I would like to do is cred-
izen have a responsibility
to tighten its belt and say
either going to have to be
it Newt Gingrich on his
to do what we can to re-
"no" to a lot of the extra
more realistic or, next
courage.
duce the deficit.
things.
year, it will be the same.
Trudi Norquist, 50
Eric Burden, 42
Payroll technician
Service technician
Issaquah, Wash.
Alexandria, Va.
Some of the blame
I blame those people
should go to us voters be-
that we voted into office.
cause no one goes out to
Taxpayers would not
vote out incumbents who
mind tax increases if
are in these positions for-
they could see the bene-
ever and ever. Maybe
fits from the extra taxes.
people feel that their
But instead of applying
vote doesn't make a dif-
those taxes directly to the
ference, but in a lot of in-
deficit, they're spending
stances, one vote has
them. It bothers me that
made a difference.
they can manipulate
That's the only way we
money that eventually
can get them out.
gets lost in the shuffle.
QUOTELINES
"We will not go up on the rates, no matter what."
- Sen. Bob Packwood, R-Ore.
"Obviously, we're trying to get to where we don't hit the
average-income people so much."
- Sen. Lloyd Bentsen, D-Texas
"Stop trying to buy us off with capital gains."
- Sen. Ted Stevens, R-Alaska
"Vote aye for the United States, vote aye for the senior
citizens, the farmers, the children, the grandchildren."
- Sen. Bob Dole. R-Kan.
"Some cling to the unrealistic dream that you can ac-
complish what you want without spending any money."
- Rep. Sherwood Boehlert, R-N.Y.
The Philadelphia Inquirer
Thursday. October 11. 1990
Bush flip-flop on taxes
reflects GOP divisions
By Dan Balz
Washington Post
WASHINGTON - The confusion
over President Bush's stand on
What happened Tuesday? The sim-
plest explanation might be that Bush
One Democrat said Bush's only
higher tax rates for wealthy taxpay-
went farther than intended during
real hope is to negotiate with Demo-
ers, which played out Tuesday in an
embarrassing and politically damag-
his news conference and then
crats in the House and a bipartisan
ing sequence, reflects deep divisions
backed off less than Sen. Bob Pack-
coalition in the Senate.
wood (R., Ore.) suggested when he
White House officials also fear that
inside the administration over
told reporters that Bush had "acqui-
some of the House Republicans now
budget strategy and sharply conflict-
esced" to the Senate Republicans.
favoring a deal on higher rates may
ing approaches favored by House
and Senate Republicans.
Bush opened the door to a rate
be using it to appear reasonable but
Scrambling to maintain Republi-
increase in exchange for a cut in
ultimately want to derail the negotia-
can unity in the face of the Demo-
capital gains taxes Tuesday morning,
tions and turn the fight into a parti-
cratic majority in Congress, the
then appeared to allow a group of
san battle.
Republican senators, aided by anony-
Bush has said privately that he still
White House finds itself mired in
mous White House aides, to slam it
fears political damage if he bows to
disagreement with no clear way out.
shut hours later after a meeting at
higher rates, although political ad-
Many loyal Republicans, in and out
the White House.
visers have told him "it's no big
of the administration, said they were
Yesterday morning, after seeing
deal." He also has been told that the
uncertain what the administration
the portraits of confusion on televi-
Democrats already have won the ar-
was trying to do. Bush said it was up
sion and in the newspapers, Republi-
gument because the President is now
to Congress to clear up the confu-
cans attempted a partial retreat from
seen as defending the rich.
sion.
the apparent flip-flop.
The current Sununu-Darman strat-
Bush reportedly was not happy
"He didn't make any decisions
egy appears to be aimed at persuad-
with the way events unfolded Tues-
[Tuesday]," Senate Minority Leader
ing House Republicans, who have
day. But White House chief of staff
Bob Dole (R., Kansas) said of Bush's
been invited to the White House to-
John H. Sununu and budget director
reaction to the GOP senators' recom-
day in waves, to abandon their talk
Richard G. Darman continued to
mendation that he take the issue off
of raising tax rates in order to unify
work to block any new agreement
the table. "He listened to us. He
the party in both chambers and then
that strays too far from the package
didn't announce his position at all.
hang tough. What was unclear yes-
soundly rejected by the House last
He didn't acquiesce."
terday was where Bush now stands.
week.
Seventeen senators visited the
White House officials said they had
White House late Tuesday afternoon.
agreed that Bush's message during
There are conflicting reports about
his news conference Tuesday was
how they ended up there. One account
that he was not ruling out or in any
said Dole and Packwood decided they
specific provision and that all issues
wanted Bush to know of opposition
were on the table in the new round
among Senate Republicans. Another
account said that Sununu and Dar-
of budget negotiations with Con-
man, knowing the senators' views,
gress.
wanted Bush to hear them firsthand
Instead, when asked whether he
were now willing to accept higher
in an effort to push him back from his
morning statement.
rates to get a capital gains cut, he
Some White House aides backed up
replied: "That's on the table. That's
Packwood's statement, with Sununu
been talked about. And if it's proper,
telling a business group later that
if it can be worked in proper balance
higher rates were off the table.
between the capital gains rate and
The White House divisions, which
income tax changes, fine."
are more tactical than ideological,
Watching the performance on tele-
grow out of the administration's de-
vision, one administration official
sire to bring back into the fold the
said, "I almost fell off my chair
House Republicans who voted against
because what Bush said "went well
beyond what we thought was the
Bush and the package last week. What
position."
has astounded White House officials is
A senior administration official
that many of those same Republicans,
said the confusing events that fol-
including House Minority Whip Newt
lowed were "just a replay of the
Gingrich (R., Ga.), have been talking
argument we have been having
up a new compromise that would in-
within the administration for the
clude higher rates in exchange for
past 36 hours."
capital gains.
Sununu, Darman and Treasury Sec-
One official said that those who
retary Nicholas F. Brady "want to
now favor striking a deal believe
close the deal and believe any re-
that the top rate on the richest tax-
opening of these problems you
payers eventually will be increased
couldn't solve over weeks and weeks
and that it behooves the Republicans
will make sure you can't close the
to get something for it, such as capi-
deal at all unless it is on straight
tal gains-tax cuts, when they can.
Democratic terms," the official said.
Vice President Quayle in particu-
But complicating White House
lar has sided with House Republi-
strategy-making was the conflict be-
cans, largely to build unity.
tween senior Senate Republicans,
The administration now faces a dif-
who fear that Bush cannot strike a
ficult strategic decision. Senate Re-
good deal with the Democrats, and
publicans, because of their numbers,
many House Republicans, who once
are a potent force in the negotia-
opposed increasing tax rates but are
tions. They have the votes to sustain
now talking about being willing to
a presidential veto of any final pack-
do so.
age that Bush dislikes. House Repub-
licans, far more a minority, are seek-
ing a role in the action in the House,
which is dominated by Democrats.
Budget
Members of the tax-writing com-
mittee were divided on the plan's
plan is
chances of passage in the House.
"It lacks sex appeal," said Rep. E.
Clay Shaw Jr. (R., Fla.) "[but) we've
taken the fishhooks out of the sum-
mit agreement."
softened
Asked why the House should pass
it, Shaw said: "Congress is getting
beat up all across the country. People
think we can't govern. Even a hard
Panel eases cuts,
political choice has more appeal at
this time than voting no or taking a
tax increases
walk."
A similar plan is being pushed by
By R. A. Zaldivar
Senate Republicans with the backing
and Charles Green
of the Bush administration. Rosten-
Inquirer Washington Bureau
kowski and Bush met briefly yester-
WASHINGTON - The House Ways
day to discuss his committee's plan.
and Means Committee cleared a five-
The President's turnabout on the
year deficit-cutting package yester-
tax issue Tuesday left many in Con-
day, making a handful of changes to
gress confused and angry. Democrats
placate members who defeated a sim-
and many Republicans were incredu-
ilar plan on the House floor last
lous that Bush could signal a willing-
week.
ness to consider higher income taxes
The committee was groping for a
on the rich in return for a cut in the
way to resolve the budget problem. a
capital gains tax, only to reverse
task made more difficult by Presi-
himself hours later.
dent Bush's flip-flop Tuesday on
"We have to see what position the
swapping capital gains-tax cuts for
President takes this morning," said
higher income tax rates for the rich.
Senate Majority Leader George J.
But committee members said they
Mitchell (D., Maine).
expected alternative proposals -
"More and more, the President
one from each party - to be offered
seems like a man with both feet
on the House floor, in which the
firmly planted on two separate
capital gains-income tax swap proba-
stools, with the stools moving apart,"
bly would be resurrected.
said Rep. Charles E. Schumer (D.,
Adding to the confusion in Con-
N.Y.).
gress, some congressional Republi-
Bush, campaigning in the South
cans said yesterday that Bush had
for Republican candidates, avoided
not ruled out trading a capital-gains
the issue.
tax cut for higher income tax rates.
Sen. Lloyd Bentsen (D., Texas),
What Bush had actually said and
chairman of the tax-writing Finance
done on Tuesday was the subject of
much debate.
Committee, said he postponed a com-
mittee meeting yesterday at which
Senate Minority Leader Bob Dole
he was going to offer a capital gains-
(R., Kan.) said that Bush had not
for-rates trade so he could rethink
agreed to anything at the Tuesday
the situation. Bentsen said he had
meeting with Republican senators.
not ruled out offering such a swap.
"He didn't make any decision,"
In an unusual move, the Ways and
Dole said.
Means Committee cleared its plan
Dole said Bush was the victim of a
yesterday without a recorded vote
media disinformation campaign, and
and without a recommendation to
that Democrats were trying to force
the full House.
Republicans to accept a capital gains-
The potential for competing pro-
tax cut so they could raise income
posals from the committee and the
taxes and get "more walking-around
two parties reflects the deep dis-
money."
agreements over the budget that
Said Dole: "Let's get away from this
have yet to be bridged. And the Ways
argument of rich (versus) poor. We
and Means Committee essentially de-
all want fairness in the tax code."
ferred the partisan debate to the
But Rep. Raymond J. McGrath (R.,
House floor.
N.Y.), a member of the Ways and
"It's a classic debate between what
the parties stand for," said Rep. Bri-
Means Committee, described the pre-
an Donnelly (D., Mass.). "That's what
dicament of House Republicans.
this place is all about."
McGrath said he and his GOP col-
Congress and the administration
leagues had pledged their support
have until Oct. 19 to agree on a
for a swap at a closed session of the
budget or once again face shutting
committee Tuesday evening. In the
down the government. The two sides
midst of the meeting, a note was
are seeking a five-year deal to cut the
sent in informing the members that
deficit by $500 billion.
White House chief of staff John H.
Ways and Means chairman Dan
Sununu had gotten the deal
Rostenkowski (D., III.) told reporters
quashed.
the committee plan reflected "a
"I thought it was a pretty good
great deal of the measures" in the
trade," McGrath said.
budget summit agreement the House
The Ways and Means plan would
rejected early Friday.
limit cuts in Medicare to $50 billion
However, Rostenkowski said the
over five years, as opposed to the $60
committee removed or softened
billion called for in the summit
"what was totally obnoxious to mem-
agreement. Providers would shoul-
bers on the floor of the House of
der $32 billion in cuts, and beneficia-
Representatives."
ries $18 billion.
Dubbed the "bare-bones" plan, the
The monthly premium for Part B
committee's measure would soften
coverage of doctor visits would rise
the Medicare cuts, shave the pro-
to $46.50 by 1995, as opposed to $54.30
posed gasoline tax increase by a'
called for in the summit agreement.
penny to 9 cents, eliminate a series of
The annual deductible would rise to
energy and business tax breaks, drop
$125 instead of $150.
the 2-cent-a-gallon tax on home heat-
A proposal to require beneficiar:es
ing oil, and discard a proposal to
to pay 20 percent of laboratory costs
delay unemployment benefits by two
would be dropped.
weeks.
Bush's poll standing
falls fast amid crises
By W. Dale Nelson
addition, 38 percent said they knew
Associated Press
that a gasoline tax increase might be
WASHINGTON - President Bush's
part of the budget deal, and 40 per-
approval rating has plummeted in
cent knew that alcohol tax increases
the last two months as the Persian
were under consideration.
Gulf crisis dragged on, gasoline
Among people under age 30, only
prices soared and the budget stale-
20 percent said they were following
mate led to a partial government
the budget news closely. The per-
shutdown, a polling group reported
centage increased with age and
yesterday.
reached 46 percent among people age
The Times Mirror Center for Peo-
50 and older.
ple & the Press, a news industry
The results were based on tele-
group that monitors public reaction
phone interviews of 1,213 adults con-
to news, reported that 55 percent of
ducted under the direction of
those responding to its monthly sur-
Princeton Survey Research Asso-
vey said they approved of the way
Bush is handling his job as Presi-
ciates by the Gallup Organization in
dent.
Lincoln, Neb. Times Mirror said it
was 95 percent certain that the re-
Bush's approval rating was 68 per-
sults could be off 3 percentage points
cent in the September poll, 76 per-
either way because of sampling and
cent in the August survey. Indeed,
other random effects.
the latest figure is the lowest of any
poll since Bush's election in Novem
ber 1988.
Surveys by various polling groups
have generally shown his approval
rating between 70 percent and 80
percent. In February 1989, shortly
after he took office, it was 61 percent.
The President's highest rating -
80 percent - came in surveys taken
in January after the U.S. invasion of
Panama.
In the latest survey, conducted by
telephone last Thursday through
Sunday, 28 percent said they disap-
proved of Bush's conduct of the pres-
idency; 17 percent said they did not
know whether they approved or dis-
approved.
The center said 68 percent of Amer-
icans surveyed rated developments
in the Persian Gulf as the most im-
portant news of September.
The survey said that 63 percent of
respondents, the same as in August,
were paying very close attention to
news of the U.S. military deployment
in Saudi Arabia and other events in
the aftermath of Iraq's Aug. 2 occupa-
tion of Kuwait.
The percentage paying close atten-
tion to rising gasoline prices, which
have soared since the invasion, rose
from 56 percent to 62 percent. The
percentage paying close attention to
stories about hostages held in Iraq
and Kuwait declined from 57 percent
to 47 percent.
Although the latest poll was taken
during the period in which budget
negotiations broke down and Bush
ordered the shutdown, which lasted
three days, only 34 percent said they
were closely following news about
efforts to resolve the impasse.
Despite this, 45 percent said they
were aware that gasoline tax in-
creases were being considered. In
THE BOSTON HERALD. WEDNESDAY. OCTOBER 10. 1990
'Tip' knocks
Foley on fed
budget talks
By ALAN LEVIN
down as speaker in 1986,
out from the state of Wash-
had called the press confer-
ington and he's not affected
Former House Speaker
ence yesterday to support
by this," said O'Neill.
Thomas "Tip" O'Neill Jr.
Sen. John Kerry (D-Mass.),
But the ex-legislator did
yesterday blasted current
but he strayed to other to-
not stop at specific criticis-
Speaker Thomas Foley's
pics under questioning
mof Foley's compromise
leadership in federal bud-
from reporters.
on the budget package.
get talks and said he never
When asked about the
He charged the speaker
would have agreed to the
budget compromise that
had let President Bush get
compromise plan that fell
was soundly defeated last
off easy in his first two
on its face last week.
Friday, despite the backing
years in office.
"Now, if I were there and
of Foley and other top
O'Neill said Foley and
I was the speaker, I never
Democrats, O'Neill said he
the Democratic leadership
would have made the deal
would have voted against
"didn't go after" Bush on is-
that Foley made," O'Neill
it.
sues such as the Exxon
said in a wide-ranging
"There never would have
Valdez Alaska oil spill, the
press conference at his
been the original deal" if he
savings and loan crisis, and
Boston office. "No way
had had his way, he said.
gun control.
would we have come up
"I couldn't take that 2-
He said he backed Bush
with a conference (agree-
ment) of that type."
cent oil tax and I couldn't
on foreign policy matters,
take the (decrease) in Me-
but said the president is
Attacking Republicans
dicare," he said.
"doing a horrible job with
and Democrats alike for
regard to national issues
the current budget prob-
The plan would have
and the budget."
lems, O'Neill called Presi-
tacked a 2-cent per gallon
Like many congress
dent Bush's decision to
tax on home heating oil,
members in the wake of
close national parks "ridi-
which O'Neill said would
presidential arm-twisting
culous."
have unfairly hit the North-
on the budget. he criticized
cast.
The white-haired former
Bush Chief of Staff John
legislator. who stepped
"But Foley, Foley comes
Sununu.
THE PLAIN DEALER, WEDNESDAY, OCTOBER 10, 1990
Bush shifts twice
on tax deal
By DAVID LAUTER
and WILLIAM J. EATON
LOS ANGELES TIMES
WASHINGTON
-
President
capital gains - profits from the
Bush. still seeking a way out of the
sale of stocks or other assets - to
budget crisis, reversed position
23%. from the current 28%, while
twice yesterday on whether he
raising income tax rates for those
would agree to raise income tax
earning $200,000 or more to 33%,
rates for the rich as Congress began
from 28% now.
work on a new budget package that
In another proposed change.
may not be finished until after the
Bentsen would raise the alternative
election.
minimum tax paid by some wealthy
During a news conference yester-
taxpayers from 21% to 25%.
day morning. Bush appeared to sig-
While
Bentsen's
House
nal he might be willing to accept a
counterpart,
tradeoff with Democrats that would
Rep.
Dan
Rostenkowski, D-III., chairman of
reduce taxes on capital gains while
the House Ways and Means
raising tax rates for wealthy taxpay-
ers.
committee, has not expressed his
views on a second-time-around tax
Only a few hours later, however,
package, the two powerful chair-
during a meeting with 16 Senate
men met yesterday to discuss how
Republican leaders who opposed
to break the budget deadlock.
any such agreement, Bush report-
The combination of devel-
edly switched positions again, re-
opments left the budget situation
jecting any talk of such a deal, par-
confused again. Both sides are in-
ticipants in the session said.
creasingly skeptical that the law-
"He asked us what we thought,"
makers will be able to put together
said Sen. Bob Packwood, R-Ore.,
an acceptable budget plan before
the senior Republican on the tax-
the Nov. 6 elections, pointing to a
writing Senate Finance Committee.
possible lame-duck session this fall.
"It was unanimous. We all put up
During weeks of budget summit
our hands and said, 'no deal. If the
talks, White House negotiators re-
price of a capital gains cut is going
peatedly had rejected any sort of
up on on the rates, then no deal."
tradeoff involving capital gains
B1 Cit "agreed with that concept."
taxes and tax increases for the rich.
said Sen. Ted Stevens, R-Alaska,
Yet, Bush indicated yesterday
"it's done, there's no way.
morning he would accept it, after it
The apparently conflicting posi-
was endorsed by House Republi-
tions came as, separately, Senate
cans.
Finance Committee chairman
But he apparently reversed him-
Lloyd Bentsen. D-Texas, unveiled
self in the afternoon after talking
his own plan for such a tradeoff
with Senate Republican leaders.
that paralleled what Bush had said
While Bush was meeting with the
earlier he might endorse.
senators, his chief of staff, John H.
Sununu, told businessmen who had
Bentsen's plan. to be presented
lobbied for the capital gains cut
to his panel today, also proposes re-
that the idea was now dead.
ducing the 10-cents-a-gallon gaso-
"He (Sununu) was pretty hard on
line tax contained in the old bipar-
that line," an administration offi-
cial said.
tisan budget accord to 9 cents a
gallon and eliminating a proposed
House Republicans have said
2-cents-a-gallon tax on home heat-
they would support the tradeoff
that Bush and the Senate Repub-
ing oil.
licans have rejected. Sunday, in a
It also would ease the proposed
straw poll at a party caucus,
increases in Medicare costs to the
roughly two-thirds of the 176 GOP
elderly by limiting the increase in
the deductible to $100, instead of
members in the House voted to sup-
$150. as proposed before (it is now
port such a plan.
$75) and trimming back the pro-
The flurry of contradictory events
underlines the disarray into which
posed rise in Medicare premiums.
the White House and the GOP have
"Obviously, we're trying to get to
plunged in the wake of the collapse
where we don't hit the average-
of last week's budget agreement.
income person so much." Bentsen
On the one hand, Bush and many
said.
other Republicans believe that cut-
The tradeoff that Bentsen is
ting taxes on capital gains
proposing would reduce the tax on
income from the sale of invest-
ments ---- would spur economic
growth and would help them politi-
cally.
But Democrats have insisted that
the cut, which would primarily ben-
efit wealthy Americans. must be
balanced by increased taxes on the
wealthy.
Congress unlikely to OK
higher taxes for wealthy
By TOM DIEMER
Americans have borne a heavier
writing Ways and Means Com-
PD BUREAU
federal tax load since World War II,
mittee. But "for the Republican ac-
mostly due to inflation what used
tivists and theoreticians, lower
WASHINGTON - Even with a
to be called "bracket creep" - and
rates have always been an article of
president's reluctant backing, get-
a climbing Social Security with-
faith."
ting a personal income tax rate in-
holding tax.
After peaking at 92% for Ameri-
crease passed in Congress would be
"Before 1981, tax brackets were
can households earning more than
an extraordinary political break-
not indexed for inflation and there-
$400,000 in 1952, top rates gradually
through. It has not happened since
fore people kept moving up into
came down to 70% in 1965, and to
the Korean War.
higher and higher brackets," said
50% in 1982 - the famous Ronald
Despite the perception that taxes
Rep. Donald J. Pease, D-13, of
Reagan tax cut, that also indexed
are constantly going up, individual
Oberlin. "If inflation went up 5%
rates - and finally to 28% in 1986.
income tax rates have not risen in
and their income went up 5%, they
A guns and butter surtax during the
nearly 40 years. In fact. a study of
were not any better off but they
Vietnam War briefly took top mar-
historical trends indicates the
would move up into one of those 12
ginal rates as high as 77% in 1969,
opposite has occurred: a steady
or 14 brackets."
but that temporary levy was
downward drift in marginal rates
dropped two years later.
Yet rates - set at 15% and 28% in
from a high of 92% in 1953 to the
Don Korb, a Cleveland tax lawyer
present top marginal rate of 28%, or
1986 - have become Capitol Hill's
and an architect of the 1986 tax re-
for some unfortunate in-
sacred cow.
form act when he worked as an In-
betweeners, 33%.
"Rates that are too high are de-
ternal Revenue Service analyst. has
"The notion that government is
structive of economic activity." said
studied the historical trends and
always raising your taxes is for the
Pam Pecarich, director of tax policy
thinks Congress will take heed.
most part not true,' said Joseph J.
for Coopers and Lybrand's Wash-
"I think it is going to make them
Minarik, executive director of the
ington office. "The politicians lis-
all the more gun shy (about raising
Joint Ecomomic Committee.
tened and learned, and over time
taxes) once they realize what they
have done everything they could to
are doing here," Korb said of the
The prospect of raising rates on
the rich picked up steam yesterday
bring rates down."
post-war reluctance to hike rates. "I
when President Bush suggested he
Too much, in the view of some
think this is a very significant point
that has probably been over-
was willing to bargain on the issue,
like Pease, who want to raise rates
looked."
probably in exchange for a reduc-
on the wealthiest Americans by 5%.
The main objective of Pease and
tion in capital gains taxes. But later
"What happens is that tax rates
allies such. as Sen. Howard M.
yesterday, Bush backed away from
have gone down so much in the last
Metzenbaum, D-O., is to eliminate
the idea under pressure from Re-
10 years that sending them back up
the so-called bubble, a phantom
publican senators.
at the high end is not going to cause
third rate which imposes a 33%
While Congress has been loathe
apoplexy for the average citizen,"
marginal rate on upper-middle
to tamper with marginal rates,
said Pease, a member of the tax-
class taxpavers. The rate, an
anomaly, is levied on joint filers
making between $78,400 and
$185,730, as a means of pulling
their average overall rates to 28%.
Income above $185,730 is again
taxed at 28%, meaning upper mid-
dle income taxpayers have a higher
marginal rate than the very wealthy
- though both groups pay the same
effective, or average rate.
Pease and Metzenbaum want to
establish a firm 33% bracket for
those making more than $200,000
annually - a historic tax rate in-
crease that Metzenbaum estimates
would add $45 billion to the trea-
sury in five years and flatten the
bubble.
"The determining factor is really
George Bush," Pease said yester-
day. "A lot of Republicans said over
the weekend. let's burst the bubble
and get on with the show."
Unhappy Americans
want the old Bush back
By TERENCE HUNT
ANALYSIS
ASSOCIATED PRESS
Bush badly misread
WASHINGTON - "The jury's
On the critical budget vote. Bush
still out," President Bush says, but
congressional
could not muster half of the GOP
in reality he's been badly bloodied
members of the House. Even most
Republicans and the
by the budget turmoil.
of the Republican leadership aban-
The president's poll ratings have
American public about
doned him.
slipped, his leadership abilities are
For Bush, it was a crushing dis-
whether they would
being questioned, his own Republi-
appointment on an issue that he
cans are in revolt, and he has
support a painful
had described as the biggest test of
thrown away his no-new-tax trump
his presidency in the domestic
prescription that
card.
field. Bush may be enjoying still-
would boost taxes on
All this, and still no budget
high popularity ratings, but what's
agreement.
it worth if it doesn't get him the re-
gasoline, alcohol and
After five months of wrangling.
sults he wants?
Congress has given Bush only a
cigarettes and raise
What Americans seemed to want
vague budget agreement along with
was the old Bush - the feel-good
health-care costs
promises to fill in the blanks later
leader who promised not to raise
under Medicare.
with tax increases and spending
their taxes. Many GOP politicians,
cuts. To get even this much, Bush
facing the voters in November, also
had to shut down the government in
liked the old Bush better.
Bush says he has full confidence
an embarrassing spectacle.
The president made it easy for
in his staff. "And when the passions
At a news conference yesterday,
Republicans to defect. He promised
get high," Bush said. "I understand
Bush acknowledged that Americans
there wouldn't be any penalty for a
that there's bound to be a little bro-
might justifiably wonder about the
no vote. He's even going out cam-
ken china up there." He said the
ability of the president and Con-
paigning for turncoats. beginning
complainers are just "squeaky
gress to govern. "I can understand
with Sen. Jesse Helms, R-N.C.,
wheels."
the frustration," he said. "I feel it
today.
"The news of course is man bites
myself at times."
Despite Bush's collegial attitude.
dog. Republican goes after Repub-
Bush badly misread congres-
there are bad feelings between the
lican."
sional Republicans and the Ameri-
White House and congressional Re-
can public about whether they
publicans over the budget negoti-
In less than a month. Bush's pop-
would support a painful prescrip-
ations.
ularity rating has dropped 10 per-
tion that would boost taxes on
Bush's strong-willed chief of
centage points to 65%. according to
gasoline, alcohol and cigarettes and
staff, John Sununu, and his budget
a Washington Post-ABC News Poll.
raise health-care costs under Medi-
director, Richard Darman, were ac-
A CBS News poll measured the
care.
cused by some lawmakers of acting
erosion at 14 percentage points and
The voters spurned the appeal
arrogantly and treating them with
pegged his approval rating at 62%.
for sacrifice. Instead, they called
disrespect. In one instance, Sununu
"I guess I learned that you can't
lawmakers to demand that they
dismissed Sen. Trent Lott. R-Miss.
do it exactly my way when we get
vote against the president. And
as "insignificant" when he said he
down on something like the
that's exactly what Congress did.
would vote against Bush's budget.
deficit." Bush said.
Frustrated
Bush irked
by budget,
Hussein
that penalizes two-earner middle-
class families earning between
$50,000 and $150,000.
SCRIPPS HOWARD
Bush defended the work of his
WASHINGTON - An impatient
top aides. chief of staff John Sun-
unu and budget director Richard
President Bush yesterday ex-
Darman. from attacks by Republi-
pressed frustration with the budget
cans and Democrats that the two
process, critics of his top aides and
Saddam Hussein for destroying Ku-
were arrogant and had extended
the painful. embarrassing budget
wait.
But he took comfort in polls
process by pushing legislators
around.
showing Americans support him on
Sununu infuriated many Repub-
foreign affairs and blame Congress
more than they blame him for the
licans by suggesting Bush might not
campaign for those who didn't go
budget mess.
In a news conference in the
along with the $134 billion in tax
hikes and the $30 billion cut in
White House, Bush hinted he may
Medicare benefits he signed onto
accept a higher income tax rate on
the wealthy in exchange for a capi-
with Democratic leaders. Yesterday
tal gains tax cut. "If it can be
Bush insisted he would campaign
for deserters from the fold. but he
worked in proper balance between
the capital gains rate and income
also firmly hailed Sununu and Dar-
man as first-class aides in whom he
tax changes, fine," he said.
He refused to be more specific,
has full confidence.
clinging to his months-old logic that
"When people get tired and stay
negotiators work best when they
up 'til 3 o'clock in the morning, ev-
ery morning, why, there's bound to
work in secret.
Shortly before 7 a.m. EDT, Bush
be tensions," Bush said about con-
signed 12th-hour legislation re-
gressional criticism of Sununu and
opening the federal government for
Darman. Sununu looked on with a
business as usual after closing it for
grin.
the three-day Columbus Day holi-
"Calm them, calm it down and try
day weekend for lack of a budget.
to go forward. That's my approach
He then admonished Congress it
to it," Bush added.
had until Oct. 19 to implement a
Asked about Iraqi President
budget resolution by settling what
Saddam Hussein's intention to
taxes to raise and what programs to
obliterate any trace of Kuwait as an
cut in order to pare the expected
independent country, Bush said
deficit of nearly $300 billion in 1991
such reported Iraqi actions as pull-
by $40 billion. If no final budget
ing Kuwaitis off of dialysis ma-
package is agreed upon in nine
chines and heaving babies out of
days, the government shuts down
incubators to send the equipment
to Baghdad are "sickening."
again.
Democrats on Capitol Hill hailed
Bush said he can't give an answer
Bush's statement on tax rates. Last
on how long he'd let such actions go
Friday Democratic leaders said the
on without military response, but it
best hope for compromise was to
is a "new equation in the last three
make the wealthiest taxpayers pay
weeks, the systematic dismantling
a 33% top rate on the last dollars of
of Kuwait that concerns us enor-
earnings, just as middle-class tax-
mously."
payers do, instead of a 28% rate.
His patience "is wearing very
This would eliminate the "bubble"
thin on that account," Bush said.
THE BOSTON GLOBE
WEDNESDAY, OCTOBER 10, 1990
The perils of Bush's
stumbling at home
ade SO that "this aggression doesn't
of staff, John H. Sununu, who is
By Stephen Kurkjian
succeed."
viewed as more conservative than
GLOBE STAFF
Bush showed foreign policy deft-
Bush and, as the budget debacle has
WASHINGTON - Having won
ness once more in the hours after
shown, far less adept in handling the
the presidency on the pledge that he
the press conference. His adminis-
sensitivities of congressmen.
would never raise taxes, George
tration put forward a strongly word-
"He has no domestic agenda and
News
Bush wavered yes-
ed resolution at the United Nations
no passion when it comes to domes-
terday on increas-
condemning ,Israel for its bloody
tic issues, SO he handles these things
Analysis
ing income tax
crackdown Monday on Palestinians,
on a crisis basis," said Doug Bailey, a
rates. Having
which threatened to disrupt US at-
Republican political consultant.
worked hard to convince civil rights
tempts to unify Arab support for the
Bailey's assessment was under-
leaders that he is sympathetic to
US response to Iraq's invasion of
scored by Bush's decision, after
their causes, the president today will
Kuwait.
meeting with Republican senators
campaign on behalf of Sen. Jesse
But as his defeat on the budget
later yesterday, to back away from
Helms, who has arguably the worst
agreement last week showed, Bush
his press conference statement that
civil rights record in the Senate.
has been far less successful on do-
he would be willing to consider a tax
President Bush is stumbling bad-
mestic issues. "I can't say I just re-
increase on the wealthy to achieve a
ly on domestic policy. And in the
joice every time I go up and talk to
budget agreement. "When issues are
process, he is alienating many of the
Danny Rostenkowski, my dear
dealt with on a crisis basis, a presi-
political coalitions that put him in of-
friend, about what he's going to do
dent will usually look for the fastest,
fice and that look to him for leader-
on taxes," Bush said, referring to the
easiest solution at hand, and SO the
ship on key domestic issues.
strong-willed Illinois Democrat who
public comes away without a clear
In his press conference yester-
heads the House Ways and Means
sense of where the President is lead-
day, Bush conceded that he greatly
Committee, which handles tax laws.
ing it," Bailey said.
prefers dealing with foreign policy
Bush told reporters that the
matters to handling domestic ones.
problems are more institutional and
Bush has perhaps his cloudiest
It was not an extraordinary conces-
stem from having to deal with a
record on civil rights issues. While
Democratic-controlled Congress.
he promised a "kinder, gentler"
sion for someone whose record high
favorability rating from his handling
"People really basically want to sup-
presidency, his follow-through has
of the Persian Gulf crisis began to
port the president on foreign affairs,
been limited to inviting a number of
plummet as the budget crisis contin-
and partisanship does, in a sense,
black leaders to the White House
stop at the water's edge," Bush said.
who have argued for the civil rights
ued and the public's confidence in his
"Whereas on domestic policy, here I
bill that Bush's top aides say he is
handling of the economy deteriorat-
ed.
am with Democratic majorities in
still intent on vetoing. Today, Bush
In contrast to his work on foreign
the Senate and Democratic major-
travels to North Carolina to cam-
ities in the House, having to try to
paign for Helms, the conservative
policy issues, Bush said, he is not
having much "fun" dealing with the
persuade them to do what I think is
Republican who has opposed every
best."
major civil rights measure since he
budget crisis. He said he enjoyed
working on the gulf crisis, putting
Others said Bush's view reflects
arriving in the Senate in 1972:
his ambivalence toward domestic is-
Helms is opposed for reelection by
together the international coalition
to condemn Iraq's invasion of Ku-
sues and his inclination to depend on
Harvey Gantt, the former mayor of
wait and building an economic block-
the advice of the White House chief
Charlotte. Gantt is black.
Although a majority of the public
has been found to believe that the
Congress and not Bush is at fault for
the failure to pass a budget package,
Bailey said the defeat of it last week
contained a strong message for the
president.
"Every poll that has been done in
recent years has stated that the
American people would be willing to
accept higher taxes as long as it
brought them better schools, cleaner
environment, better health care,"
Bailey said. "If he had an agenda
that was committed to those issues,
people would have been more than
willing to accept higher taxes."
THE BOSTON GLOBE
WEDNESDAY, OCTOBER 10, 1990
An embarrassingly vivid contrast
for the Republicans
THOMAS OLIPHANT
get summit deal last week.
mond of South Carolina - the Dr. No
The rejectionism of the Newt
of more than a generation - votes for
Gingrich-misled House crowd effec-
WASHINGTON - From the
a budget bill and declares from the
tively dealt it out of the game; the
slime pits Friday morning in the
floor that "the American people want
wise gesture of the Senate Republi-
action."
House, Republicans ascended the
cans dealt them in.
high ground yesterday morning in
In the days ahead, the Republi-
On Sunday, the House GOP was
the Senate.
cans have tough choices to make,
SO tied up by its no-tax ostriches that
"For heaven's sake, you're grown
and privately acknowledge their
not a single Republican bothered to
men and women; why can't you solve
rough contours. If they truly want a
show up at the conference with Sen-
the problem?" was how retiring Sen.
lower rate for capital gains, they
ate leaders of both parties that nego-
James McClure of Idaho aptly sum-
must accept a higher top rate on or-
tiated the final form of the budget
marized the public's damning ques-
dinary income; if they want to join
resolution.
tion. He then answered it: "We can if
Democrats in easing the budget's
The contrast with the Senate Re-
we tell the truth. Quit the postur-
impact on Medicare, new tax breaks
publicans was embarrassingly vivid.
for business must be resisted; and if
ing."
With the climactic round of budget-
According to this principled con-
they want a lower or different tax on
writing just beginning, the Senate
servative, a fundamental verity
gasoline or energy, they are prob-
GOP quickly won concessions in the
about governmental gridlock is that
ably looking at deeper cuts in de-
temporary measure allowing the
fense.
"neither party wants to admit what
government to reopen yesterday,
their agenda is"; and the reason is
Thanks to major leaguers such as
which the House's Democratic ma-
that neither is confident enough
James McClure, the Republicans can
jority had rejected on Sunday. In
about the appeal of its agenda to be
shape those choices; if President
one, symbolic and real spending cuts
candid about it.
Bush wakes up, he can play, too.
were made part of the stop-gap
The Democrats, McClure said,
funding bill; in another, nonbinding
want government to do more. and fa-
but clear instructions were given to
vor higher taxes to pay the cost. The
Republicans want government to do
complete the detailed budget-writing
by the end of this week.
less and tax less, and favor cutting
domestic programs.
Far more important, by choosing
In politics, however, the Demo-
participation rather than pouting,
crats are afraid to make a direct case
the Republicans earned the right to
for higher taxes, while the Republi-
wag a warning finger at the numeri-
cans are afraid to make a direct case
cally superior Democrats. That task
for specific cutbacks in programs.
was handled by veteran deficit-fight-
The result is that the Democrats
er Pete Domenici (R-N.M.), the sen-
succeed in protecting programs,
ior GOP man on the budget commit-
while the Republicans succeed in re-
tee. No budgetary funny business,
straining taxes, each satisfying the
he warned; no smoke and mirrors,
public's conflicting impulses while
and nothing less than $500 billion in
nearly wrecking the country's fi-
genuine multiyear savings, with pre-
cise enforcement mechanisms, or the
nances.
Republicans walk.
The only way out of gridlock, Mc-
Clure said, is a simple statement,
The Republicans' decision came
which he made to the Senate's
hard. At a closed-door meeting Mon-
Democratic majority before voting
day - Senate Minority Leader Bob
for the 1991 budget resolution: "All
Dole called it the raucous caucus -
right, I'll meet you halfway."
tempers flared. Dole, however, was
More than half of McClure's Re-
able to produce a majority of his par-
publican colleagues joined him, in
ty for the budget resolution, led by
contrast to the House GOPs rejec-
nearly all his senior people. You
tion of President Bush and his bud-
know that the antigridlock move-
ment is cooking when Strom Thur-
Democrats offer trade
on taxes; Bush flip-flops
By Peter G. Gosselin
GLOBE STAFF
portedly switched again and opposed
enues over the next five years.
any trade, according to participants
Democratic negotiators have re-
WASHINGTON - Senate Democrat-
in the session.
peatedly sought the rate increase to
ic leaders yesterday tried to revive
Bush reportedly asked the GOP
correct what they say is an unfair
stalled budget talks by offering to trade
leaders what they thought of the
shifting of the tax burden to middle-
a capital gains tax cut for higher income
idea, according to Sen. Bob Pack-
class and lower-income taxpayers.
taxes on wealthy Americans, but the
wood, an Oregon Republican. "We
just put our hands up and said, 'No
Democrats have previously label-
White House flip-flopped on the idea,
leaving prospects for a budget settle-
deal on rates at all' and he just ac-
ed the capital gains tax cut a give-
ment as muddled as ever.
quiesced in it," Packwood said after
away to the rich; the administration
President Bush said early yesterday
the session.
has said it would spur growth.
that he was ready to drop his longstand-
Packwood said Bush also asked
The capital gains tax cut would
ing opposition to an income tax hike for
the leaders if they would hold fast to
reduce federal tax revenues by $9.8
the rich in return for a long-sought cut in
their opposition. "And to a man, in
billion over the next five years, ac-
the capital gains tax rate. But late in the
the room, every single person said
cording to committee staffers.
day, the president apparently reversed
we will support that" position, Pack-
Besides the tax trade, the com-
himself under pressure from Senate Re-
wood said.
mittee plans that Bentsen is expect-
publicans.
Some press accounts quoted an
ed to introduce today will junk a con-
The reversal revealed anew deep fis-
unnamed White House official as
troversial proposal to impose a 2-
sures among congressional Republicans
saying the president then said,
cent-a-gallon tax on home heating
and suggested just how hard it will be
"Fine, we don't need either one of
oil. Bentsen had previously cham-
for lawmakers to hammer out a five-
them," referring to income tax in-
pioned the proposal, which was
year, $500 billion deficit reduction plan
creases and capital gains tax cuts.
strongly opposed by New England
as called for by the stopgap tax-and-
While Bush met with the sena-
lawmakers.
spending plan approved by Congress
tors, the White House chief of staff,
Other elements of the committee
and signed by Bush early yesterday
John Sununu, was reportedly telling
plan include:
morning.
business executives who had lobbied
Easing highly unpopular Medi-
The two sides have until Oct. 19 to
for the capital gains cut that the idea
care cuts that led many lawmakers,
work out a deal or face the drastic cuts in
was dead.
to oppose the first deficit reduction
federal operations that were narrowly
The White House refused to
deal. Staffers said Medicare would
averted yesterday.
comment either on Bush's meeting
be cut about $43 billion; previously it
Before Bush's sudden change of
with the Senate Republicans or on
was to have been cut $60 billion.
heart, it appeared that the White House
Sununu's remarks. Bentsen, who is
Elimination of plans to save
and congressional negotiators were on
expected to propose the tax trade-off
$4.6 billion by delaying the start of
the way toward a budget compromise.
to the Finance Commmittee this
unemployment insurance for two
Aides to Senate Finance Com-
morning, could not be reached for
weeks after workers lose their jobs.
mittee Chairman Lloyd Bentsen said
comment last night.
A slight drop in a proposed tax
the Texas Democrat was ready to
The events yesterday left the
increase in gasoline from 10 cents
support a cut in the capital gains
budget situation as confused as it
per gallon to 9 cents.
rate, which would chiefly benefit the
has been since late last week, when,
New taxes on beer, wine, li-
wealthy, from 28 percent to about 23
despite strident calls by Bush and
quor, tobacco and luxuries such as
percent in return for boosting the in-
Democratic leaders for passage of a
expensive cars, boats, jewelry and
come tax rate for the wealthiest
deficit reduction plan more than five
furs.
from 28 to 33 percent. The aides said
months in the making, the House
Bentsen's proposal had been crafted
overwhelmingly defeated the mea-
in consultation with another power-
sure.
ful Democrat, Rep. Dan Rosten-
The defeat pushed the federal
kowski of Illinois, chairman of the
government within a hair's breath of
House Ways and Means Committee,
full shutdown. The two sides averted
a shutdown early yesterday by put-
suggesting that the trade-off might
ting off the most controversial deci-
help break the impasse over the bud-
sions about how to change the re-
get.
Bush started the day by praising
jected plan.
Yesterday's events left many
the idea of a trade, which he had pre-
wondering whether the bargainers
viously opposed.
can hammer out a deal in the 10 days
"That's on the table; that's been
before the next crisis.
talked about," he said at a morning
The tax trade-off is at the center
news conference. "If it's proper, if it
of the Senate Finance Committee
can be worked in proper balance be-
plan to break the impasse and is
tween the capital gains rate and in-
likely to guide Democratic negotia-
come tax changes, fine."
tors in the coming weeks, according
However, by late afternoon,
to committee staffers who briefed
when Bush met with 16 Senate Re-
reporters yesterday.
publicans who oppose any such
Under the plan, according to
agreement, the president had re-
staffers, tax rates for couples mak-
ing more than $217,500 in income
would be raised from 28 percent to
33 percent. The increase would raise
an additional $40 billion in tax rev-
THE BOSTON HERALD, WEDNESDAY, OCTOBER 10, 1990
Sununu gets vote of confidence
By JOE BATTENFELD
WASHINGTON - President Bush
yesterday defended his beleaguered
chief of staff, saying he has "full confi-
dence" in John Sununu's ability to deal
with Congress.
"When the passions get
Bush's strong endorsement came
high, I understand that there is
as many lawmakers - particularly
bound to be a little broken
Republicans - blamed Sununu for
china up there," Bush said. "So
I don't worry about that."
jeopardizing budget negotia-
Bush attributed the attacks
tions with his heavy-handed
on Sununu to a few unhappy
tactics.
members.
"What you hear is the
"Anytime you have a diffi-
squeaking wheel," he said, ad-
cult road like this, there's
ding that Republicans such as
bound to be some griping about
Senate Minority Leader Robert
it," Bush said at a White House
Dole and House Minority
press conference, with a smil-
Leader Robert Michel are sa-
ing Sununu at his side.
tisfied with Sununu.
"I have total confidence in
Sununu himself stepped for-
our team," the president added.
ward yesterday to deny reports
"I think they did a first class
that he told GOP House mem-
job."
bers that Bush would come to
Along with budget director
their home districts and chal-
Richard Darman, the former
lenge them to explain their
New Hampshire governor has
budget votes.
become a lightning rod for cri-
"No, I didn't," Sununu said.
ticism by lawmakers in the on-
"What I said was, the president
going budget saga on Capitol
wants your support on the
Hill.
budget. He's going to look you
The list of his reported put-
in the eye sometime and ask
downs and four-letter outbursts
you to do it, and I hope that you
against congressional leaders
supported him, because if he
has grown daily here.
looks you in the eye and asks
you to do it on the campaign, it
Rep. Joseph Moakley (D-
might be a little embarrass-
South Boston), chairman of the
ing."
House Rules Committee, has
When asked whether he
openly predicted Sununu will
went "too far" in pushing some
be forced out of the White
Congress members, Sununu re-
House.
sponded, "I don't think SO. We
But other observers said
got a budget agreement. didn't
Sununu's job appears secure
we?"
because of Bush's strong sense
Some lawmakers, however,
of loyalty.
noted Sununu was kept away
Bush, in fact. attempted yes-
from the Capitol while the
terday to take the heat off his
House and Senate debated the
chief of staff.
latest budget agreement.
When asked whether he had
chewed out Sununu, Bush re-
plied testily, "Absolutely not."
He insisted that no long-
term damage had been inflict-
ed by Sununu and Darman on
the often fragile egos on the
House and Senate floors.
THE SUN
WEDNESDAY,
OCTOBER 10, 1990
Bush says he
may back rise
in top tax rate
"I think
people want a chance
But aides later say
against the incumbents up there on
the Hill," said Mr. Bush, who has
he won't, rejecting
complained repeatedly about having
capital gains trade
to deal with a Democratic majority in
Congress that is dominated by well-
entrenched leaders.
By Karen Hosler
California and Colorado, two
states where Mr. Bush is expected to
Washington Bureau of The Sun
campaign before the Nov. 6 election,
WASHINGTON - President
both have term-limit questions on
the ballot. The California referen-
Bush said yesterday he may agree to
raise income tax rates for the
dum applies only to state legislators,
but its success is thought likely to
wealthiest Americans in exchange
have at least an attitudinal impact
for more favorable treatment on cap-
on Congress.
ital gains, signaling a willingness to
On the tax issue, the president
go beyond what his negotiators have
indicated for the first time yesterday
proposed in budget talks.
that he may be willing to completely
"That's on the table," Mr. Bush
eliminate the so-called "bubble" that
said at a White House news confer-
gives the wealthiest Americans à
ence. "If it can be worked out in a
marginal tax rate of 28 percent while
proper balance between the capital
taxing those with upper-middle in-
gains rate and income tax changes,
comes at the top rate of 33 percent.
fine."
For a married couple filing jointly
But hours later, aides said the
in 1990. the 33 percent rate applies
president had been convinced during
to adjusted gross incomes between
a meeting with Republican senators
$78,400 and $162,077. Couples re-
not to consider such a trade because
porting higher incomes would pay at
the Democrats probably would get
the rate of 28 percent.
the better end of the bargain.
White House spokesman Marlin
"They said we're never going to
Fitzwater cautioned that such an in-
get the balance we want with capital
crease in the income tax rates would
gains, so let's forget it." deputy White
have to be offset by a deep cut in the
House press secretary Alixe Glen re-
capital gains rate, to perhaps 15 per-
ported. "The president told them,
cent. Capital gains, earned from the
'OK. if that's what you want.'
sale of assets, are currently taxed at
Mr. Bush's seemingly speedy
the same rate as earned income.
turn-about illustrated the volatility of
At his meeting with the Republi-
an issue that has been at the heart of
can senators yesterday afternoon,
the budget-cutting debate since talks
Mr. Bush was warned that the Dem-
began earlier this year.
ocrats who control the tax-writing
By publicly dropping the adminis-
committees were never going to re-
tration's resistance to an increase in
duce the capital gains rate enough to
the personal income tax rates, the
make the trade-off worthwhile.
president appeared to abandon the
last vestige of his "no new taxes"
But Mr. Bush, who told reporters
pledge of the 1988 campaign.
he has been "pulling and tugging" to
His comments were taken as a
get a budget agreement for nearly
five months, said, "I want to get
sign by lawmakers now working to
something done in these committees.
come up with details of the $500 bil-
I don't think It would be helpful to
lion, five-year budget plan adopted
draw a line in the sand."
early yesterday that Mr. Bush is
In announcing the budget agree-
open to any reasonable offer in
ment he reached with congressional
hopes of making a substantial cut in
leaders last week, the president pro-
the nation's soaring budget deficit.
claimed that, despite its calls for
"What struck me as most impor-
higher gasoline, cigarette, alcohol
tant was the atmosphere of his re-
and luxury taxes, the package could
marks." said a staff alde to the tax-
claim the virtue of leaving the per-
writing House Ways and Means
sonal income tax rates intact.
Committee, which is expected short-
Mr. Bush acknowledged yester-
ly to consider a proposal along the
day that his previous resistance to
lines of what Mr. Bush was discuss-
such tax increases - particularly
ing. "He was saying. 'Let's all get to-
his "read my lips" anti-tax pledge
gether and work something out.
"makes It more difficult" for fellow
But at the same time. the presi-
Republicans who supported him
dent said he might enlist in the anti-
then to join him now that he's will-
incumbent campaign now building
ing to raise taxes in order to cut the
around the country by speaking out
budget deficit.
on the stump during the next few
But the president said he has no
weeks in favor of limiting congres-
regrets, noting that "changed eco-
sional terms.
nomics" since the campaign have
convinced him to "go forward from
here."
Congress faces
mass of details
in next 10 days
By Peter Osterlund
Washington Bureau of The Sun
WASHINGTON - Now comes the
It was not clear whether that
hard part.
pairing would meet with the approv-
After nearly six months of tortu-
al of the White House, not to mention
ous negotiation. lawmakers have
congressional Republicans. Until
signed off on a broad spending plan
yesterday. President Bush had long
that purports to slash S500 billion
maintained opposition to an increase
off the federal budget deficit during
in income tax rates, although his ne-
the next five years. But they have
gotiators did advance a proposal to
given themselves just 10 days to
raise upper-income taxes in ex-
write in the thousands of details
change for a capital gains tax cut
needed to make the plan a reality.
toward the end of the budget summit
"It's going to be murder," said
talks. Republicans in Congress have
Representative Robert T. Matsui. D-
maintained similarly staunch oppo-
Calif.. a member of the tax-writing
sition to income tax increases.
House Ways and Means Committee.
But last week. in a closed meeting
Yesterday, as lawmakers contem-
of House Republicans, two-thirds of
plated the deadline they put before
those present voted in a straw-poll to
themselves. the Ways and Means
support an increase in high-end in-
panel and its counterpart on the oth-
come taxes in exchange for a cut in
er side of Capitol Hill, the Senate Fl-
the capital gains tax.
nance Committee, began to meet be-
- And yesterday. the president said
hind closed doors to try to figure out
publicly for the first time that he
just what some of those specifics
could support such a trade-off.
might be.
But later in the day. Sen. Robert
Throughout the day. the reports
O. Packwood, R-Ore., emerged from
trickled out. A two-penny tax on
a White House meeting with Mr.
home heating oil and a two-week de-
Bush and key congressional Republi-
lay in unemployment benefits -
cans saying that "our uniform posi-
deficit-cutting proposals from the
tion was that we will not go up on
now-defunct budget summit agree-
the [income tax) rates, no matter
ment - will probably not become
what." On Capitol Hill. meanwhile,
law. The S60 billion in Medicare cuts
White House lobbyists put out the
advanced by the original budget ac-
word that the significance of the
cord will almost certainly be scaled
president's remarks had somehow
back to a reduction in the neighbor-
been exaggerated by the news me-
hood of $40 billion to 845 billion.
dia.
Higher "sin" taxes on beer. wine,
Whatever the truth, It is supposed
liquor and cigarettes appear inevita-
to be hammered into legislation by
ble, although the actual increases
Oct. 19, at which point another
may differ from those proposed in
shutdown of the federal government
the summit agreement. A 10 percent
is threatened If Congress and the
tax on high-price luxury goods such
president have not settled on the fine
as yachts, furs and jewelry looks as if
points of the budget plan. Those fine
It will survive the collapse of the orig-
points are to be put into writing by
inal compromise plan. Gasoline tax-
more than a dozen congressional
es appear certain to jump from the
committees, populated with lawmak-
current 9 cents-a-gallon rate. but not
ers whose nerves have been rubbed
by the 12-cent increment originally
raw by the budgetary clashes of the
suggested by congressional and
past few weeks.
White House negotiators.
The task before them promises to
Senate Finance Committee staff
stretch patience further. The new
aides yesterday said that the panel's
plan requires lawmakers to assign
chairman, Sen. Lloyd Bentsen. D-
cuts to specific programs, a grim
Texas, would endorse a doubling of
task in the best of times. Agriculture,
the current tax on gasoline. some-
for example, stands to lose $13 bil-
thing of a concession from a law-
lion over the next five years. federal
maker who had opposed a gasoline
retirees have been targeted for an 88
tax rise in favor of an oil import fee,
billion reduction. and the Guaran-
which would have provided a wind-
teed Student Loan program appears
fall for Texas oil producers.
headed for S2 billion in cuts.
Committee aides also said the
Then there's the defense budget.
chairman would support a cut in the
The budget pact, which would trim
tax levied on capital gains. currently
$40.1 billion out of the current fiscal
taxed at the same rate as earned in-
year's deficit, called for a $10 billion
come, in exchange for an increase in
reduction in this year's military al-
the tax rate imposed on the highest
lowance, bringing defense spending
income earners.
to about $296 billion. But liberals
Mr. Bentsen would increase the
have said they would like to pare the
income tax paid by individuals earn-
Pentagon's budget further.
ing over $113,640 a year and cou-
Yesterday. the House Appropria-
pies earning in excess of $217,510
tions Committee approved a S297
annually from 28 percent to 33 per-
billion defense bill that would elimi-
cent. That rise, projected to affect
nate 77,000 troops and slash Mr.
600,000 taxpayers and add more
Bush's request for strategic weap-
than $40 billion to federal coffers
ons.
over five years, would be coupled
"As it sits here today, it's veto
with a reduction to 19.6 percent in
balt." said Representative Joseph
the tax rate imposed on income de-
McDade of Pennsylvania, ranking
rived from the sale of such assets as
GOP member of the Appropriations
stocks. bonds and real estate.
subcommittee an defense.
Back to Budget Bargaining
In the end, whatever Congress produces in the
higher income tax rates are negotiable, a stance
way of a budget deal will have to be judged against
resisted by his own party in the House. But he also
the bipartisan leadership package it rejected. Right
says they must be "worked in proper balance" with
now, nothing of substance is on the table - only
capital gain taxes - a potential sticking point in
a vague expression of intent that American voters
bargaining with liberal Democrats.
should regard with great skepticism.
Problems could abound in finding substitutes
One of the ornaments of the original plan ham-
for other features in the bipartisan package reject-
mered out by President Bush and the combined
ed by election-wary incumbents. If New England is
congressional leadership was its adherence (with
to be placated by scrapping a small tax on heating
one major flaw in tax breaks for start-up compa-
oil, if the gray-power lobby is to be assuaged on
nies) to the 1986 tax reform principle of treating
Medicare costs, if a proposed hike in gasoline taxes
all kinds of income equally: The ill-starred agree-
is to be reduced and farm subsidies pared down
ment rejected the Republican demand for a prefer-
only modestly, Congress will have to compensate
ential tax rate on capital gains and the Democratic
in other areas to reach the goal of a five-year, $500
clamor to burst the "bubble" that gives the wealthy
billion reduction in projected deficits.
+
a lower marginal tax rate than the upper middle
These problems are back in the laps of legisla-
class SO that effective tax rates come out evenly.
tive committees that could not handle them in the
With the bipartisan package sidetracked, the
first place. Can they reach an agreement by Oct.
1986 reform statute is again in trouble. Democrats
20? Is It possible to concoct an agreement that is
are back to bubble-bursting. all in the name of
simultaneously palatable to Congress and sub-
making the tax code more progressive (although
stantive in reducing national indebtedness? Are
some experts say the reverse might be true if capi-
the left and right fringes reconcilable? Could an-
tal gains rates are cut). Conversely, President Bush
other federal shutdown threaten?
again sees a chance to revive capital gains tax cuts
Washington's lack of courage, cohesiveness
to encourage investment and growth, a concept as
and conviction provide scant room for optimism.
debatable as whether the Treasury would come
There remains the danger that all decisions will be
out a long-term winner or loser.
put off until the post-election deliberations of a
Mr. Bush for the first time has conceded that
lame-duck Congress.
The Atlanta Junirual AND CONSTITUTION
TUES., OCTOBER 9, 1990
THE ATLANTA CONSTITUTION
For 122 Years the South's Standard Newspaper
Jay Smith
Ron Martin
Publisher
Editor
Dennis Berry
John W. Walter Jr.
Tom Teepen
President
Managing Editor
Editorial Page Editor
James M. Cox, Chairman 1950-57 James M. Cox Jr., Chairman 1957-74
Deficit madness must stop now
For months, budget negotiators in Con-
won't be known until later this month when
gress acted like a bunch of teenagers getting
the general resolution is put into binding leg-
ready to write a term paper. The legislators
islation. Such legislation will have to be
rolled up their sleeves, sharpened their pen-
nailed down in the very congressional com-
cils, adjusted the lights, shuffled papers, got
mittees that have been unable to get the job
coffee - did everything but the task itself.
done in the first place.
Finally last week, leaders of Congress
and President Bush were able to cobble to-
In all likelihood, the compromise will not
gether a package of tax hikes and spending
reduce the deficit as much as the original
cuts that would have made a $500 billion dent
plan. On the plus side, it will be a fairer docu-
in the nation's enormous budget deficit. But
ment if it does include an income tax hike for
neither the Republican nor the Democratic
the wealthiest Americans, who had their
leaders were able to control their party mem-
rates slashed during the Reagan years.
bers well enough to get the accord approved.
At this time, it is unclear how Mr. Bush
As a result, Americans got a taste of what
views the compromise. If he uses his veto,
governmental gridlock can do. On one of the
there is no indication he can find a majority
last warm weekends of the year, national
even in his own party to support a viable al-
parks and museums had to shut down be-
ternative.
cause Uncle Sam was broke. Over the week-
end, Mr. Bush refused to approve stopgap
However the matter is settled, one lesson
funding to keep government functioning. He
is clear: Even in a time of national emergen-
was wise to stand firm and keep the pressure
cy, even when our troops are facing a fierce
on Congress to reach another agreement.
enemy in the Persian Gulf, politicians cannot
Now a new compromise has been ham-
find a way to work together for the common
mered out. Sort of.
good. This is not a pretty spectacle.
The revised resolution, approved by the
For a decade, leaders in Washington have
House in Monday's wee hours and by the Sen-
been pretending that it was possible to slash
ate in the evening, unfortunately has far few-
taxes while greatly increasing spending for
er specifics on cuts and taxes. It appears to
the military. The results were predictable.
retreat from some of the previously proposed
When President Reagan came into office in
reductions in Medicare benefits; that's rea-
1981, the national debt limit was $935 billion.
sonable. It also seems to open the door to
By the time the Great Spender left office, it
higher income taxes for the wealthy and low-
was $2.8 trillion. Now it is rising to $3.44 tril-
er capital gains tax rates, and that's support-
lion. Even as the national debt rises, the an-
able too.
nual deficits continue out of control.
Of course no one really knows what the
new budget will do because Congress again
At some point, this madness must stop. If
has decided to delay any tough decisions.
the budget committees stick to its outlines,
this bill offers a a fair package of taxes and
The true content of the compromise
spending cuts.
TUES., OCTOBER 9, 1990
The Atlanta Juurnal AND CONSTITUTION
THE GINGRICH FACTOR
GOP whip gambles
with political future
Is Newt Gingrich as smart
as a whip after all? Or is he
self-destructing before our
Tom
fascinated eyes?
Either way, Mr. Gingrich's
Teepen
political Perils of Pauline ad-
ventures have become an in-
triguing subplot to the budget
crisis.
As whip - that is, the sec-
measure of Mr. Gingrich's
ond-ranking member of Re-
artful dodging that, so far at
publican Party leadership in
least, his fellow GOP leaders
the U.S. House of Representa-
and even President Bush ap-
tives - it's Mr. Gingrich's job
parently feel they must con-
to keep the party's troops on
tinue trying to deal with him.
the battlefield and following
party orders, especially those
To be sort of fair about
of their party's president.
this, Mr. Gingrich has a point
Instead, without yielding
in his current position. If we
his general's stars, the Geor-
aren't in a recession, we teeter
gia Republican has been lead-
on one's edge. This is a bad
ing a revolt in GOP ranks, re-
time to raise taxes. The gov-
sisting any increase in taxes
ernment should be either low-
as part of the solution to the
ering them or increasing
nation's budget deficits.
spending, to goose the econo-
Or, at least, that is his lat-
my along.
est position.
The problem is that Presi-
Mr. Gingrich has sur-
dents Reagan and Bush have
rounded the tax issue over re-
presided over such large tax
cent months, at one time or an-
giveaways and deficits so hor-
other occupying just about ev-
rendous it is no longer possi-
ery possible position. And,
ble to put off the day of reck-
typical of him, each time he
oning. At least the Democratic
has pressed his position as the
plan includes some offsetting
only patriotic one, denouncing
growth policies, as the com-
all others in the kind of ulti-
promise also did.
mate terms that have made
But Mr. Gingrich is not
him such an infamous politi-
commanded by such fine
cal slanderer.
points. He has a weather eye
When President Bush first
cocked to his own political
put his lips in reverse, Mr.
prospects - first to his re-
Gingrich disagreed, holding
election (opposing taxes, even
out against taxes. Later, he
irresponsibly, never hurts)
came around, joining the GOP
and to his ambition to become
leadership team that worked
the king of the Republican
with Democratic leaders to
right.
produce the compromise that
Conservative Dan Quayle,
he then, once again changing
who ought to rule the right by
sides, helped to defeat.
dint of office, has all the pros-
And by last weekend, Mr.
pects of a turkey on Thanks-
Gingrich, fresh from stabbing
giving eve. Jack Kemp is
his president in the back, was
mired in the gritty business of
in the well of the House accus-
the Department of Housing
ing Democrats of disloyalty to
and Urban Development. Bob
the president by passing a def-
Dole in the Senate is old hat
icit-reduction plan of their
and compromised.
own. It was like Brutus scold-
Newt Gingrich is, as al-
ing an anti-Caesar heckler.
ways, playing political hard-
In almost any other politi-
ball with his opponents of
cal operator, that kind of reli-
choice, but this time he is
able duplicity would have its
playing hardball with his own
practitioner in mortal political
future, too.
danger from all of the quar-
Mr. Teepen is editor of The
ters he had betrayed. It is a
Constitution's editorial pages.
The Dallas Morning News
Tuesday, October 9, 1990
Congress moves to
avert shutdown
By Robert Dodge
wine, liquor and cigarettes all will
and Susan Feeney
be decided by congressional tax-
writing committees. Final decisions
Washington Bureau of The Dallas Morning News
about cuts in defense spending and
WASHINGTON - A massive shut-
major domestic programs like Medi-
down of the federal government
care also remain to be decided.
appeared to have been averted
Likewise, a controversial pack-
early Tuesday as Congress inched
age of business investment incen-
toward drafting a $500 billion defi-
tives and enticements for energy
cit-reduction package.
production also will be reconsidred
Shortly after midnight Monday,
by Senate and House tax writers.
the Senate approved by a wide mar-
gin a tax-and-spending plan that
Amendments in the Senate's ver-
was approved by the House in the
sion of the temporary appropriation
early hours of the day.
measure would extend funding
through Oct. 19. But as a concession
All that remained was for the
House to ratify Senate amendments
to Republicans and the president, it
froze spending at 1990 levels.
in a temporary spending measure
'I think it is good symbolism to
that is expected to be signed by
hold spending at last year's levels,"
President Bush. The president
Mr. Gramm said.
vetoed a similar short-term funding
The Senate also set out a sched-
plan on Saturday to pressure Con-
ule that calls for congressional com-
gress into making progress on writ-
mittees to finish their work on the
ing a budget.
budget by Oct. 12. The House and
"The American people want lead-
Senate budget committees are sup-
ership, not speeches," said Senate
posed to stitch together the tax-and-
Minority Leader Bob Dole of Kan-
spending packages by Oct. 12 so a fi-
sas, urging his colleagues to ap-
nal budget can be approved by Oct.
prove the budget.
19.
"If we do not act now, when?" he
Mr. Bush, who asked Americans
asked rhetorically. "If we arenot ca-
to understand the inconvenience of
pable, who is going to act?"
the government shutdown, felt the
And Senate Majority Leader
pinch himself during the long
George Mitchell of Maine added,
weekend.
'We simply must pass this resolu-
To save money, he declined to
tion."
take his helicopter or limousine to
Texas' senators split on the plan,
the presidential retreat at Camp Da-
with Democrat Lloyd Bentsen vot-
vid, Md. - a decision that left him
ing for it and Republican Phil
stalled in a four-wheel-drive truck
Gramm opposing the plan.
in Washington traffic on the return
Lawmakers met again late into
trip Monday. Along the way, a tire
the night in hopes of averting a cri-
blew out on the accompanying Se-
sis that would virtually shut down
cret Service "war wagon." Agents
the entire government. While cer-
toting machine guns jumped out of
tain safety services would continue,
the heavily fortified station wagon
a shutdown would suspend many vi-
and commandeered a Park Service
tal services and leave most of the 2.4
police car to rejoin the 11-vehicle
million federal employees without
motorcade.
work.
The budget crunch also put a
The budget approved by the both
damper on the swearing-in cere-
chambers is a simplified version of
mony for Supreme Court Justice Da-
an earlier tax-and-spending pack-
vid Souter. Mr. Bush warned guests
age the House rejected Thursday.
at a reception not to expect "lar-
gesse" because the White House was
The latest package calls for $500
operating with a limited staff.
billion in deficit reduction in five
years, with $40 billion of that in fis-
Senate leaders spent much of
Monday wrangling over whether
cal 1991. But the package soothed
the strongest objections by delaying
they had enough support from the
some of the most difficult decisions
rank-and-file to approve the budget
resolution.
on tax and spending.
Earlier proposals to raise taxes
Although the package does not
discuss cuts in Medicare benefits,
on gasoline, home heating oil, beer,
key Democrats said they intend to
scale back the $60 billion in reduc-
tions outlined in the first budget
plan to $42 billion.
The latest package also requires
committees to find another $20 bil-
lion in spending cuts or tax in-
creases.
"It is a promise to deal with the
deficit in the sweet by-and-by," said
Mr. Gramm, criticizing the plan as
spending package earlier this year.
short on specifics and saying it in-
Although the White House has
tended to give Democrats a free
kept a low profile since Thursday,
hand to raise taxes in committees.
Mr. Bush has been calling senators
"I am concerned we are buying
in recent days - including Texans
Mr. Bentsen and Mr. Gramm.
two days of relief with a month of
Mr. Gramm talked with the pres-
misery by not being specific and
will create more problems that will
ident about the budget Sunday
come back on us in a month," the
night while Mr. Bush was at Camp
David.
senator added.
But Mr. Bentsen said, "Ameri-
"I told him we have a lot of
cans are tired of hearing politicians
heavy lifting, and I do not think we
in Washington argue about the
are headed in the right direction,"
Mr. Gramm said.
budget and expect them to deal
with it."
Mr. Bentsen used his time with
The division between the two
the president on Saturday to discuss
Texans illustrated the split between
proposals to include a reduction in
the two parties.
the capital gains tax in the budget.
Democrats seemed substantially
Mr. Bentsen, who wants to offset
more confident of producing a ma-
the cut by raising the income taxes
jority of votes to approve the pack-
of the most wealthy, said he
age. But, despite the endorsement
received "no commitments" from
of Senate Minority Leader Bob Dole
the president.
of Kansas and other GOP leaders, it
Mr. Bentsen also told reporters
was uncertain until early Tuesday
that a package of incentives to en-
whether enough Republicans
courage energy production is in
would support the plan.
jeopardy. Those provisions were in
"It's all smoke and mirrors," said
the earlier budget proposal but
Sen. John McCain, R-Ariz. "Before,
were not in the version approved
it was outrageous. Now it's ob-
by the House.
scene."
It will be up to Mr. Bentsen,
Noting the difficulty Republi-
chairman of the tax-writing Senate
cans faced in approving the pack-
Finance Committee, to get the in-
age, Sen. Patrick Leahy, D-Vt., said,
centives back into tax legislation
"We're past the time for rhetoric,
his panel must draft as part of the
and we're moving toward reality,
budget process.
and reality hurts like hell."
"When you have 100,000 troops
The budget resolution, which
in the Middle East," Mr. Bentsen
Congress normally is supposed to
noted, "there is justification" for
finish by mid-April, does not re-
the energy provisions.
quire the president's signature. In-
stead, it is designed to instruct con-
gressional committees to draft legis-
lation to implement tax and
spending policies.
After the House rejected a
budget resolution Thursday pro-
duced by the bipartisan budget
summit, congressional leaders
charged that the White House
should not be involved in the ini-
tial negotiating process. Now, Sen-
ate and House leaders are preparing
to return the budget to the same
congressional committees that
were unable to write a tax-and-
The Dallas Morning News
Tuesday, October 9, 1990
Lawmakers find humor amid
tedium of budget process
By Susan Feeney
Washington Bureau of The Dallas Morning News
When House leaders needed a
WASHINGTON - Most of the
long-winded soul to orate until the
(pause) break.
new budget plan could be brought
We shout and jeer and fuss and
time, the 11th-hour budget proceed-
ings on Capitol Hill were an odd
to the floor late Sunday night, they
bark.
mix of lawmaking and hi-jinks.
turned to a reliable source: Rep.
We blame each other in the
As the government lurched
Kika de la Garza, D-Mission.
dark.
Mr. de la Garza rose to deliver a
And now we have run out of time.
toward a possible massive shut-
so-called "one minute" - the 60-sec-
And that, dear friends, is our own
down - which appeared likely to
ond messages that members may de-
crime.
be averted in the wee hours Tues-
day morning - the combination of
liver each day on any topic.
The government - it has shut
high pressure and high stakes pro-
Rep. Dick Armey, R-Euless, asked
down.
duced the best and worst Congress
if it would be a "Texas" one minute.
And we're the only game in town.
Let's work to get this budget
has to offer.
Indeed, it was.
Clashing agendas, colliding egos
Mr. de la Garza, chairman of the
through.
and pure election politics brought
House Agriculture Committee, of-
And get these tourists to the zoo.
heated exchanges, occasional ac-
fered a roughly 30-minute "one
commodations and sometimes
minute" on farm policy, complete
And this is how I end my poem:
zingers that made even the fiercest
with charts and graphs.
Let's pass something and go ho-
combatants laugh in unison.
In the Senate on Monday, Sen.
em.
Take all that and add the inten-
Dale Bumpers, D-Ark., took on the
sity of condensing six months of
time-absorbing duties.
budget work into hours or days and
For 48 minutes, he filled the Sen-
As House Republicans tried to
working sometimes as late as 4 a.m.
ate's pale yellow chamber with
sandbag the new Democratic
To illustrate their points,
ruminations on the budget deficit,
budget accord Sunday night, they
lawmakers took to quoting the likes
the Civil War, World War II, Mars,
started questioning the new plan's
of Christopher Columbus, the
the Superconducting Super Collider
effect on Operation Desert Shield,
Founding Fathers, Woodrow Wil-
and poultry, among other things.
the U.S. military deployment in the
son, the late Rep. Claude Pepper of
Persian Gulf.
Florida and Garfield. The cat.
But before GOP lawmakers could
Rep. Charles Stenholm, D-Stam-
The White House pulled out all
invoke the Stars and Stripes to se-
ford, trying to persuade his col-
the stops last week to persuade
rious effect, Mr. de la Garza stepped
leagues to approve the new budget
House members to vote for the orig-
in.
resolution early Monday morning,
inal budget hatched in the summit
Moving to the well of the House,
reached for the words of the car-
between the Bush administration
he scolded the Republicans, saying
toon fat cat.
and Congress.
they had "no right" to raise such
"When you find yourself in a
"First I got a call from George
concerns.
hole," Mr. Stenholm said, "the first
Bush," explained Rep. Ed Jenkins, a
His son, Navy Lt. Cmdr. Jorge de
rule of thumb is to quit digging."
conservative Democrat from
la Garza, was over there, the con-
Sen. Phil Gramm, R-Texas, look-
Georgia. "Then I got a call from
gressman said. And if he was satis-
ing back on the weekend's legisla-
Jerry Ford. Then I got a call from
fied that the new budget plan did
tive drama, said, "That's not the
Richard Nixon."
no harm to the deployment, they'd
Then the phone rang again.
better be, too.
"First I got a call from
"I said, 'Who is it now, Abraham
House Republicans switched
Lincoln?'
George Bush. Then I got
gears and moved on to other, ulti-
mately unsuccessful, tactics.
a call from Jerry Ford.
Throughout the process, one of
Then I got a call from
the most animated lawmakers was
Without a word, Rep. Jack
Richard Nixon. I said,
the silver-haired, silver-tongued
Buechner, R-Mo., aired his feelings
Rep. Silvio Conte, R-Mass. At 1:05
'Who is it now,
about the marathon proceedings.
a.m. Monday on the House floor -
He wore a navy blue tiè with the
Abraham Lincoln?' "
when nerves were shot and tempers
likeness of Mickey Mouse dancing
flared - Mr. Conte brought comic
across it.
- Rep. Ed Jenkins
relief in the form of a poem he
Georgia Democrat
wrote.
A sample:
kind of American democracy I read
We scream and moan and boo
about in history books as a child."
and hiss.
We don't have time to take a
One challenge was filling time
while lawmakers work behind
closed doors on the real business at
hand.
THE DETROITNEWS TUESDAY, OCTOBER 9, 1990
Keep Their Feet to the Fire
President Bush during the weekend recovered
nues from existing taxes are scheduled to rise $80
some political ground in the budget mess by veto-
billion this year, while the deficit must be cut only
ing Congress' effort to obtain temporary funding to
$50 billion. Is it too much to ask Congress and the
keep the government running. By holding Con-
government to live with the kind of belt-tightening
gress' feet to the fire and threatening a shutdown,
that goes on in American households nearly every
he stands a better chance of getting spending re-
day?
straint without big tax increases. If Mr. Bush gives
As the country heads into a recession, raising
in now - as it appeared last night he might - he
taxes is a particularly dumb idea. The left, still
could be in for bigger trouble later.
bogged down in 1960s-style class warfare, is espe-
The House budget resolution approved yester-
cially intent on soaking the rich. But even if you
day calls for slightly less in spending cuts and more
confiscated the entire income of the rich, it
in taxes then the package that went down in flames
wouldn't run the government for more than a few
last week. But it really is no more but a scrap of pa-
days. And pretty soon the politicians would be
per. The real work would fall to the Democratic
coming after the middle class. The money wouldn't
control committees. And they will push Mr. Bush
be used to reduce the deficit, of course. It would be
into accepting deficit measures far worst for the
used to fuel more spending.
country then the automatic budget cuts provided
The only real way to cut the deficit is to cut
for under the Gramm-Rudman Deficit Reduction
spending, or at least to hold spending below the
Act.
rate of inflation, and promote economic growth.
It is the threat of these cutbacks - and only this
That's what Ronald Reagan persuaded Congress to
threat - that gave Congress an incentive to deal
do in the 1980s, and it reduced the deficit steadily
promptly and seriously with the budget. If the
to 2.5 percent of gross national product from nearly
president had threatened Congress with Gramm-
6 percent of GNP after the last recession. It wasn't
Rudman from the start, he would be a lot better off
flashy, but it worked - and with a minimum of
today. He would have gotten serious budget re-
pain.
straint without tax increases. And that wouldn't
The country has already seen the results of try-
have been nearly as traumatic as many in Congress
ing to negotiate with the taxers-and-spenders in
and the media would like you to believe.
Congress - and it didn't like what it saw. The
In order to meet this year's deficit target, after
president lost a golden opportunity to gain real
all, the federal government would only have to hold
control of the budget process by using the tools
down the projected increases in spending. Reve-
available to him. It may have been his last chance.
Chicago Sun-Times
TUESDAY, OCTOBER 9, 1990
Bush, Congress act to avert shutdown
By Jerome Idaszak
Washington Bureau / Chicago Sun-Times
WASHINGTON-Prodded by the fear of a broad
government shutdown, congressional leaders and
$100,000 than the first package,
President Bush agreed Monday night to short-term
and that cuts in farm subsidies
would be shifted to soften the
business. funding that would allow agencies to open today for
impact on dairy farmers, among
others.
The Senate passed the measure on a voice vote,
and House passage later in evening was expected.
Sen. Bob Graham (D-Fla.) said
Under the agreement, the government would oper-
the changes in Medicare and more
ate at normal levels through Oct. 19. Congressional
even distribution of tax increases
leaders hope all budget work under a companion
persuaded him to vote for the
budget measure passed by the House will be com-
budget plan.
pleted by then. Senate passage of the budget mea-
Left unsolved was how to meet
sure was expected by early today.
the promise that the package
"Out in the country, they don't think we look like
would lower the budget by $500
heroes. They think we look like jerks," said Sen.
billion. Some Democrats suggest-
William L. Armstrong (R-Colo.) about the arguing
ed "unspecified savings" while
others said the money would be
that's gone on for the past week.
raised through new taxes.
Senate leaders predicted a narrow victory in a vote
"I see it raising $165 billion in
after midnight on a budget that would seek $500
taxes," said Sen. Connie Mack (R-
billion in higher taxes and less spending over the
Fla.), who opposed the plan.
next five years.
"What's really wrong with this
Because of a dispute over details of the budget.
package is not that it's too severe,
Congress had authorized no money for the federal
too Draconian. It's too little, too
government for the fiscal year that began Oct. 1.
late," Armstrong said.
It was the vague qualities that
To keep the pressure on Congress to pass a budget.
caused only 32 of 168 House Re-
Bush last Saturday vetoed a bill to keep the govern-
publicans to vote for the plan and
ment open for a week while debate over the budget
many Senate Republicans to blast
continued.
it, too.
That veto drew attention with the closing of
"This process has gone from
Yosemite Park and other national campgrounds and
outrageous to obscene,' said Sen.
the shutdown of national muse-
John McCain (R-Ariz.).
ums and monuments here.
"By adopting a budget which
Urging approval of the budget
basically makes undefined prom-
pact Monday, Sen. Alan J. Dixon
ises, we are making a job harder to
(D-III.) called a federal shutdown
do and more likely a job that will
not be achieved," said Sen. Phil
"a frightful alternative" that
Gramm (R-Texas), who backed
would cut air travel. bridge repair
and purchase of defense material.
the first budget plan because of
its details.
among other things.
The Republican fear is that be-
"This is not just the bear at the
200, the Washington Monument
cause Democrats control a major-
ity of both bodies they'll craft
or the park you can't go into next
weekend." Dixon said. "This is
changes to fit their spending and
taxing priorities.
very, very serious stuff."
But Senate Democratic leaders
The budget agreement before
the Senate was a revision passed
walked their own tightrope, know-
after midnight Sunday by the
ing that if the changes differ too
House, 250-164, with the major
much from the first package, Bush
will veto the effort.
change of lower fees on the 33
"If the president of the U.S.
million elderly in the Medicare
doesn't like what we produce here
program.
While the new budget lacks de-
then he can simply veto it and
send it back to us," said Senate
tails, House Democrats said their
Budget Committee Chairman Jim
goal is an increase of about $15
Sasser (D-Term.).
billion or $20 billion in Medicare
VE
Bush, returning to the= White
fees instead of the original $30
billion. That would mean a de-
House Moriday avoided e public
ductible rising from $75 to $100
role as Senate debate began.
instead of $150. and monthly pre-
mium increases less steep than
under the first budget plan. which
would almost double them after
five years.
House Democrats also suggested
that higher taxes would tilt more
toward those earning above
Rosty is king
of the Hill
as budget
war rolls on
By Basil Talbott
Budget revamp divides
pire, were omitted from the bud-
Washington Bureau / Chicago Sun-Times
battle turf; Page 24
get summit plan, which cut out
Rostenkowski in the final weeks.
WASHINGTON-Poised to
Peter Dwars, director of the Illi-
preside as king of Capitol Hill
III.), a member of Ways and
nois Housing Development Au-
during the final stage of the bud-
Means and a Rostenkowski prote-
thority, last week lobbied Rosten-
get war is Rep. Dan Rostenkowski
ge. "And if you cross Danny,
kowski here to keep the housing
(D-III.), the committee chairman
there's a price to be paid."
bond program. The Illinois Devel-
who came out of the Chicago
In its latest version of the bud-
opment Finance Authority wants
school of Democratic ward poli-
get resolution, Congress will have
to keep the other program that
tics.
leeway that was not given in the
was due to expire.
Rostenkowski's Ways and
proposal coming out of the budget
The Ways and Means Commit-
Means Committee is slated to
summit. The budget summit, com-
tee staff has been working on Ros-
handle the most costly and con-
prised of top legislative and White
tenkowski's recommendation for
tentious elements of the budget
House aides, sought to limit Ros-
some time. It will represent Ros-
agreement Congress has been
tenkowski's options by specifying
tenkowski's best reading of what
working to produce.
what taxes should be raised and
his committee of 23 Democrats
For the next couple of weeks,
by how much. The new version
and 13 Republicans will accept.
Rostenkowski will be the most
eliminated the limits.
Rostenkowski's job brings risks
important man in Washington.
The same tax issues will come
as well as opportunity.
"The lobbyists and the media
up in the Senate before the Fi-
In 1981, Rostenkowski tried to
will suffer lots of bruises elbowing
nance Committee headed by Sen.
wrestle the tax bill from President
each other to get to Danny Ros-
Lloyd Bentsen (D-Texas,, but
Ronald Reagan but lost out when
tenkowski's door," said Rep. Hen-
Rostenkowski has the edge. The
the president outbid him. Only
ry J. Hyde (R-Ill.).
Constitution gives the House first
last. year, Rostenkowski was re-
When Congress and President
crack at money bills.
buffed by his committee when he
Bush finally agree on a budget
A Rostenkowski aide said the
opposed a break in the capital
resolution, Rostenkowski's tax-
two chairmen huddled privately to
gains tax, which he then recom-
writing committee will have to
make a joint recommendation, but
mended.
choose and scale the taxes needed
haven't been able to agree.
Committee sources said his new
as well as decide where to make
Regional differences between
proposal, which he is ready to
the cuts in Medicare.
the Chicagoan and the Texan and
make quickly, will likely include a
His close relationship with
the makeup of their respective
capital gains break as well as a
Bush. his skills as a tough negotia-
panels make an accord difficult.
change in the tax rates to hit the
tor and his reputation for deci-
The House Ways and Means
wealthy harder.
siveness are among his assets.
Committee is heavily urban in
Rostenkowski's great triumph
His assertive brusqueness was
character, with members from
was the 1986 tax reform bill,
illustrated early Friday when he
Chicago, New York, Boston. Balti-
which did away with many tax
delivered a rock 'em. sock em
more. Cleveland. Los Angeles and
shelters.
floor speech criticizing the budget
San Francisco-Oakland. Bentsen's
His staff said the current chal-
summit convened among Bush
panel is largely rural in character.
lenge is greater, however. It must
and congressional leaders. That
Sources close to Rostenkowski
be done is a shorter period, and it
group produced an agreement re-
predicted that his proposal, re-
will be the largest deficit reduc-
jected last week by the House.
ferred to as "the chairman's
tion plan in the nation's history.
Rostenkowski promised in his
mark," will include goodies for
speech to fix it in his committee.
Chicago and other urban commu-
He took a slap at presidential
nities. These were lacking in the
aides who have become unpopular
budget summit's proposal, which
because of their budget dealings,
listed in Texas' direction.
saying his committee members
Two examples of the likely ad-
would not be "rubber stamps."
ditions are extension of a housing
House Speaker Thomas S. Foley
revenue bond program for first-
(D-Wash) "is not somebody who
time homeowners and an industri-
likes conflict. Danny is not a guy
al development bond program for
who's willing to step back from a
companies that want to add a
fight," said Rep. Marty Russo (D-
plant. Both programs, due to ex-
THE BOSTON GLOBE
TUESDAY, OCTOBER 9, 1990
Decisions at cliffside
It is unfortunate that the problem besetting
Bush exhibited some of the same characteris-
Congress and President Bush over the deficit re-
tics. By simply threatening to withhold approval of
duction package has been cast most vividly in the
a short postponement of the shutdown, required
context of shutting down government. That danger
under terms of the Gramm-Rudman-Hollings defi-
is real enough, and has already inconvenienced
cit reduction act, Bush encouraged everyone else
some Americans, but the larger issue is much
to play the dangerous game of my-way-or-no-way.
more important. Congress and the president came
This danger of paralysis in the legislative pro-
close to a flawed but tolerable package that would
cess should not be taken lightly - as anyone watch-
at last have established a timetable for reducing
ing Massachusetts political events for the past two
the federal deficit.
years could easily testify. Coalitions of support for
Shutting down government represents a crisis
any package on Beacon Hill were impossible to as-
- a short-term upheaval that could not last for
semble for month after month. The Massachusetts
long. The deficit problem is a chronic disease that
Legislature has 200 members in the House and
over a long period has cost the nation dearly in
Senate. Congress has 535 members, from far more
both its domestic and international economic af-
scattered political and geographic backgrounds.
fairs. Disposing of the crisis without addressing
Massachusetts has been struggling over its basic
the long-term ailment dooms the country to persis-
tax and spending structures. Congress has been
tent economic disability.
fussing at the fringes - and has demonstrated that
When the House last Friday rejected the com-
it is willing to create chaos in the process.
promise measure put together by congressional
The politics of compromise is often messy busi-
and administration representatives, some of its
ness and no joy to ideological purists. Results may
members argued that they could not tolerate this
be unsatisfactory to nearly everyone, but they do
or that element of the package. Democrats largely
keep the system moving and edging toward pro-
opposed some program cuts and the emphasis on
gress. Congress and Bush have shown, by rushing
consumption taxes to raise revenues. Most Repub-
headlong toward last-second budget and tax deci-
licans were still wedded to President Bush's no-
sions, that they are willing to deprive the nation of
new-taxes campaign slogan. Both were clearly will-
the kind of fiscal stability it needs to resume eco-
ing to risk paralysis rather than accept what were
nomic growth. Unintentionally, they have also giv-
for the most part minor adjustments in basic tax
en an indication that Massachusetts is still a trend-
and spending policies and programs.
setter on the political front.
The Evening Sun
Baltimore, Tuesday, October 9, 1990
Tiny compromise is poor weapon
in war on calamity
T
HE GREAT Compromise dealt
Not surprisingly, politicians dis-
tional calamity - loss of Number
with slavery and was SO impor-
covered the wisdom of giving the
Oneness, for heaven's sake! - the
tant that history books still write it in
voters more while fighting all ef-
taxes involved were too slight to
capital letters. Now we have the
forts to pay for the new boons with
constitute even a good soaking. It
small compromise, and small is al-
real money.
was only a dunking.
most too big a word for it.
Needing a philosophy to justify
Sure, the poorer classes would
Some might call it tiny, consider-
themselves, the politicians were
continue to bear the heaviest tax
ing all the somber talk in the air about
blessed by the arrival of the Reagan
burden, as in the Reagan years, but
impending na-
economists bearing a theory worthy
it was more accurate to call it a
tional calamity.
of the Wizard of Oz.
dunk-the-poor budget.
Russell
People fac-
The way to fill the Treasury to
You might have expected conser-
ing calamity
overflowing, they said, was not by
vative Republicans to congratulate
Baker
surely want
raising taxes, but - get this, folks!
the president for his cunning in per-
their leaders to
- by cutting taxes.
a.
suading the Democrats to join him in
do something
This would free so much money
this assault on their natural constitu-
more dynamic than raising the price
for the private market that business
ency. But no.
of beer, cigarettes, gasoline and
would boom and tax collections rise
The ineffable Newt Gingrich,
health insurance.
despite lowered rates.
House Republican whip and the very
Yet that's about all that was con-
Here was a politician's dream of
embodiment of "Representation
tained in the budget deal between
Paradise. Despite the much-bally-
With No Taxation Whatsoever,"
President Bush and the Democratic
hooed impending calamity, politi-
promptly said he and all who still
leaders.
cians still cannot give it up.
cherished the old Reagan way
Yes, there were also new taxes on
Nor can you blame them. Though
thought the president had gone too
furs and cars in the $30,000 price
many may now privately concede
far. And so they voted against him.
range, but still - this is war on ca-
that the theory didn't work, the pub-
Perhaps the conservative defec-
lamity?
lic still seems to detest returning to
tion will have long-term benefit for
The peril is economic. Awareness
the old idea that when governments
the country.
of it is what's behind the whining
distribute boons somebody has to
Suppose it persuades Bush that
about Japan's supremacy and what
pay.
nothing he does will ever win him
makes best sellers of pamphleteers'
Chief among those determined to
conservative support.
warnings that it's all up with the
keep shunning reality has been Bush.
Gosh, it might persuade him to
U.S.A.
In 1980, before becoming
give the country a break by dropping
What to do? The obvious answer:
Reagan's vice president, Bush de-
the conservative Dan Quayle from
Get out:of debt.
scribed the Reagan argument that
the ticket in 1992.
You usually get out of dept by'
tax cuts would enrich the nation as
cutting costs, increasing income and:
"voodoo economics."
using the savings and added revenue
Eight years later, though, Ameri-
to pay the bill collector.
Government, however, can't do it
cans were SO wedded to the get-rich-
by-cutting-taxes theory that he of-
this way anymore.
Why? Because of the politicians'
fered them his "read my lips" pledge
of "no new taxes" as assurance that he
terror of raising the taxes needed to
would never abandon the tried and be-
pay for all the things taxpayers de-
loved old policy simply because it had
mand. In the 1980s taxes became po-
failed.
litical death.
The Republic, which was born
Earlier this year, finally con-
crying "No taxation without repre-
fronting the potential calamity, he
sentation," began demanding "Rep-
agreed to consider tax increases.
resentation without taxation."
The deal defeated last week -
Politicians who opposed the lat-
the tiny compromise, if you like -
est increase in Social Security bene-
was the result. It was denounced by
fits were doomed just as surely as
some Democrats às a soak-the-poor
politicians who proposed new taxes
budget, but this overstates the case.
to pay for it.
Weighed against the potential na-
Chicago Tribune,
Tuesday, October 9, 1990
Bush, Congress OK plan
to avert federal shutdown
Gramm (R-Texas).
By Elaine S. Povich
House Speaker Thomas Foley
Chicago Tribune
(D-Wash.) said the fiscal bills
WASHINGTON-The Senate
should be passed to end "this un-
late Monday approved a new
necessary and artificial crisis"
budget package, averting a major
crippling government functioning.
nationwide government shut-
The House approved the new
down that could have caused
budget plan, which is aimed at
chaos for federal workers and
saving $500 billion over the next
many citizens alike.
five years, early Monday morning
In a fast-moving evening of
with mostly Democrats backing
closed-door negotiations, Senate
the package. The proposal was ex-
Democratic and Republican
tremely vague, and congressional
leaders agreed on a continuing
leaders said the details would be
resolution that would keep the
filled in later.
federal government in operation
Specifically, they said there
as well as a broad new budget
would be fewer cuts in Medicare
package.
than the original budget
The continuing resolution was
agreeement between Congress and
passed shortly before 10 p.m.
Bush, which was rejected by the
CDT. The House was expected
House, and that the burden on
to go along with the Senate ver-
Medicare recipients would be
sion, and President Bush ordered
eased.
that he be awakened when the
In the tax area, leaders said the
work was complete so he could
House Ways and Means Commit-
sign the resolution.
tee and the Senate Finance Com-
The last-minute action by the
mittee would be given flexibility to
Senate brought to a temporary
act.
end one of the most disjointed
Emerging from private caucuses
periods in governmental man-
on Monday, senators from both
agement in recent memory.
parties predicted that a cut in the
With Congress and the White
capital gains tax-the levy on sales
House stymied over the budget
of such assets as stocks and
and the money running out,
bonds-would become part of the
such government services as
new budget, along with higher tax
museums and parks were closed
rates for the wealthy.
over the long Columbus Day
Democrats have insisted that
weekend.
any cut in the capital gains tax,
But the full impact of a gov-
which they view as a tax break for
ernment shutdown was not felt,
the wealthy, must be accompanied
since most federal employees
by a commensurate increase in
were not scheduled to return to
rates for upper-income taxpayers.
work until Tuesday morning.
Specifically, they have suggested
bursting the so-called "bubble" in
The budget agreement calls for
the tax code which results in very
details of spending cuts and tax
wealthy taxpayers paying a top in-
increases to be worked out by
come tax rate of 28 percent while
Oct. 19. If Congress and the
upper-middle-class earners pay a
president fail to agree on the de-
top rate of 33 percent.
tails, a similar fiscal crisis could
"I think it will. be part of the
occur.
trade," said Sen. Lloyd Bentsen
There were signs that one
(D-Texas), chairman of the Fi-
issue that had held up a budget
nance Committee. "If we had a
agreement for months-a cut in
capital gains tax cut, the same
the capital gains tax, sought by
people that would benefit from it
Bush, and higher income taxes on
will have to pay for it by an in-
the rich, sought by the Demo-
crease in the [income tax] rates."
crats-might again become part of
A Republican on Bentsen's com-
a deficit-cutting plan.
mittee, Sen. John Chafee of Rhode
While the new budget doesn't
Island, agreed that the tradeoff
specifically call for the politically
was probable.
dicey tradeoff, it provides flexibili-
"Some like myself think an in-
ty in choosing taxes, and congres-
crease in rates is a perfectly justifi-
sional leaders said the issue was
able price to pay for [a cut in]
likely to come up again as Con-
capital gains," he said, "though
gress implements details of the
I've never been keen on capital
new plan in the next two weeks.
gains anyway."
Senate Budget Committee Chair-
Rep. Dan Rostenkowski (D-III.),
man James Sasser (D-Tenn.)
chairman of the Ways and Means
Monday night urged approval of
Committee, was readying a tax
the budget to end this "govern-
proposal to bring before his com-
mental chaos and public frustra-
mittee Tuesday. While details were
tion.
still being worked on, aides to
"The American people are say-
Rostenkowski said his proposal
ing simply, 'Fix it. Do what you're
would resemble the one he made
paid to do. Make decisions. Legis-
in March. That proposal called for
late. Keep the government func-
an end to the tax bubble, which he
tioning,' Sasser said.
said would raise $44.3 billion over
But several senators said the
the next five years.
budget plan was so broadly written
that real policy decisions about
taxes and spending were being put
off.
"This says we will make deficit
reduction in the sweet bye-and-
bye," complained Sen. Phil
BOSTON HERALD
Tuesday, October 9, 1990
Senate leaders push for
budget resolution
By ANDREW MIGA
WASHINGTON - With the federal
ministration officials tele-
government lurching. toward a full-
phoned wavering GOP
scale shutdown, Senate leaders last
senators to urge them to
back the revised plan, ac-
night pressed for quick passage of a
cording to a United Press
revised budget blueprint to avert a
International report.
crisis.
The president has said
"Failure to adopt this resolution
he would not support an-
will deepen the crisis which now ex-
other stopgap bill unless
Congress passes a budget
ists," warned Senate Majority Leader
resolution that cuts
George Mitchell (D-Maine).
spending $40 billion the
Mitchell's Republican counterpart,
first year and $500 billion
over five years. The re-
Kansas Sen. Robert Dole, said he sup-
vised plan includes those
ported the new five-year, $500 billion
target figures.
plan pushed through the House early
Bush had also wanted
yesterday by Democrats on a largely
any stopgap bill to include
Gramm-Rudman style
partisan vote.
across-the-board spend-
"I want the process to move ahead,"
ing cuts. Such reductions
said Dole.
were not included in the
plan before the Senate
Among leaders in both parties, sen-
last night.
timent was strong that the revised
Should Bush veto or re-
pact stood as the last, best hope for a
fuse to sign a stopgap
budget deal.
measure passed by Gon-
...
The strain of the week-old budget
gress, hundreds of thou-
sands of federal workers
debacle was evident as both sides
would be sent home today.
jockeyed for advantage in a what has
the first working day
emerged as a bare-bones game of po-
when the full effects of the
litical brinksmanship.
government shutdown
would be felt.
"This process has gone from outra-
Stripped of all the high-
geous to obscene," said Republican
blown rhetoric and politi-
Arizona Sen. John McCain.
cal posturing, the budget
The Senate was expected to vote
stalemate has come to re-
semble a high-stakes
late last night
game of political chicken.
on the revised budget ac-
Bush warned that with-
cord as well as a House-
out a budget from Con-
approved emergency
gress, he would close
funding bill that would
down the government.
keep the government run-
After the House last week
ning until Oct. 20, the date
Congress plans to adjourn
rejected the budget sum-
for mid-term elections.
mit pact last Friday,
President Bush, whose
Bush made good on his
threat.
veto of an earlier stopgap
House Democrats
bill was upheld by the
House Saturday, has not
quickly responded with a
plan that would use the
indicated whether he
summit's spending and
would support either mea-
reduction targets, but let
sure.
the heads of Democratic-
But there was one sign
controlled committees
of White House backing
pencil in the specifics on
yesterday. Vice President
taxes and cuts.
Dan Quayle and other ad-
Many Republicans view
Bush's support of the
Democratic plan as tanta-
mount to political suicide
because it cedes broad
discretionary budgetary
powers to Democrats.
This process
But the cost for Bush to
reject such a measure is
has gone from
to continue both the gov-
outrageous to
ernment shutdown and
the political stalemate.
obscene.
The Democratic plan
could also leave Bush
- Sen. McCain
faced with a difficult veto
decision on- the budget
late in October, close to
Many Republicans in
Election Day.
both chambers, fearful of
The revised budget ac-
being shunted to the bud-
getary sidelines, balk at
cord draws heavily from
granting such powers to
the defict reduction pact
Democratic-dominated
cobbled together by White
panels.
House and congressional
"I'm not going to sign
negotiators during 20
onto this fill-in-the-blanks
weeks of secretive budget
package," said Sen. Phil
summit talks. The sum-
Gramm (R-Texas), a bud-
mit pact was rejected by
get summit member.
the House early Friday,
The sniping over the
254-179.
budget has brought into
The new accord passed
sharp relief the deep
yesterday by the House
partisan fault lines that
was deliberately vague,
define debate on Capitol
similar to normal budget
Hill.
resolutions that leave
Democrats generally
blank tax and spending
want to ease the deficit by
levels
further taxing the rich,
The $60 billion in Medi-
this despite evidence that
care cuts called for in the
substantial revenues can
summit pact, a major
only be raised by tapping
sticking point in the
the huge middle class
House, would be scaled
Most Republica
back to $48 billion in the
meanwhile, favor spend-
revised plan. A 2-cent-per-
ing cuts with no new
gallon home heating oil
taxes. but they have yet to
tax would be scuttled in
find enough reductions to
committee. according to
make a meaningful differ.
congressional sources.
ence in the budget.
The measure would also
The jousting. however,
grant broad latitude to
has also spurred fresh de.
the Democratic-con-
bate on an old issue, capi-
trolled House Ways and
tal gains. Both sides now
Means and Senate finance
envision a tradeoff wher-
committees to determine
eby Democrats agree to
specific tax and spending
capital gains tax cuts fa-
levels.
vored by Republicans in
exchange for higher tax
rates on the rich.
Los Angeles Times
MONDAY, OCTOBER 8, 1990
Budget Fight Tests Speaker's Mettle
Politics: Thomas S. Foley has been the
jugular-were cited as just the qualities needed to
rescue the House from the partisan wrangling into
architect of consensus in the House. Now,
which it had plunged under his predecessor, former
some colleagues wonder if he is tough
Rep. Jim Wright (D-Tex.).
Foley, a lawyer, was assistant attorney general of
enough to handle the deficit crisis.
the state of Washington before he came to the nation's
capital in 1961 as an aide to the late Sen. Henry M.
By RONALD J. OSTROW and PAUL HOUSTON
(Scoop) Jackson (D-Wash.).
TIMES STAFF WRITERS
In 1964, helped by the landslide election of President
Lyndon B. Johnson, Foley narrowly beat an 11-term
WASHINGTON-He stands out among the 435
Republican congressman to win the right to represent
members of the House of Representatives-a brainy,
his conservative district in eastern Washington.
undeniably decent man who is liked by almost
He later honored the man he had defeated, Rep.
everyone, Republicans and Democrats alike.
Walt Horan, at a reception.
Yet Rep. Thomas S. Foley (D-Wash.), after 16
A decade later, Foley reluctantly accepted the
months as Speaker of the House, is facing the most
nomination of his fellow Democrats to replace Rep. W.
serious political test of his career.
R. Poage (D-Tex.) as chairman of the House Agricul-
The stunning defeat of the bipartisan accord on
ture Committee-at the time part of a move to limit
budget deficit reduction last week has placed Foley on
the authority of conservatives who had dominated
the firing line and raised a new question in the capital:
House committees.
Can this man really lead?
Foley immediately named Poage vice chairman.
: Foley showed a rare flash of aggressiveness Sunday
Former Speaker Thomas P. (Tip) O'Neill Jr.
when he criticized President Bush for shutting down
(D-Mass.) brought Foley into the House leadership in
federal government services in the face of the budget
1980 by naming him to the third-ranking post of whip.
crisis. Still, characteristically, he did not question the
"Tom Foley sees three sides to everything," O'Neill
President's motives.
said at the time.
"If there was any criticism of the Speaker, it is that
he ought to be tougher toward the President," liberal
W
hen Foley was elected Speaker, Rep. Leon E.
Rep. Sam Gejdenson (D-Conn.) said as he emerged
Panetta (D-Carmel Valley), current chairman
Sunday from the House Democratic Caucus, where the
of the House Budget Committee, hailed the choice as
outlines of a new budget proposal were discussed.
the perfect one to help reunify the House. "If there's
one man who can repair the damage, it's Tom Foley,"
"I
think Tom has done an excellent job," Rep. W.G.
he said when Foley took the job.
(Bill) Hefner (D-N.C.), a conservative, said as
But critics fret that the same traits that have made
he left the caucus. "I'd just like to see him meaner, but
Foley so effective could prove to be liabilities when it
that's not his nature. I'd like to see him be more
comes to resuscitating the budget package. Will he
vicious.
But that's why he's Speaker and I'm not."
now be able to take off the kid gloves and take a more
Foley is clearly under pressure now. It was he who
bare-knuckle approach?
put together-and shepherded for 4½ months-the
Still, on Sunday, there was some evidence that
negotiations between the White House and Congress
Foley may be about to change-to move "left with the
that produced the plan that his fellow House members
[budget] deal," as Rep. Charles Wilson (D-Tex.) put it,
rejected last week-in part, they said later, because
in order to bring more Democrats on board.
they believed they had been shut out of the process.
In the battle between Congress and the Bush
How Republicans, who balked at the tax proposals in
Administration over the weekend, it was Foley who
the first package, might be persuaded to go along with
a more liberal version remains to be seen.
spoke for the lawmakers on the TV interview shows.
Now it is he who must patch things up-first among
Foley has made it clear that he has little hope of
Democrats, then between Congress and President
turning around Rep. Newt Gingrich (R-Ga.), the
Bush.
minority whip, who led the opposition to the budget
The son of a judge who himself had judicial
compromise.
ambitions early on, 61-year-old Thomas Stephen
"I'm not sure that we will get Mr. Gingrich's support
Foley has been a consensus-builder for much of his 26
for any plan," Foley said on NBC-TV's "Meet the
years in Congress.
Press" on Sunday. "I certainly would not make an
Indeed, Foley's passion for consensus and compro-
assertion that any plan, any reasonable plan, would
mise-and his absence of the instinct to go for the
have to have Mr. Gingrich's support."
Los Angeles Times
MONDAY, OCTOBER 8, 1990
Why the Mess?
Lawmakers Go
Their Own Ways
On the Democratic side, one
group insists that the deficit is all
billion this year.
the fault of former President Ron-
By TOM REDBURN
Interest soon could be the largest
ald Reagan and that the principal
TIMES STAFF WRITER
component of the budget-exceed-
cure should be to reverse the 1980s
ing the allowance for the Pentagon
WASHINGTON-Why can't the
and raise taxes on the wealthy.
and Social Security.
federal government clean up its
Meanwhile, another group of
Congress and the White House
budget mess?
Democrats argues that the deficit
have tried almost everything in an
At the heart of the fiscal gridlock
really is not much of a problem.
effort to get the deficit under
that has paralyzed Washington
They suggest that it is time to
control:
this weekend is a cruel fact: To the
spend more freely on domestic
-They reformed the budget
average voter, the benefits of re-
problems that have festered over
the last decade.
process more than 15 years ago.
ducing the deficit lie somewhere in
-Five years ago-convinced
the uncertain future, while the
On the Republican side, one
that the only way to force action
group agrees that the deficit is a
was to hold a gun to their own
NEWS ANALYSIS
problem but blames Democrats for
heads-lawmakers created the
not being willing to cut spending.
doomsday machinery of the
costs are visible and painful to the
But there is just as much convic-
Gramm-Rudman deficit reduction
public right now.
tion among a large core of conser-
law. The law requires Congress to
And in an era when political
vatives that the deficit is not
parties have lost their influence
set yearly targets for reducing the
responsible for any economic ills
over voters-and members of Con-
budget deficit and mandates auto-
and that the solution to the current
gress must stand or fall as individ-
matic across-the-board cuts in
slowdown is to cut taxes even
uals on Election Day-a large ma-
federal spending if the lawmakers
more.
fail to meet them.
jority of lawmakers found it far
That doesn't leave much room in
safer politically to pick the $500-
-This year, they isolated a few
the middle for the Establishment
top officials in a room for 4½
billion budget compromise apart
Democrats and Republicans, who
than to support it.
months-and the House promptly
recognize that the federal govern-
"I'm not elected by the Presi-
rejected the result that the negoti-
ment's well-entrenched benefit
ators produced.
dent," said Rep. Lynn Martin (R-
programs for the elderly-which
"The fact that you had the elite
III.), an outspoken opponent of the
now make up roughly half of all
going off talking to the elite and
budget package who is engaged in.
federal spending outside of interest
a tough election battle to oust Sen.
protecting the elite really hurt any
on government borrowing-are
Paul Simon (D-III.). "I'm elected
serious consideration of the plan,"
threatening to devour the rest of
Rep. Thomas J. Downey (D-N.Y.)
by my district-and my district
the budget.
argued.
thinks I've done the right thing."
"Folks, if we cannot make any
Everything has failed.
As a result, practically the only
savings in the entitlement pro-
At the same time, however, the
thing upon which lawmakers can
grams at this time, I do not know
agree today is that they disagree
economic collapse that so many
where we are going to be in a
with each other.
experts predicted if the federal
generation," House Minority Lead-
"It's not that the center didn't
government did not curb its appe-
er Robert H. Michel (R-III.) plead-
hold," says Brookings Institution
tite for borrowing did not material-
ed Thursday night just before the
ize, either.
scholar Joseph White, co-author of
budget compromise was rejected.
"The Deficit and the Public Inter-
"If there were any justice in the
"We are not going to have any
est." "It's that there isn't any
world, there would be a dramatic
pie to distribute in a few years
center left any more."
end to the deficit story," says Paul
because entitlements are driving
For almost a decade, the battle
Krugman, a former Council of
discretionary spending down,"
over the deficit has eclipsed almost
Economic Advisers staffer who
Michel said. The Medicare pro-
everything else in domestic policy
now is a sadder and wiser econo-
gram, for example, now costs the
and left the government divided-
mist at the Massachusetts Institute
public more than $100 billion a
between an unruly Democratic
of Technology.
year and is rising at more than 12%
Congress, often beholden to special
"The adverse consequences of
a year.
interests, and a conservative White
the deficit would become spectacu-
But when budget negotiators
House driven by ideological pas-
larly apparent in an economic crisis
sought to raise that part of Medi-
sions.
and the public would rise up and
President Bush's decision to
care paid by the elderly to help
throw the rascals out," Krugman
abandon his no-new-taxes pledge
finance the program's skyrocket-
says.
and negotiate a compromise with
ing costs, lawmakers gagged.
"But of course," he adds, "there
middle-of-the-road congressional
"What are we socking it to the
isn't any justice in the world."
leaders was supposed to have
elderly for?" asked Rep. Silvio O.
changed all that.
Conte (R-Mass.). "Where are they
going to get the money?"
B
ut Bush may have waited too
Where they are getting it from
long. Today, Congress is split
now is future generations, who will
into at least four camps, with many
be asked to bear the swelling
members holding strong beliefs on
burden of federal borrowing used
the best way to close the budget
to cover the gap between revenues
gap.
and expenditures.
"The passions are intense-the
Interest payments on the federal
issues are of enormous concern to
debt, which now are higher as a
everybody," Richard G. Darman,
proportion of the total economy
director of the White House Office
than at any other time in history,
of Management and Budget, said
are expected to reach almost $260
Sunday on CBS' "Face the Nation"
program. "It's the good of the
country that's at stake, but it's also
people's ability to get themselves
reelected."
Los Angeles Times
MONDAY, OCTOBER 8, 1990
Support Grows
for a Tax Trade
By PAUL HOUSTON and TOM REDBURN, TIMES STAFF WRITERS
WASHINGTON-With much of the government shut down for lack of
funds, congressional leaders struggled through the day Sunday to win
bipartisan support for a new deficit reduction package to replace the
$500-billion plan that was rejected by the House on Friday.
In a development that could
break the budget logjam and re-
open government offices, House
President Bush successfully ve-
Republicans overwhelmingly en-
toed a similar stopgap measure on
dorsed suggestions for a compro-
Saturday and selectively closed
mise that would raise income taxes
down a number of government
on the very rich in exchange for a
operations, saying that he wanted
reduction in capital gains tax rates.
to keep the heat on Congress to
The straw vote-which came in
approve a new deficit-reduction
a closed caucus called to explore
plan.
GOP sentiment for striking a new
His action ignited partisan war-
budget deal with the Democrats-
fare on Capitol Hill, as the House
marked a stunning reversal of the
failed by six votes to override the
hard-line approach that GOP lead-
veto.
ers had taken at the negotiations
that produced the earlier budget
F
oley, who pleaded with Bush
pact.
not to force a confrontation
It was not immediately clear,
that might destroy chances for a
however, how quickly any such
new bipartisan budget, vented un-
compromise could be put together.
characteristic fury over the veto
Democratic leaders said consider-
Sunday, even as he sought to reach
ation of such a tax trade-off would
a new compromise with Republi-
cans.
have to wait until congressional
committees take up details of any
He accused Bush of "creating a
new package later in the week.
crisis that is totally artificial,"
In the meantime, the Democrats
charging that "We're injuring in-
pushed a new plan of their own
nocent people" affected by the
shutdown.
aimed at softening proposed Medi-
care cuts and shifting tax increases
"It's like saying we ought to
rebuild the fiscal house of this
more toward the wealthy. But they
said their own proposal would
country and he sets the House on
contain few specifics, leaving de-
fire for awhile to get our atten-
tails for congressional committees
tion," Foley complained.
to work out.
Foley also sought to assuage
rank-and-file Democratic law-
The Democratic plan also would
makers, who had been angered by
reduce the extra share of Medicare
the fact that they were left out of
costs that the program's beneficia-
the 4½-month-long negotiations
ries would have to pay to only $12
between congressional leaders and
billion over five years instead of
top Bush Administration officials.
$30 billion-a move designed to
Meeting with reporters in an
gain crucial support of the elderly,
ornate lobby off the House floor, he
who had protested the earlier plan.
Lawmakers on both sides of the
pointedly noted that the new pack-
aisle had been especially leery
age was being drafted without any
about angering senior citizens, who
formal negotiations with White
constitute a potent bloc of voters in
House officials-though he con-
congressional elections, now less
ceded that they were being kept up
than a month away. Last week's
to date informally.
plan sparked a barrage of phone
He also insisted that the Demo-
calls and telegrams from the elder-
crats' new budget plan is aimed at
ly.
"appealing to members of both
House Speaker Thomas S. Foley
parties. It reduces the increased
(D-Wash.) expressed hope that a
cost in the Medicare program and
new budget outline would be ready
provides a more equitable and fair
for action by the House late Sun-
distribution of taxes."
day, in time to go to the Senate for
He said the plan would contain
a vote today.
aggregate figures for reducing
If a new package is adopted. the
spending and increasing taxes but
leaders then will seek to pass a
details would be left up to commit-
separate stopgap funding measure,
tees-mainly the House Ways and
needed to reopen government
Means Committee and the Senate
agencies before Tuesday, when
Finance Committee.
workers end a long Columbus Day
"There's not a dime's worth of
weekend. Without such a resolu-
tax increases-not 10 cents' worth
tion, most federal workers would
of cuts in the budget resolution,"
be sent home.
he said. "It allows the committees
to consider these issues."
B
ut that is just the thing that
Senate Majority Leader George J.
appears to concern Republi-
Mitchell of Maine with Senate
cans the most. Many minority par-
budget negotiators from both par-
ty members voiced fears Sunday
ties, but that no House Republican
that if the details of the plan are
had shown up.
left to Democratic-controlled com-
"I hope that someone would
mittees, the final package will not
come from your side," Gephardt
curb spending enough to keep tax
told GOP members, "so that what
increases to the bare minimum.
the President has asked us to do for
"I've got reservations about re-
five months [and] yesterday and
ferring details to my committee,"
today-to get a budget resolution"
said Rep. Bill Archer (R-Tex.).
can be done.
top-ranking Republican on the
At their own caucus Sunday,
tax-writing Ways and Means pan-
Republicans debated whether to
el. "We're out-numbered, 23 to
continue seeking a compromise
12."
with the Democrats or instead to
Added Rep. Jack Buechner (R-
adopt a strategy of confrontation,
Mo.): "We may get a bone out of
seeking to force Congress to enact
the Democrats but certainly not a
deep spending cuts by persuading
five-course meal."
Bush to veto appropriations bills
As behind-the-scenes negotia-
deemed excessive.
tions wore on Sunday night with-
House Minority Leader Robert
out any sign of agreement. Minori-
H. Michel (R-III.), one of those
ty Whip Newt Gingrich (R-Ga.)
favoring a new bipartisan accord,
pressed for a stopgap spending bill
asked for a show of hands on a
that would impose $40.1 billion in
proposal to cut the tax on capital
across-the-board cuts until Con-
gains to 20%-from 33% now-in
gress can produce a permanent
exchange for boosting the ordinary
budget.
income tax rate on the wealthy to
Normally mild-mannered, Foley
32% from 28%.
erupted in fury at Gingrich's sug-
gestion that Congress was blocking
R
epublican leaders said the
a deal that would allow govern-
plan-which they said would
ment operations to resume by re-
reduce the deficit by $13 billion
fusing to cooperate with the White
over five years-drew surprising
House.
support.
"Of all the people in this House,
"There was at least a two-thirds
in this country, that has little claim
majority for it," Rep. Jim Leach
to cooperating with his President,
(R-Iowa) told reporters later.
it is the gentleman from Georgia,"
In recent days, even conserva-
Foley declared to cheers and ap-
tive Republicans such as Gingrich,
plause from fellow Democrats.
who originally opposed income tax
Within minutes, House Majority
hikes, have shown a willingness to
Leader Richard A. Gephardt (D-
consider such a tax swap in hopes
Mo.) stormed onto the floor to
that lower capital gains rates
announce that he had been waiting
would help stimulate the ailing
for the last six hours in the office of
economy.
However, White House Chief of
Staff John H. Sununu said Sunday
that the Administration still oppos-
es raising the top income tax rate.
Sununu, obviously rankled that
Gingrich had led a House GOP
rebellion that helped sink the orig-
inal budget compromise, noted that
it was Gingrich and other Republi-
cans who had insisted earlier on
holding fast against any change in
income tax rates.
Robert Akerman
The Atlanta Junirnal AND CONSTITUTION
George Bush tried his 'riverboat gamble,' and lost
They called Ronald Reagan's tax cut plan
pledge under which he was elected, and said
nomic ideas.
a "riverboat gamble"- but it worked, politi-
he would put "revenue increases" on the ta-
I think that to get out of this mess now the
cally and economically, for a decade.
ble at a budget summit.
starting point has to be to take the current
George Bush, who once
I wrote then that only a very good deal, in
budget - the one for the fiscal year just end-
called Mr. Reagan's ideas
terms of immediate spending cuts and long-
ed - and use the "flexible freeze" approach
"voodoo economics" and
term procedures to get federal spending un-
to adapt it for the new year. Even without
then professed to accept
der control, would redeem his abandonment
new taxes, the deficit looks much different if
them for that decade, has
of that pledge.
we think in terms of continuing current
tried his own "riverboat
He didn't get a good deal. He got such a
spending instead of projecting from a base
gamble," and lost.
bad one that both Democrats and Republi-
that includes built-in increases. Fiscal 1990
As 1990 wore on, the
rate of increase in govern-
cans rebelled against the congressional lead-
spending would provide the 1991 budget
ment revenue began to de-
ers who had negotiated it.
ceiling; funds from those items which can be
cut below this year's spending can be trans-
cline, presaging a greater
Where do we go from here? President
ferred to those which absolutely must be in-
increase in the deficit than
Bush already is on record as saying that the
MON., OCTOBER 8, 1990
creased. And, in the end, we might find that
President Bush's own economists, voodoo or
budget agreement he got was the best one
new taxes this year aren't really necessary
otherwise, had prophesied in January. That
possible at present. Presumably he does not
after all.
decline was in itself a sign that a recession
have much to offer at this point. Those who
had begun.
opposed his deal, especially those on the Re-
George Bush lost his budget battle, but he
Neither the liberal economics of John
publican side who had the instinct to know
doesn't have to lose the economic war. If we
Maynard Keynes nor the doctrines of the
that it was not good economics, may be able
can stave off the recession that his proposed
supply-siders advocate a tax increase in a re-
to come up with a better plan. But whether
budget could only have worsened, he may yet
cession. But President Bush gambled any-
many Democrats will go along with them is
come out of the political war strong enough
way. He abandoned the "no new taxes"
doubtful, since they don't have the same eco-
to fight another day.
Newsday
October 8, 1990
Refusing to do the right thing
tirely different reasons, of course. Bush had
MARY McGRORY
pleaded with them on television and in person
for help on a "bipartisan budget." His chief of
WASHINGTON - Can Congress come
staff, John Sununu, got out his truncheon and
back? Can President Bush?
laid about in a way that made some nostalgic
The executive and legislative branches
for "the good old days of Donald Regan."
joined hands and jumped into a sea of raging
The president, who has had such phenom-
public disapproval of government. Bush made
enal luck with Francois and Margaret and
the mistake of thinking he could govern with
Helmut on the perilous matter of the Persian
slogans as easily as he had campaigned on
Gulf, could not persuade Newt Gingrich, his
them. Members of Congress feared the elec-
party whip in the House, to give him a vote.
torate would never forgive them for exercising
Too late the House leaders saw the folly of
common sense, although poll after poll had
told them that voters would accept higher tax-
their ways and put out word that they, too,
es if they were applied to deficit reduction.
hated the budget agreement. They passed a
continuing resolution, one that would have at
Contempt for Congress could be read in
least kept the machinery of government roll-
the reproachful stares of the tourists who sat
ing. Bush promptly and righteously vetoed it.
in the House and Senate galleries because
Not for him "business as usual," although it
they were locked out of other public buildings.
was his studied ignoring of the deficit and his
Congress' failure to pass a budget resolu-
religious crusade against new taxes that had
tion was the problem, White House operators
done so much to fashion the crisis.
told callers. Pictures of tots sobbing at the
The mortified Democrats tried to override
White House gates and Boy Scouts frowning
at the base of the off-limits Washington Monu-
his veto and spent Saturday raucously failing.
ment make Congress look bad. But Bush, who
The tourists took it all in. On a sparkling
vetoed a continuing resolution to keep the gov-
Sunday afternoon, Bill Erickson, an engineer
ernment going, didn't look much better.
from Chicago, while wife Betty nodded vigor-
Democratic leaders of the House, for rea-
ously in agreement, passed judgment on the
architects of the debacle.
sons they have yet to explain, accepted a bud-
get agreement that offended the party's major
"I watched the House yesterday, and they
were like a crew of kids out of control. I went
constituencies.
Their troops in the House rebelled. Bitter
to the Senate and they had five people on the
things were said about Speaker Tom Foley.
floor - they don't even come to hear each other
Liberals compared him to the British colonel
speak," he said. "If this is normal, maybe we
in "The Bridge on the River Kwai," the Alec
should do something different and elect people
Guinness character who got SO carried away
who care about their jobs."
by the process that he failed to realize he was
While the Ericksons were assessing their
collaborating with the enemy.
leaders, the Democrats were regrouping. Rep.
Last Thursday, liberal Democrats joined
Sam Gejdenson of Connecticut said, "We de-
right-wing Republicans, who also abandoned
cided to be Democrats." On the backs of enve-
their leader in voting against the bill - for en-
lopes they jotted down a few thoughts about
reducing Medicare costs and raising the taxes
of the rich. Foley presented the sketch to the
caucus. Huzzahs followed, and Foley smiled
for the first time in four days. The new budget
passed at dawn.
The whole problem was trundled over to
the Senate, where it was as if none of the ag-
ony, embarrassment, disruption and yawning
chaos had ever been.
The Democrats quavered and havered in
their caucus. Some incumbents with House
challengers lamented that they might have to
vote against the new budget because their ri-
vals had. They wanted assurance that Republi-
cans would support it, SO they would not be
naked to a charge by Bush that they had once
again passed a tax-increase measure over his
protest. Republicans hung back from doing the
right thing.
It is as if Alice Roosevelt's cynical dictum;
"No good deed goes unpunished" had become
the law of the land.
Mary McGrory is a syndicated coiumnist
Bush's Big Lie
For years he derided taxes. No wonder people rejected his
call to accept them now.
The budget impasse is a colossal failure of
George Bush's leadership.
For the past decade, Bush was first cheer-
leader, then head coach, of a Republican team
that kept on winning largely because it told
the public it wouldn't have to pay more taxes
to reduce the deficit. No wonder that when
Bush finally went on television last week to
tell Americans, essentially, that he had lied,
they cried foul. He hadn't prepared them for
the truth. And the outpouring of negative
phone calls from voters to House members -
standing for re-election next month - shut
the coffin on the bipartisan budget deal.
But the unfortunate part about it is that the
void created by the House's rejection of the
pact - and Bush's petty, partisan effort to
shift responsibility for the entire affair to Cap-
itol Hill - is apparently going to be filled with
something that could turn out to be worse.
The new idea is a budget cut and pasted
together by congressional committees, the
very fiefdoms that SO far have displayed as
much political cowardice in earlier deficit-re-
duction efforts as the White House.
It's true that one of the many reasons for the
budget agreement's demise is that powerful
committee chairmen felt their toes were
crushed when administration officials and
congressional leaders settled in private on a
distasteful deal, then tried to ram it through
Congress. Handing the job back to congres-
sional committees - the course about to be
taken - is a welcome dose of democracy.
But the danger is that real deficit reduction
will again be lost to fiscal gimmickry. For all
the unfairness in the doomed pact Bush and
congressional leaders crafted, it did provide
for real tax hikes and real spending cuts. Year
after year, Congress has settled for phantom
savings that fell short of deficit-cutting goals.
That must be the prerequisite for a new
deal. Not only should it meet the original
pact's deficit reduction of $40 billion this year
and $500 billion over five years. it must achieve
these reductions in fact - not on paper. If a
new budget agreement isn't credible, the Fed-
eral Reserve won't lower interest rates and
the nation will slip into recession.
The rejected agreement should be changed
in two key ways, to make it fairer but still
effective in stanching the red ink. It must roll
back the odious increases in payments that
Medicare participants must make. And it
should end the hoax that income-tax rates
can't or shouldn't be raised. Even in their hu-
miliation, Bush and his top advisers cling to
this idea - oblivious to the fact, that their
insistence on excise taxes that hit the poor
and middle class harder than the rich was a
key reason Congress, and the public. turned
down the first deal.
Higher tax rates for the wealthy are eco-
nomically and politically appropriate - and
the price Bush has to pay for a decade of lies.
CHICAGO SUN-TIMES, MONDAY, OCTOBER 8. 1990
Budget-pact loss
widens GOP split
aving suffered the most hu-
acting "like a bunch of thugs." in
miliating defeat in Con-
the words of one lame-duck GOP
gress by any Republican
congressman. to win House ap-
president in recent history. George
proval. There was no laughter
Bush in a morning-after reflex
when reports hit the Republican
reached for more of the previous
cloakroom of a threatened Sununu
night's poison, by seeking to re-
visit to confront Rep. Robert
negotiate the flawed budget agree-
Walker, a chief deputy party
ment-with Democrats.
whip. in his Pennsylvania district.
After a White House strategy
Gingrich and fellow House GOP
meeting. President Bush's main
leader, Rep. Vin Weber. sought to
operatives traveled to Capitol Hill
avert defeat until the 11th hour
to meet Speaker
Thursday. They
Thomas Foley,
met with a fre-
Senate Majority
quent antagonist,
Leader George
Senate Republican
Mitchell and
Leader Robert J.
House Majority
Dole, and tenta-
Leader Richard
tively mapped a
Gephardt. Repub-
plan that would
lican congressional
resurrect the cap-
leaders who had
ital gains cut but
supported the
raise the top indi-
budget pact were
vidual income tax
absent. No wonder
Rowland Evans &
rate. Thumbs
then that House
down from the
Robert Novak
Minority Whip
White House.
Newt Gingrich,
Instead, Foley
who led the GOP
was sent out of an
rebellion, was a pariah cut off
Oval Office meeting Thursday to
from presidential contact.
publicly reassure Congress that
Even to critical insiders at the
the agreement would be fine-
White House, the course taken by
tuned in House committees. Since
the president and his men seemed
those committees are Democratic-
suicidal. Instead of trying to close
controlled, the speaker's mild
the party's self-inflicted budget
words chilled Republicans.
wounds, the White House was
That led to GOP defections be-
venting its anger against rebel Re-
vond White House expectations.
publicans. Never during nearly
When it then became clear that
two years of budgetary infighting
the budget would lose, Foley could
with Democrats was so much ven-
not deliver Democratic votes.
om displayed by the Bush team as
Not before and not after Gin-
on Friday after the great defeat.
grich mobilized his House Repub-
These are the pitfalls of biparti-
lican whip organization to sustain
sanship run amok. In their search
the president's veto of the stopgap
for deficit reduction. Bush and
spending measure Saturdav was
chief of staff John Sununu aban-
he in touch with the White House.
doned their party's principles and
The once-intimate relationship
welfare.
between Gingrich and Sununu is
To Bush's agents inured to
now in ruins.
Democratic demands during five
Republicans supported the veto
months of haggling. the deal
even though they question Bush's
seemed pretty good. But Republi-
tactics. "I guess he's embittered."
cans across the country were
said Rep. Henry Hyde. a widely
stunned. On the heels of the presi-
respected Republican lovalist.
dent's retreat from his no-new-
"If Bush really shuts down the
taxes pledge and the collapse of
government." said Democrat Ru--
his efforts to get capital gains tax
sell Hemenway of the National
cuts. the imai proposal befouled
Committee for an Effective Con-
Republican sensibilities: a new tax
gress. "then we'll win some seats
shelter that could benefit tast-
[in Congress]-a lot of seats."
buck operators, one of the biggest
tax increases in history. no real
Evans & Nocak are nationalis
constraint on domestic spending.
syndicated columnists of the Chi-
What followed WAS Bush aide-
cago Sun- Times.
Gingrich's gotta go
The budget reduction package is back on track today after hav-
ing been briefly derailed chiefly by Newt Gingrich, the Georgia
Republican congressman who is a leading practitioner of
scorched-earth politics.
Appearing on ABC-TV's "Nightline" early this morning, Gin-
grich looked a little like the cat who had swallowed the canary.
But before it's over, we predict with some confidence, he will
look more like the snake who swallowed the pig, because in the
"end Gingrich is going to have to swallow a much more distasteful
hudget compromise, from his point of view, than the one he
scuttled last week, to the great embarrassment of his president.
The final package most likely will include a trade-off of a capital
gains tax reduction in return for a higher marginal income tax rate
-on the wealthiest - the very package which the Democratic ne-
gotiators proposed throughout the four months of difficult negoti-
ations which Gingrich wrecked in one night.
in If this dismal exercise in governmental irresponsibility has
"proved nothing else, it has proved that Newt Gingrich is simply
unfit for leadership in a political system where separated power
"rèquires compromise. He may be of some value as a gadfly who
sharpens public debate, but he will never be a leader. It's time to
relegate Gingrich to the back bench where he belongs.
Gridlock: Can democracy work?
Y
OUR PEOPLE, sir, are a great
others will pass some sort of com-
there is a time for a politician to rise
beast!' That was Alexander Ham-
promise to keep the government go-
above his principles. That now has
ilton's supposed response to the idea
ing while he opposes any such deal to
become the definition of statesman-
of government by the people. It does
great popular acclaim. But there are
ship, and George Bush has met it. So
sound just like him, even if historians
so many cagey pols in Washington
have a few Democratic leaders -
have never been able to verify the
that compromise didn't stand a
Speaker Tom Foley, Chairman Dan
comment. At this juncture in the histo-
chance first time out. What we have
Rostenkowski of Ways and Means,
ry of the Republic that Colonel Hamil-
here is a profile in something other
and even Richard Gephardt, who is
ton
helped
than courage.
now a former populist. But only a
shape, such a
few politicians may be capable of
Paul
description
The critics of this plan do have a
meeting such a standard. Ideologues
would be all too
point: Almost anybody could have
on the right are outraged and in re-
Greenberg
accurate. Wres-
drawn up a better deal - if the object
volt. The ones on the left are no
tling with the
were to serve only one's own interests.
more pleased with the Democratic
country's rapa-
Or satisfy only one's own judgment.
leadership. And when the ideologues
cious deficits, its few leaders finally
For my part, slicing the defense budg-
are joined by the opportunists and
et just when an armed confrontation
patched together a compromise for
careerists of both parties in Con-
looms abroad sounds reckless, if not
Congress to rip apart. And beyond
gress, the combination may prove
ludicrous. I also have doubts about
Washington, the writhing has just be-
unbeatable. That is how democracy
whether this deficit reduction plan
gun. This beast has a thousand
deadlocks. That is how phrases like
will reduce the deficit any more than
heads, each with a hungry mouth,
"the general welfare" and "the com-
the previous ones approved with great
and each capable of the most pierc-
mon weal" acquire a quaint, even
fanfare during the Reagan adminis-
ing screams if denied a single mor-
negative, connotation in this age of
tration. But could anyone have drawn
sel. Seldom has democracy ap-
me
and
mine.
up a better deal if the object was tou
peared, alas, 80 democratic.
Like many another argument over
control the deficit and still promote
money, this one is about more than
The easiest position to take on this
the general welfare?
money. It is about whether the gener-
plan to reduce the deficit was: Hell,
Was this compromise fair? Well,
al welfare will come before parochial
no. In principle, all may be willing to
what is fair? Would it be better to
interests and prejudices. It is about
sacrifice for the common good. In pol-
give every interest its fair share of
whether the system can still work,
itics, each felt it was being singled out
an ever failing economy? Then all
whether leadership can still lead,
as a victim. That is how democracy is
could sit back as interest rates
whether the two parties can do any-
disrupted, the center shrinks and the
soared, confidence in the country
thing more than check each other
system stalls.
waned, recession gave way to de-
and whither this republic is tending.
The professionals who minister to
pression
and be assured that this
We will see. Very shortly. The clock is
this great beast called Demos - they
creeping chaos was perfectly fair.
ticking. That may be the only thing
are called politicians - busied them-
A cynical witticism holds that
moving in Washington.
selves running for cover. Newt Gin-
grich, a Georgia firebrand who is now
supposed to be a Republican leader,
fairly sprinted. Dale Bumpers, the Ar-
kansas statesman and orator, though
not necessarily in that order, slipped
into his populist mode. This budget
deal, he said, "looks like it's calculated
to devastate a state like Arkansas."
Now there's a good, sound, responsible
term: devastate.
The secret of the successful dem-
agogue is not just to echo the fears
of the beast but magnify them. To
defend this compromise would have
required a measure of courage, real-
ity, even risk to one's political ca-
reer. Naturally a majority of the
House of Representatives voted
against it.
The really cagey pol will still
hope for the best of both worlds: that
SUNDAY
Los Angeles Times
OCTOBER 7. 1990
Ax Gramm-Rudman-Hollings?
POLITICAL
Martin Anderson, senior fellow.
FORECAST
Hoover Institution at
Stanford University:
The Gramm-Rudman-Hollings Act aims
There is only one way out of this
to curb the federal deficit by forcing
deadly economic trap that our
congressional and White House negotiators
budget generals have fought their
to come up with a budget plan or face deep
way into. We need to adopt the
cuts in government programs. No matter
"Lithuanian Solution"- sus-
what happens to the latest plan, was
pend Gramm-Rudman-Hollings
Gramm-Rudman u positive or negative
for a year. Instead of raising taxes
force in bringing it about? Should it be
and plunging this economy into a
retained? The Times asked seven economic
recession that will create a deficit
analysts:
that really is dangerous, we should
live with our relatively small defi-
William E. Simon, secretary of the
cit a while longer, defeat Saddam
Treasury in the Nixon and Ford administra-
Hussein and resolve the gulf crisis,
control spending as much as we
tions:
can, enjoy Christmas and see how
The Gramm-Rudman process is a
things look in 1991.
workable instrument to impose a degree
of fiscal discipline on the Congress. The
Robert J. Kuttner, author of the
Congress tried its best to evade the law's
forthcoming book, "The End of Lais-
(deficit-reduction] targets by raising the
sez-Faire":
spending limits each year when it became
apparent that the required belt-tighten-
There was a point in time, circa
1985, when it made sense to enact
ing would be too painful. Despite congres-
sional manipulation, the process did serve
something like Gramm-Rudman as
as a restraint on spending.
a way to hold Reagan's feet to the
fire, to force him to choose be-
The fact is that our deficit problem lies
tween his military buildup and his
in the Congress itself, not in the Gramm-
tax policy. But Gramm-Rudman
Rudman process or in various gimmicks
has become a chronic way of
designed to restrain the Congress' insati-
paralyzing government. It's been
able appetite to spend taxpayers' dollars.
overtaken by events.
Members of Congress are driven by one
The whole budget is now SO.
overwhelming objective: their own re-
totally out of whack and the num-
election. Everything else-including the
bers are SO big-and they keep
integrity of our currency or the long-
changing Gramm-Rudman, any-
term health of our economy-takes a
way-that it's become, on balance.
back seat.
more of a negative. I think they
Congress hen discovered long ago that
should scrap it.
they get re-elected by redistributing
The only way the budget is ever
taxpayer funds to interest groups that will
going to get back into balance is by
support their next campaign. Since virtu-
restoring the tax rates on rich
ally all 535 members of Congress behave
people to what they were pre-1981.
this way, the result is absolute fiscal
Gramm-Rudman. coupled with the
chaos in Washington, and we have to go
Administration's refusal to enter-
to the brink of financial ruin before
tain taxes on the rich, turns it into a
Congress will act.
chronic game of pass the buck. I
I have long believed that one solution
think it would be ridiculous to
lies in fixing clear limitations on congres-
extend it, and tinker with it. one
sional terms of office. This would force
more time. It's like a mirage in the
our representatives to consult the long-
desert. It's always 20 miles away
term interests of our nation and put an
from you.
end to the idea that a politician can use
the federal budget to ensure his re-elec-
Kathryn Eickhoff, former chief
tion term after term after term
economist. Office of Management
In short. the Gramm-Rudman process
and Budget during the Reagan Ad-
should be retained as a measure to
ministration:
restrain spending. but it must be under-
Gramm-Rudman has performed
girded by other disciplining measures
a useful function in the four years
such as congressional term limitations
since its enactment in 1986. Eleven
and a presidential line-item veto.
billion dollars in true savings re-
I don't think it's Gramm-Rud-
sulted from the first sequester. The
man that's essentially put our feet
brief sequester forced by [OMB
to the fire. Effectively, we've al-
Director Richard] Darman early in
ready scrapped Gramm-Rudman.
fiscal 1990 also produced savings. It
It's a perfect example of why a
is doubtful that savings in other
constitutional amendment to bal-
years were greater than what
ance the budget doesn't work,
would have been achieved in
because the people running the
Gramm-Rudman's absence.
country who make laws cannot
By shifting budget ground rules,
make laws. All they did was keep
Gramm-Rudman has produced
the budget imbalance from getting
new opportunities for "smoke and
as bad as it would have been
mirrors." It has also provided a
without Gramm-Rudman.
needed discipline to the budget
process. However, in and of itself,
Claude Barfield, resident fellow,
it has not been able to solve the
American Enterprise Institute:
budget crisis nor prevent it from
I think that Gramm-Rudman, on
getting much worse.
balance, has been a very positive
If Gramm-Rudman is to contin-
force over the last few years and
ue, the targets must once again be
was a force in getting the Adminis-
amended. The budget compromise
tration and the Congress to get
proposal is a step in this regard.
together. The people who often
If there were no Gramm-Rud-
criticize Gramm-Rudman say that
man, it would have to be invented
it represents a bankruptcy of the
to give the budget committees the
political process, that it's throwing
clout they need to enforce the
decision-making to some kind of
budget resolution. It is better to
institutional gimmick. The problem
improve the Gramm-Rudman that
with that is it gets it backward. The
we know than try to get along
political process was bankrupt in
without it.
the first place, and therefore
turned to something like Gramm-
Lester Thurow, dean of the
Rudman.
Sloan School of Management at
It's like a killer who writes on a
Massachusetts Institute of Technol-
mirror, "Stop me before I kill
ogy:
again." And that's what Congress
Under Gramm-Rudman-Holl-
did, in effect, when it passed
ings as passed, we're already sup-
Gramm-Rudman.
posed to have balanced the budget.
The Congress does need
And, in fact, the budget deficit in
some form of discipline, because I
1992, even with a budget package,
see no signs that it will discipline
is going to be bigger than it was in
itself.
1991. It's like canoeing very rapid-
ly up a river that's running very
Arthur Laffer, former economic
fast so that you're actually going
consultant for President Reagan:
backward, even though you're
Real or perceived deadlines only
paddling like crazy.
encourage bad decisions. Gramm-
I think the event that makes the
Rudman has, for several years
[budget negotiators] more serious
now, introduced an artificial dead-
this time is that the Germans and
line with a national threat-the
Japanese have basically been
sequester of enormous sums of
funding the deficit, and the Ger-
government spending. The stock-
mans have notified the world that
market crash of 1987 was a direct
they're not going to be lending
consequence of Gramm-Rudman.
money to the rest of the world.
The deleterious implications, how-
They're going to be borrowing
ever, are nowhere more apparent
money and putting their money,
than they are with the recent
plus the borrowed money, into East
budget compromise. The Gramm-
Germany.
Rudman deadline forced polariza-
Because of the events in the
tion within the legislative and
Tokyo stock market, as well as the
executive branches and tried to
interest in building more housing
achieve its resolution by confron-
in Japan, it seems highly likely that
tation. not by reason.
the Japanese are also going to be
The political dynamics are
lending less money to the world in
bad enough under normal times,
the future. That basically makes it
but with Gramm-Rudman they are
impossible to evade [the deficit] in
catastrophic. Gramm- Rudman
the way in which we've evaded it
should be legislated out of exist-
in the past.
ence.
ST.LOUIS POST-DISPATCH
SUNDAY, OCTOBER 7, 1990
Budget Brinkmanship
Because the American political system seems to
cludes seeking partisan advantage by holding the
be incapable of functioning, the U.S. government
basic operations of government - and its benefi-
may be incapable of carrying out its responsibil-
ciaries - hostage. Accordingly, a resolution to
ities. How did this sorry state of affairs come about?
delay draconian Gramm-Rudman cuts is essential.
The nation itself, and its president and Congress, in
What should the budget look like? Ideally, it
that order, virtually asked for it.
should cut military spending much more than the
When voters reward politicians who promise
document just rejected. The Cold War is over;
benefits without costs, they virtually guarantee the
significant reductions are possible. Ideally, income
failure of leadership that led to last week's budget
tax rates should be raised, particularly for wealthy
crisis. That failure of leadership is principally Pres-
Americans. A credible deficit-reduction package
ident Bush's. He refused to prepare the nation for
demands major new revenue. Increasing income
the sacrifices that sensible deficit reduction re-
taxes is fairer than hiking excise taxes because the
quires - and delayed the budget process itself by
former better reflect the taxpayer's ability to pay.
insisting for too long on a wrongheaded cut in
Finally, spending cuts should be spread more even-
capital-gains taxes. But Congress must accept a
ly among the budget's beneficiaries; Medicare re-
large share of the blame, too. Many of its members
cipients were asked to pay more than their fair
showed themselves unwilling last week to vote for
share in the budget rejected early Friday morning.
any pain and sacrifice, despite the greater good.
But in the real world of deadlocked government,
What now? Members of Congress need time to
something less than perfection must be accepted.
negotiate among themselves about a budget, since
Those who don't like new taxes must face the need
they rejected the compromise agreed to by their
for at least some of them. Those who don't want
leaders. They cannot adjourn without doing so. But
spending cuts must accept that some are essential.
President Bush is wrong to force them to deliberate
And all must accept pain - both office-holders and
under the pressure of either a government shut-
their constituents. There just isn't enough waste in
down or across-the-board spending cuts.
government to make all the cuts completely pain-
Government is a public trust. That trust pre-
less. That point, above all, must be accepted.
THE BOSTON SUNDAY GLOBE
OCTOBER 7, 1990
Boston Sunday Blobe
Founded 1872
WILLIAM 0. TAYLOR, Chairman of the Board and Publisher
JOHN P. GIUGGIO, Vice Chairman
JOHN S. DRISCOLL Editor
RICHARD C. OCKERBLOOM. President
BENJAMIN B. TAYLOR, Executive Editor
MARTIN F. NOLAN. Editor, Editorial Page
DAVID STANGER. Executive VP & General Manager
HELEN W. DONOVAN. Managing Editor Sunday
ARTHUR KINGSBURY, Vice President
ALFRED S. LARKIN JR., Managing Editor Administration
WILLIAM B. HUFF, Treasurer
THOMAS F. MULVOY JR., Managing Editor / Daily
FRANK E. GRUNDSTROM JR., VP Human Resources
KIRK SCHARFENBERG, Deputy Managing Editor
STEPHEN E. TAYLOR. Business Manager
H.D.S. GREENWAY. Associate Editor
GREGORY L. THORNTON. VP Employee Relations
LORETTA McLAUGHLIN, Deputy Editor, Editorial Page
Publishers
CHARLES H. TAYLOR, 1873-1922
WILLIAM 0. TAYLOR. 1922-1955
WM. DAVIS TAYLOR, 1955-1977
President
Editor
Editor
JOHN I. TAYLOR. 1963-1975
L.L. WINSHIP, 1955-1965
THOMAS WINSHIP, 1965-1984
Budgetary shenanigans
The disorder of government in Massachusetts
Appalled by the senseless guidelines that Du-
is nearly complete. An incredible breakdown is oc-
kakis and Lashman dished up, these executives re-
curring among the leadership at the State House.
fuse to end rent subsidies and evict working-poor
Announcements by Governor Dukakis of fund-
tenants onto the street. They refuse to turn out the
ing cuts are now issued willy-nilly with little re-
worn-out veterans who get room and board for a
gard for their effect on recipients of service. Worse
pittance at the soldiers' homes. No one can coun-
yet, the announcements are not even valid - made
tenance taking bread-and-soup money away from
one day only to be rescinded the next.
St. Francis House or closing 400 shelter beds.
Major facilities, such as the Chelsea Soldiers
But where is the money to come from? Does
Home, the Holyoke Soldiers Home and St. Francis
the governor really expect the treasurer, attorney
House in Boston, the largest feeding station for
general and secretary of state to fork over more of
the homeless and hungry in the state, are told that
their shrinking piece of the budgetary pie - the
they must start closing down for lack of funds.
latest strategy to emerge from the Dukakis camp?
Within a week, they are told that it was all a mis-
Voters are onto these budgetary shenanigans.
take; money will be found.
They disbelieve that the cuts are sincere and are
Operations are in a shambles. Cabinet-level ex-
convinced the announcements are scare tactics.
ecutives of huge state departments are saying no
Dukakis' on-again, off-again cuts now cruelly
to the man who appointed them. They refuse to
fuel support for the tax-rollback referendum. Ad-
accept the governor's latest round of $310 million
ministrative chaos fans the fire. The governor
in budget cuts - cuts designed by Edward Lash-
should withdraw and let those entrusted with run-
man, the administration and finance chief.
ning the services salvage as much as they can.
Sunday
Gazette-Mail
October 7, 1990 $1.00
The Sunday Newspaper of West Virginia
T
HE 1991 FEDERAL budget plan
President Reagan and Democratic lead-
smashingly defeated by a
ers in Congress, who did not know or
rebellious House of
did not care, staged a tax-slashing, de-
Representatives in the pre-dawn hours
regulating, wild spending spree, with
Friday had many flaws and little to
higher outlays and less revenue - one
recommend it. The package was a series
of the uglier examples of irresponsibili-
of bad compromises to get something -
ty at both ends of Pennsylvania Avenue.
anything - before Congress so it could
A cure for the spend-but-don't-tax
close shop and head home for the fall
addiction appeared in the Gramm-Rud-
campaign.
man Act, which dictated cutbacks in all
An elite bipartisan group haggled for
government operations (and a halt for
weeks before cobbling it together at the
some), unless the small band of negotia-
very last moment. The result affronted
tors for the executive and legislative
nearly everyone.
branches reached agreement before fis-
Liberals ripped into reductions in
cal New Year's Day - Oct. 1 of each
Medicare services and increases in
year.
Medicare premiums, higher gasoline
This year's down-to-the-wire, last-
taxes, unfair new levies on alcohol and
minute agreement gave Congress a
tobacco products (since the affluent can
take-it-or-leave-it choice. Congress de-
afford them far better than the poor
cided not to take it. House members
can), and failure to raise taxes for the
knew that their rejection would create a
very well-to-do.
crisis. That didn't stop them.
Conservatives liked Bush's cut in cap-
"The (budget-making) process
ital gains taxes (scuttled in the final
amounts to government by cabal," The
draft), and disliked higher Social Securi-
New York Times commented. House
ty payments by the upper middle class,
members rejected the cabal's recom-
and the failure to meet spending-cut
mendation.
goals in full. They groused that the deal
Budget reform, so promising in the
would stifle, not stimulate, economic
Ford-Carter years, vanished in the
growth.
1980s. It is absolutely essential to
Further negotiations, now mandated,
re-reform the process and get back to
may not produce anything fairer or
the sensible, unpleasant process of bal-
better.
ancing needs versus income.
President Bush is on the spot. So is Con-
If not, a dreary repeat of this year's
gress. Bush vetoed a stopgap step to defer
dimly understood compromise next
imposition of Gramm-Rudman spending
cuts but he boldly told members of both
year, and the next, and the next, is a
virtual certainty.
parties, worried about voter reaction back
home, to "blame the president."
President Bush, House Speaker Tom
It shouldn't be that way.
Foley, and Senate Majority Leader
George Mitchell have been sent back to
Congress adopted a rational, sensible,
the drawing board. If and when they
easy-to-understand budget process in
find a plan Congress will accept, they
1974. It took budget-making away from
should immediately begin seeking con-
Capitol Hill powerhouses who chaired
sensus on re-reform, a better method to
key committees, who got signals from
manage the country's bank account.
the White House. Instead, budget com-
The old Saturday matinee movie se-
mittees were created in each house to
ries ended each episode with the hero or
decide the eternal question of providing
heroine facing a seemingly inescapable
necessary programs with adequate
funds - not in the inner recesses of the
disaster. That was fine for film thrills,
Capitol, but in open public forums.
but it's unacceptable as the annual cri-
sis in fiscal policies of the world's
That lasted until the 1980s, when
greatest nation.
2H
10/7
William Dean Singleton,
THE
Chairman of the Board
Donald F. Hunt, Publisher
DENVER
F. Gilman Spencer, Editor
Chuck Green, Editorial Page Editor
POST
Gay Cook, Managing Editor
William H. Hornby, Senior Editor
"There is no hope for the satisfied man' - F.G. Bonfils, Publisher, 1895-1933
Budget nonsense
OMMON sense took a triple-
ament defies easy resolution.
gainer dive off the high board
But not all the blame can be
of reality last week when the U.S.
foisted on the politicians: Ameri-
House nixed the spit-and-glue
can voters themselves are unwill-
budget agreement cooked up by
ing to make the sacrifices needed
President Bush and a handful of
to solve the problem.
congressmen.
Airplane owners howl about
The agreement was absurd,
higher luxury taxes being placed
both in content and in the way it
on the purchases of aircraft, but
was put together. But it was
simultaneously scream if the gov-
equally absurd for members of
ernment tries to scale back ser-
Congress to oppose the budget
vices such as aviation weather re-
pact on grounds that certain spe-
ports or airport expansions.
cial-interest groups didn't want to
Senior citizens whine that they
pay their share of the bills.
shouldn't have to forgo Medicare
Depending on whose calcula-
benefits, ignoring the reality that
tions you use, the federal debt
their selfishness subtracts from
stands at more than $3 trillion.
their grandchildren's future eco-
Since there's not enough cash in
nomic security.
the public till to pay this IOU, Un-
Every year, Congress autho-
cle Sam has to borrow more mon-
rizes programs that it can't pay
ey to pay off the bills he already
for, and it delays any meaningful
has accumulated.
discussion about trimming feder-
That means he's competing
al spending until late fall, when
with priväte enterprise for a lim-
the Gramm-Rudman law threat-
ited supply of new credit. Interest
ens to impose draconian cuts.
rates go up and businesses get
Then, in a self-deluding dance
fewer dollars with which to cre-
of the absurd, congressional lead-
ate new jobs. In this and other
ers and the president rush a jury-
ways, the federal debt is a mas-
rigged compromise through the
sive drain on the U.S. economy.
two houses, leaving all the hard
Simply put, the United States
questions for the next year. The
has to get its bad spending habits
trouble is, they don't tackle the
under control.
hard questions the following year,
The federal government should
either.
have been paying its bills during
The government's way of put-
the past decade, when the longest
ting together budgets must be
peacetime expansion in Ameri-
changed. No amount of superfi-
can history created an economy
cial tinkering can fix the underly-
strong enough to withstand tax in-
ing problem. A realistic budget
creases. But the opportunity was
must be constructed at the start
lost under the no-new-taxes ideol-
of each fiscal year, rather than at
ogy of Presidents Reagan and
the end of the 12-month period
Bush, coupled with an irresponsi-
when legislative panic ensues.
ble Congress that was unaccount-
Uncle Sam must, in a reasoned
able to anyone.
and orderly fashion, raise taxes
Now the nation is sliding into
across the board and cut back on
recession, which is the worst time
popular programs. The alterna-
to raise taxes. The trouble is. the
tive is to weaken America's eco-
debt is an even bigger drag on the
nomic base SO much that the
economy, SO it has to be taken
United States eventually will sink
care of soon. This terrible predic-
into financial despair.
THE PLAIN DEALER, SATURDAY, OCTOBER 6, 1990
The budget breakdown
G
overnment at its worst: That's the sorry spec-
Yet special interests and special pleaders -
tacle America's voters saw yesterday.
including Pentagon contractors. upper-income
The astonishing defeat of the last-minute fed-
investors and scaremongers among the affluent
eral deficit-reduction package - just hours be-
elderly - denounced even the slightest sug-
fore the onset of irrational. across-the-board
gestion that they must make sacrifices in the na-
spending cuts - marked the triumph of short-
tional interest. The president's nationwide tele-
sighted absolutism over the long-term national
vised address backfired: Instead of rallying his
interest. As renegade right-wingers joined la-
supporters, the president evoked a chorus of,
menting liberals to defeat the accord in the
"Cut everybody else - but not me."
House of Representatives, 254-179, the obstruc-
Ironically, President Bush is now suffering the
tionists sent a message that should shake this Re-
delayed consequences of the "Don't worry, be
public to its foundations: Perhaps the United
States lacks the maturity to govern itself.
happy" theme of his 1988 campaign: Having
The nation now faces a constitutional crisis.
failed to tell voters that deficits are undermining
the nation's long-term prosperity, he finds it hard
Congress cannot craft a budget, the president
threatens not to accept an interim compromise
to suddenly mobilize support now. If he deplores
and the public awaits the doomsday alternative:
the far-right House Republicans who denounced
the Gramm-Rudman-Hollings scythe. If this were
his proposal's acceptance of tax increases, he
a parliamentary system, this week's "vote of no
should look in the mirror: They are only parrot-
confidence" would have brought down the admin-
ing the simplistic anti-tax slogans Bush himself
istration and cleared the way for a new coalition.
peddled just two years ago.
Instead. Americans must spend this weekend
wondering if their government will open for busi-
It will not be easy to resurrect a workable anti-
ness next week.
deficit package. The leaders of the Republican
This week's budget breakdown revealed the
White House and the Democratic Congress are
failure. not just of political leadership, but of na-
tinkering with the budget formula - increasing
tional followership. All of Washington's top-rank-
the cut from the Pentagon here. reducing the
ing leaders - the president, the leaders of both
trims of Medicare there, scrambling for broad-
houses of Congress and both parties, even the
based revenue increases everywhere - yet they
chairman of the Federal Reserve Board -
endorsed the five-year anti-deficit package. This
seem to lack a majority for any sort of budget
modest accord would have reduced the federal
compromise.
deficit by a mere $35 billion next year - far less
The gravity of this crisis is not lost on the vot-
than the $50 billion originally promised. After a
ers. Cynicism about this deadlock of democracy
decade of ritual denunciations of "blue smoke
is irresistible, threatening to undermine their
and mirrors" evasions, voters should have been
faith in their governing institutions. Yet voters
ready to accept the inevitable: a bipartisan com-
must exhort Washington to keep trying to reach a
promise that would trim some benefits and raise
compromise. promoting budget thrift over contin-
some taxes.
ued self-indulgence.
THE MIAMI HERALD. SATURDAY. OCTOBER 6. 1990
The Miami Herald
JOHNS KNIGHT
JAMES L. KNIGHT. Chairman Emeritus
DAVID LAWRENCE JR., Publisher and Chairman
ROBERTOS AREZ
JIMHAMPTON
JANET HUSMIR
Editor
Executive Editor
#0ANN ADWRAGG
PETE WEITZEL
hat:-
Managine Editor
Budgetary DTs
I' IS cold-turkey time in Washington.
Painful. abrupt withdrawal is not the
HANG TOUGH, MR. PRESIDENT
best way to end an addiction, but some-
times it is the only way.
ity Whip Newt Gingrich of Georgia -
defied their President and voted 105-71
President Bush failed to persuade a
majority of his own Republican members of
against his compromise with the Demo-
the House to follow his retreat from the
cratic leadership. The Nays included South
"read-my-lips, no-new-taxes" philosophy
Florida Reps. Tom Lewis of West Palm
Beach and Ileana Ros-Lehtinen of Miami.
that he inherited from his predecessor.
Spurning his pleas, House members early
Moderate Democrats such as Rep. Larry
yesterday rejected the compromise budget
Smith of Hollywood and Harry Johnston of
proposal 254-179. He now has no responsi-
West Palm Beach then bolted, too, refusing
ble choice but to stick by his threat to veto
to expose themselves to campaign dema-
any evasive action on Capitol Hill that would
goguery on behalf of a lost cause. Of 257
continue Federal business as usual without
House Democrats, 149 voted No.
a deficit-reducing budget agreement.
The compromise was itself a sham that
put the entire Persian Gulf expedition and
Five years ago, at the beginning of the
the massive S&L bailout "off budget," thus
second Reagan Administration, the Govern-
masking a real deficit far higher than the
ment tried to wean itself from dangerous
Gramm-Rudman target of $64 billion. But
deficit; spending and an unprecedented
even so, it entailed more discipline than the
growth in total national debt abroad. Des-
House could muster. Collectively, the
perate, it adopted the fiscal equivalent of
House could not swallow $134 billion in new
the alcoholic's Antabus. Some recovering
gasoline, cigarette, alcohol, airline, and
drunks take Antabus as a deterrent to
other taxes. Especially painful in Florida,
relapses because its presence in the body
where half of all hospital days are funded by
causes a violent physical reaction to alcohol.
Medicare, the compromise would cut $60
It is an attempt to protect oneself against
billion from medical care for retirees. The
one's own weakness.
House also could not take tax breaks for
Congress called its Antabus the Gramm-
investment in new businesses, a trade-off
Rudman-Hollings Deficit-Reduction Act. It
for forgoing a cut in the capital-gains tax.
prescribed a series of budget goals. such as
The spectacle in Washington yesterday
reducing the annual Federal deficit to $64
and today resembles nothing more than the
billion for Fiscal Year 1991. which began on
sight of a relapsed drunk on Antabus, still
Monday. There is a $10-billion cushion. If a
grasping his bottle even as he retches into a
goal is not met, the law induces a violent
toilet. It is an ugly sight, and a terrifying
budgetary convulsion called "sequestra-
posture for the Government of a super-
tion." It whacks $105 billion from the bud-
power that is on the brink of war in the Per-
get overnight. across'the board. with about
sian Gulf and entering a recession at home.
one-fourth from defense.
The temptation is great for President
Little is spared besides Social Security
Bush to relent. to allow the suffering Con-
checks. Head Start loses funding for
gress a quick snort in the form of a continu-
150.000 children. More than one million
ing budget resolution or an amendment to
college students lose their Pell grants. Fed-
Gramm-Rudman in order to delay the day of
eral housing subsidies vanish. Veterans'
reckoning. He must resist it. The Govern-
care diminishes. Mail service is curtailed.
ment has had its second chance, and third.
Many of the Government employees who
fourth. fifth. ad nauseam.
are off on Monday for Columbus Day will
Five years of collective irresponsibility
not return on Tuesday.
by Presidents and Congress, Republicans
In spite of the human pain and economic
and Democrats, have frittered away the
damage that this slasher scenario will
right to another chance. It's cold-turkey
inflict. House Republicans - led by Minor-
time at last.
THE TAMPA TRIBUNE
H. DOYLE HARVILL
Chairman and Publisher
October 6, 1990
EDWIN A. ROBERTS, JR.
LAWRENCE L. McCONNELL
Editorial Page Editor
Managing Editor
Published by The Tribune Company
JACK BUTCHER
W. SCOTT TRUNDLE
202 South Parker Street
Vice President
Vice President
Tampa, Florida 33606
and Business Manager
FOUNDED IN 1895
JAMES F. URBANSKI
President and General Manager
EDITORIALS
Defeat of deficit-cutting bill
opens way for a smarter plan
Rarely, in the history of the United States, has
capital gains. And even liberal economists agree
a piece of fiscal legislation gone down the tubes
that reducing the capital-gains tax would be a
for such good reason. The "deficit-reduction" bill
welcome economic stimulant, although they hate
so theatrically hammered out by the White
the idea of giving investors, including middle-
House and congressional leaders, and so roundly
class folk who are selling their homes, farms or
defeated by the House of Representatives in the
small businesss, a break.
wee hours of yesterday morning, was a prescrip-
So what now? Gramm-Rudmann? The nation
tion for disaster.
could handle such a sequester for a time, be-
After the House vote, Rep. Dan Rostenkowski,
cause Social Security, Medicaid, food stamps, and
chairman of the Way and Means Committee, de-
the Women, Infants and Children program are
clared: "This is a sad night for the House, for our
excluded from the across-the-board cuts - and
political system and for America."
Congress has the power to rearrange spending to
With respect, Rosty is full of baloney. The
make sure that air traffic controllers and health
$135.3 billion of tax increases, particularly con-
inspectors are not affected.
sidering the economy's delicate condition, would
But there's a better way - the 4-percent solu-
have shoved the nation "back to recession, back
tion, which requires no new taxes and no pro-
to high interest rates, back to double-digit infla-
gram cuts. It would permit spending to rise by 4
tion, back to malaise," according to Rep. Dana
percent annually - about the rate of inflation.
Rohrbacher, a California Republican. Rohrbach-
The result? A balanced budget by 1994. Unfortu-
er is right on all counts.
nately, that plan would probably be demagoged
Many pundits see the collapse of the budget
to death by congressional liberals, even if it were
compromise as a defeat for President Bush, but
combined with a freeze on defense spending at
as Edward L. Hudgins of the Heritage Foundation
levels acceptable to the White House and Capitol
notes, it wasn't the House vote but the measure
Hill.
itself that was a defeat for the President. Mr.
Anyhow. the good news is the awful deficit-
Bush retracted his promise not to raise taxes and
cutting scheme is dead, and the nation now has a
abandoned his long-time effort to cut the levy on
chance to do something wise instead of wacky.
The Tampa Tribune, Saturday, October 6, 1990
If key senators can't figure
deficit how can anyone?
Wild-eyed and wondering about its fate on the eve
prospective pain of emphysema and lung cancer) will
of "Armageddon" (the Gramm-Rudman sequesters
pay $14.80 more next year - not nearly enough to pay
that, predictably, did not happen), Washington read a
the social costs of smoking. Yo, you three-beers-a-night
New York Times jeremiad about the coming chaos.
guys, brace yourselves for paying an extra $29.20 a
Cuts in the weather service would mean the "accuracy
year. Call it Pain Lite.
of weather forecasts might deteriorate." Gosh.
The surtax on automobiles costing more than
But in the nick of time, the budgeteers nicked the
$30,000 is backdoor protectionism. The bulk of those
deficit just enough to justify the real purpose of the
cars are foreign. The surtax is actually a tariff against
exercise, another change of what are smilingly called
Germany (Mercedes, BMW, Porsche) and Britain (Jag-
the "requirements" of the Gramm-Rudman (more
uar).
smiles) "law." The target for fiscal 1991 was $64 billion
But even if the filthy rich do not buy jets or yachts,
in cuts. During the dickering about this deal, the offi-
they do not escape unnicked. For someone earning
cial estimate of the budget deficit was increased by
$200,000, the reduction of the value of itemized deduc-
about that much, to $293.7 billion.
tions will be equivalent to an increase in the top in-
But before believing that number, bear in mind that
come-tax rate - here we tiptoe to the pain threshold -
two Sundays ago two intelligent senators, Democrat
from 28 to 28.8 percent. And you thought bolshevism
Fritz Hollings of South Carolina and Republican Phil
was dead.
Gramm of Texas, were asked on television a rudimen-
Of the five-year increase of $134 billion in tax reve-
tary (you might have thought) question: How big is the
nues, more than half, $74 billion, comes from regres-
deficit? That is, what is the relevant number for the
sive consumer excise taxes. The gas tax alone - the
difference between the inflow and outgo of government
tax consumers have the least chance to minimize -
money?
will raise $45 billion, which is 24 times as much as all
Gramm said $250 billion (this was before the latest
the taxes on yachts and jets and other toys for the filthy
upward revision of projections). Hollings said that coun-
rich.
ting the year's costs of the savings-and-loan bailout and
Conservatives are cast down and rising in revolt
subtracting the funds from the Social Security and oth-
because the capital-gains rate will not be cut. (That cut
is the only grand passion of a President enjoying strato-
GEORGE F. WILL
spheric approval ratings. So much for the Imperial
Presidency.) But conservatives have this consolation:
The conservative aim has been to scrub America clean
of the last trace of liberalism, and this deficit-reduction
er trust funds, the number $427 billion was about right.
deal does it.
So two experienced senators were apart by $177 billion
This package and its implications should immunize
in defining the problem. And $177 billion is more than
Democrats against the dread charge that they even re-
quadruple the $40 billion that the budgeteers propose
member anything about liberalism. But, then, perhaps
(God and Newt Gingrich willing) to nibble from the
Republicans have - not difficult, this - outsmarted
deficit.
themselves. The (definite article: "the") Republican
Originally they set for themselves the modest goal
idea is to call opponents liberals. Republicans no longer
of cutting $50 billion. (Political rhythms run counter to
can do that, without laughing, now that Democrats are
economic cycles: When the economy is expanding, the
preening like this:
political class says we will grow to a balanced budget;
when the economy is squishy, the political class says
We Democrats are proud because we have not
cuts will bring on a contraction. Besides, serious cutting
made life more regressive by cutting capital-gains
is impossible in an election year or the year before
rates. That is the (definite article: "the") Democratic
one.) But while the deficit projection was being in-
idea: opposition to capital-gains cuts.
creased by $60 billion, the deficit-cutting goal was being
Democratic liberalism having been validated by
shrunk to $40 billion. That is, $40 billion not counting
that victory, Democrats are now free to reject Sen.
the cost of the Persian Gulf operation.
Moynihan's proposal to cut the regressive Social Securi-
It is an iron law of our politics: Inflation of language
ty tax which, for 74 percent of taxpayers, is a bigger
accompanies contraction of political perspective. The
burden than the income tax.
most frequently used word concerning the deficit-cut-
Liberalism's service to those 74 percent is this warn-
ting package is "pain."
ing: Stay away from yacht salesmen.
A pack-a-day smoker (someone not deterred by the
FALO NEWS
Saturday, October 6, 1990
House rejects tax plan
with 1,000 points of spite
WASHINGTON - Would this be the
night to cork up the bubbly, forget the
new mink coat and cancel that order for a
Mercedes-Benz 560SL?
Would the Reagan Revolution come to
a close, not with a whimper but a bang?
After 10 years of the Gipper's don't-
worry-be-happy orgy that ran up $300
billion deficits, Congress grimly faced
By SANDY GRADY
canceling America's credit card. Goodbye
champagne, hello castor oil.
pressured, nervous Honorables began jug-
Could it do the nastiest, guttiest, most
gling the tax-raise hand grenade. But omi-
unpopular thing in a politician's lexicon
nously, liberal Democrats led the rebel-
- raise (ugh) taxes?
lion.
No wonder the Honorables took up
"George Bush made sure people mak-
the tax hatchet in the middle of the night.
ing over $200.000 don't get hit." pro-
They hoped Bubba and Mrs. Bubba were
tested respected Rep. Dave Obey. D-Wis.
snoring or watching baseball playoffs on
"My people who drive trucks and are
TV.
on Medicare get hurt while the Trumps
It wasn't pretty to watch, this noisy,
and Helmsleys get a break," said Rep.
exhausting, sloppy, bitter brawl. As one
Bob Wise, D-W.Va.
congressman said of the struggle over
Wild man Jim Traficant. D-Ohio, bel-
George Bush's budget deal (higher costs
lowed: "Today we voted a death penalty
for gas, beer, cigarettes, posh cars and
for anybody who kills a congressman. If
Medicare), "They sound like pigs caught
we pass this bill, that may not be a deter-
in a gate."
rent. I say, shut the government down!"
The day began with a Blare-In.
Anger from Republican conservatives
Incited by demonstrators holding
boiled. "I didn't slosh through the snows
signs, "Honk If You Hate Taxes," a jam
of New Hampshire electing George Bush
of cars, taxis and trucks set up a hooting
to abandon his no-tax pledge." said Tom
din that vibrated the White House win-
DeLay, R-Texas.
dows like hammers of hell.
Desperately. the big artillery was
Then came telephone bedlam. From
wheeled out. Minority Leader Bob Mich-
Hoboken to San Jose, constituents
el, R-Ill., the Republicans' fiercest orator.
bombed congressional offices with a 10-
said, "You can pick this apart with 1,000
to-1 fury against taxes. Irked by the 12-
points of spite. But folks. we're in debt.
cent gas hike and Medicare rise, they
We've got to ante up."
screamed, "It stinks!"
Applause rolled when bull-like Dan
"I'd like to fast-forward all calls to the
Rostenkowski. D-III.. vowed his Ways
White House," sighed Rep. Tim Penny,
and Means panel would knock out tax-
D-Minn.
shelter scams. "We won't be a rubber
But Bush was also working the phones
stamp." roared Rosty.
madly. The read-my-lips president ironi-
House Speaker Tom Foley closed with
cally was lobbying for $134 billion in new
taxes. The president's big guns, Dan
a last plea for the deficit-buster: "If not
now. when? If not us. who?"
Quayle, John Sununu and Dick Darman,
beamed their "stand-by-your-man" argu-
A few minutes after 1 a.m., they began
ments on Republican right-wingers.
voting. At first it looked close. Then
In a poignant touch. Republican Chair-
members gaped at the blinking tote board
man Lee Atwater, fighting a brain tumor.
in somber disbelief.
sent a note to Hill friends: "Please do not
Bush was losing. Republicans - Bush
turn your back on the president. Lec."
only got 71 out of 170 votes - detected
Bush knew it would be a tight gamble.
in droves. Then Democrats. fearing to go!
"We're 11 Republican votes short.' he
whipsawed in a lost. unpopular cause.
was told early in the evening. With their
panicked. By 238-171. Bush's "last. best
voters squawking angrily and 435 Honor-
hope" of beating the deficit flopped.
ables facing elections in five weeks. Bush
It was a low. glum moment. Everyone
told them, in effect: Look. you've got
slunk quietly into the night. The Honor-
wiggle-room to fix this deal later in com-
ables had a chance for bravery. And the
mittees.
blew it.
Finally at 10:40 p.m., fatigue-fogged.
Philadelphia Daily News
THE BUFFALO NEWS
Saturday, October 6, 1990
An unbudgeted disaster
Defeat of compromise leaves outlook glum
HE FEDERAL budget compromise
opponents shoulder a special responsibility
T
worked out by President Bush and con-
for patching together not only an alternative
gressional leaders was far from perfect.
of equal quality, but one that will win
But it didn't deserve the quick and re-
majority approval in House and Senate.
sounding defeat it got in the House of Rep-
Objections to the package have centered
resentatives.
on consumer tax increases and boosts in
Nor does the nation deserve the confu-
Medicare costs. Imperfect as it was, howev-
sion and tension visited upon it by this
er, the compromise did spread the pain. No
failure of a skittish rank-and-file to follow
group got hit with the entire burden.
the advice of its party leaders on the thresh-
A former director of the Congressional
old of an already extended budget deadline.
Budget Office, Rudolph Penner, said the
The big deficit-reduction bill was ham-
proposed tax increases "are very small, only
mered together during months of negotia-
2 or 3 percent in the overall burden." A
tions. It was a compromise, which by defini-
liberal analyst, Isabel Sawhill of the Urban
tion means that no party achieved
Institute, estimated that a simple transfer of
everything it wanted.
only $75 from lowest to highest income
But this agreement would have deflated
groups would equalize these burdens.
the federal budget deficit by an estimated
Higher-income people, she said, would pay
$40 billion for the current new fiscal year
more than critics contended because they
and by $500 billion over the next five years.
buy far more of the luxuries on which excise
Painful and tough? Yes, of course, largely
taxes were introduced.
because Washington has been playing cute
With defeat of the package, the alterna-
fiscal games for years and now the time of
tives look unrelievedly grim.
reckoning has arrived. But this was real
To do nothing, which many might prefer,
deficit reduction.
would, Bush says, cause a deficit of $300
And Alan Greenspan, chairman of the
billion in the current budget year. Gim-
Federal Reserve Board, which manages
micks would be fun and politically safe but
credit policies, had indicated that adoption
would solve nothing.
of this "credible" package would bring lower
The automatic cuts in across-the-board
interest rates for millions of Americans.
spending under the Gramm-Rudman law
Measured against what must, in the long
could hack up to $100 billion from spending
run, be done to significantly bring down the
alone in a single year, a brutal step that is
deficits, this program was timid. despite all
still preferable to a failure of congressional
the congressional screaming. But it was,
action. Brutal or not, this is the result of
very significantly, a start.
long-established procedures legislated by
Too few in Congress dared take any
Congress.
chances with an unpopular vote - even for
An annual deficit of a nearly third of a
the good of the country - only a month or
trillion dollars, and its chaotic conse-
so before the November elections. Now the
quences, would be totally unacceptable.
The Atlanta Zournal
October 5, 1990
James J. Kilpatrick
Compromise budget plan
is nothing but spinach
WASHINGTON - One of the
Members should not be in-
all-time great cartoons in The
timidated by talk of imaginary
New Yorker appeared in 1928. It
horrors. Pull the trigger! Let us
depicted a mother trying to pull a
paraphrase the ancient Romans'
con job at the dinner table.
fearless defense of justice: Fiat
"It's broccoli, dear," says the
sequestra; ruat caelum. Let se-
mother to her rebellious child.
questration be done, though the
"I say it's spinach," says the
heavens fall. For the heavens
kid, "and I say the hell with it."
would not fall. The president re-
The budget agreement that
tains authority to exempt such
was reached on Sunday, after
essential services as meat in-
four months of tedious negotia-
spection and air traffic control. A
tions, should be greeted in the
federal government suddenly
same way. Yes, the agreement
stripped of non-essential ser-
contains a few useful provisions.
vices could function indefinitely.
Taken by its four corners, the
It would be a better government.
scheme is a stinker.
The Andrews agreement errs
Looking at this document, one
in every way. A sensible package
searches for the most appropri-
would have included significant
ate adjective. The word that
reduction in the tax on capital
comes instantly to mind is "dis-
gains. Bush has been right in ad-
graceful." President Bush began
vocating this long-range stimu-
the process on Jan. 29. He sent
lus to entrepreneurial invest-
up a budget purporting to reduce
ment. He let himself be swindled
the deficit to $63.1 billion in fis-
out of it by Democrats who de-
cal 1991. That deficit now is esti-
magogued the idea to death.
mated at $293.7 billion.
Under the agreement, gas
Budget Director Richard
taxes would go up - but the add-
Darman described the presi-
ed revenue would not go for
dent's January budget as "seri-
needed work on our highways.
ous." He said it contained no
Similarly, the pact would drain
gimmicks. In fact, the budget
off new funds that are desperate-
document was a farce.
ly needed for airports. It is fine to
Thus encouraged to behave
boost taxes on wine, beer, ciga-
irresponsibly, Congress rose
rettes and expensive cars, but
magnificently to the challenge.
this is nickel and dime stuff.
The two chambers proceeded to
The agreement's greatest
miss every deadline contained in
failure lies in its failure to curb
the budget act. On Monday, when
spending. Here the principles of
the fiscal year began, the Senate
representative government have
had passed only four of the 13
been superbly upheld. The peo-
regular appropriation acts. Not a
ple are as irresponsible as their
single one of these key bills had
members of Congress. The peo-
gone to the White House.
ple want a trillion dollars worth
Instead of an orderly legisla-
of goodies a year. But don't make
tive process, characterized by
us pay! Congress will oblige.
public debate and thorough con-
An example: Among this
sideration, congressional leaders
year's spending bills is a bill for
presented the country with a
water and sewer projects. The
contemporary version of the
town of Turbeville, S.C., stands
smoke-filled room. Ambassadors
to receive a grant of $1.5 million.
from the White House huddled at
Is this a federal responsibility?
Andrews Air Force Base with a
Of course not. But when Sen. Er-
dozen key members of Congress.
nest Hollings was asked about it,
In a repudiation of the whole
he explained that if Turbeville
process of representative gov-
didn't get the money, some other
ernment, they cobbled together a
town would. He had to stand by
compromise. At the last possible
his constituents. Statesmanship
minute they unloaded their
be damned. Build the sewers.
agreement. If the pact is not ac-
The agreement may be the
cepted on the Hill in the next two
best that could be achieved, but
weeks. a horrible thing will hap-
it's a bummer. It isn't broccoli. It
pen: The blunderbuss cuts re-
isn't fresh asparagus or Boston
quired under the Gramm-Rud-
lettuce. It's spinach. The kid had
man Act will be triggered.
the right idea.-(c1990.)
Jim Wooten
Insider George Bush has been rolled by Democrats
Blame me, says George Bush. OK, let's.
rage that Mr. Bush's surrender prompts is
have evaporated.
Genial George has been snookered, rolled,
not directed at the nickle-and-dime taxes.
Mr. Bush had a chance. He swore to a
and bamboozled by the Democrats.
It's the unconditional surrender of any
principle that would force Congress to make
Once again, voters are
management tool to control federal spend-
choices to live within its means.
hoodwinked. Jimmy Carter
ing. And not only has he surrendered, but
Instead, the consummate Washington in-
The Atlanta Zournal
sold himself to the country
Democrats have stripped him of all principle
sider rolls over. He is left with an emasculat-
as the Washington outsider
and assigned him the humiliating task of fac-
ed presidency without values, meaning or
who would change the sys-
ing the American people to front the deal.
purpose - the kind of president who should
October 5, 1990
tem. That was talk. His pol-
Spending is on the runaway course now
never commit this country to war.
icies were spending as
that it was last year or the year before. This
usual.
deal does nothing to alter that.
The nation had this kind of leadership in
Then came Ronald Rea-
The head of the General Accounting Of-
the Vietnam era - presidents who would put
gan, who fought the system
young men's lives on the line and then
fice, Comptroller General Charles Bowsher,
change the rules and the objectives.
for two years and snoozed
told a Senate panel Wednesday that this bud-
for six, while spending con-
get deal won't produce the $500 billion in
I don't mind higher taxes, nor do I object
tinued unabated. Federal spending has not
deficit reductions promised over five years.
to soaking the rich, if need be, or eliminating
declined a single year since 1965.
And, he said, more tax increases will be
my mortgage deduction or any other middle
And now comes the genial insider George
class benefit. It's not the taxes that bother
needed in one to three years.
me. It's the deceit.
Bush, who vows to impose discipline on the
We'll get the taxes. But even while negoti-
federal budget. His method: no new taxes.
ators were behind closed doors smoking and
Americans have been saying for the last
Overnight, though, he's flipped.
joking until the Oct. 1 crisis developed, the
three presidents that they wanted to change
The no-new-taxes pledge, combined with
House and Senate continued to pass bills
the system. Instead, the system changes
Gramm-Rudman, was a management tool
mandating new and higher spending.
presidents.
that could have forced Congress to discipline
Five years from now the taxes will re-
The surprise is that in George Bush's
itself in the face of special interests. The out-
main, but the spending "savings" will long
case, he flipped for SO little.
THE CINCINNATI ENQUIRER
FRIDAY, OCTOBER 5, 1990
Genuine deficit compromise
WASHINGTON: The howls of
campaign in the sense that Presi-
outrage from right and left are the
Germond
dent Bush should be precluded
clearest evidence imaginable that
from attacks on the Democratic
the budget agreement between
& Witcover
congressional leadership on the
the White House and congression-
spending question while the Dem-
al leaders is both a genuine com-
ocrats are similarly precluded
promise and an attack on the
from stinging him on the tax issue.
deficit problem that is more than
He has swallowed some taxes;
gimmicks that nibble around the
they have swallowed some real
edges. The fate of the compro-
ductions in Medicare benefits ac-
spending cuts.
mise in Congress now represents
companied by increases in Medi-
But the task for both Bush and
a significant test of the political
care taxes.
the Democratic leaders is still
system.
But the context in which the
It may be argued that there are
formidable. The president has to
decisions will be made also is
serious flaws in the package. A
deliver half the Republicans in
colored by the pervasive suspicion
strong case can be made that the
both houses of Congress as his
in the electorate that the politi-
defense budget could be cut more
part of the agreement, and that
cians are both unresponsive and
deeply than it provides. It remains
may be difficult in the House,
incapable of confronting serious
hard to defend a system of in-
problems in a serious way. That
where the minority whip, Rep.
come-tax rates that tax the suc-
suspicion is the underlying basis of
Newt Gingrich, is not above
cessful at 33% and the truly afflu-
the strong sentiment among the
playing dog in the manger. The
ent at 28%. The increases in
voters for limitations on the num-
Democrats may have a similar
excise taxes are inherently re-
ber of terms state legislators and
problem with both House mem-
bers and senators on the far left of
gressive.
congressmen can serve. So the
The package alone will not
critical question is whether Con-
the party, particularly on the
solve the deficit problem. Nor will
gress can afford not to approve
Medicare plan. And there will be
it prevent the economy from slip-
the package or some reasonable
regional reactions that cross party
ping into recession.
facsimile of it in the next three
lines - for example, protests
But the operative point is that
weeks.
from western delegations that the
the negotiators behaved as serious
The political equities at this
gasoline-tax increases are particu-
people on both sides. Anyone who
point are a mixed bag. For Presi-
larly burdensome to those who
has examined the deficit problem
dent Bush, there is some obvious
must routinely drive much longer
as it has grown in severity over
value in being seen as a leader
distances than are required in the
the last five years has recognized
willing to confront and deal with
Northeast.
that any solution, even a partial
the most complex issue on the
The bottom line, then, is that
one, would involve real pain for
national agenda. On the other
the compromise is only a first step
some taxpayers and beneficiaries
hand, the president has been
in what promises to be an awk-
of social services. This one in-
obliged to renege on his promise
ward negotiation to pass legisla-
volves real pain, not just account-
of "no new taxes" and to abandon
tion to accomplish its purposes.
ing gimmicks and one-time de-
his insistence on reductions in
But it is also an opportunity for
vices.
capital-gains taxes.
the incumbents in Congress to
The climate in which Congress
But the Democrats have been
demonstrate that, contrary to the
now must address the compro-
forced to yield, as well, on a basic
popular opinion at the moment,
mise is politically difficult. An
element of their original plan -
they are capable of doing their
election is a month away, so in-
some change in the income-tax
jobs.
cumbents have a totally under-
rates to make them more progres-
standable fear that their challeng-
sive.
ers - with no responsibility of
Depending on how the issue
their own to vote - will attack
plays out on Capitol Hill, the
Jack Germond and Jules Wit-
them on such things as the 12c
agreement may take the deficit
cover are Washington-based. na-
increase in gasoline taxes and re-
issue effectively out of the 1990
tionally syndicated columnists.
CHATTANOOGA NEWS-FREE PRESS
ROY McDONALD
FRANK McDONALD
LEE ANDERSON
Founder and Publisher
Chairman of the Board
Publisher
1936-1990
and President
and Editor
Friday, October 5, 1990
Even Congress Can't Stand It
For a long time. the American
So the package failed.
people have been showing an increas-
Congress deserves blame for the
ing lack of confidence in Congress. And
whole thing - but not alone. Remem-
now. by its vote to turn down its lead-
ber, we got into this mess because
ers' own so-called "deficit reduction"
members of Congress found they could
plan. the House of Representatives has
get elected by promising us voters
said in effect that it has lost confidence
costly handouts and favors without
in itself.
taxing us to pay for them. We, the peo-
The rejected plan is bad and SO are
ple, sold out. Congress did what was
the alternatives - all because Con-
financially wrong to appeal to us.
gress is irresponsible in buying votes
Now what? There must be cuts in
by spending more than is coming in
spending and we, the people. must pay
and passing the difference on to pres-
for whatever spending continues. And
ent and future generations to deal with
that will still leave our children and
somehow - never saving how.
our grandchildren mortgaged over
Conservatives and liberals. Repub-
their heads for goodies we have
licans and Democrats. joined forces to
received and left them to pay for. Is
doom the "compromise" plan that
that the kind of heritage we want to
Democratic and Republican congres-
leave our loved ones?
sional leaders had put together at the
As bad as the rejected deal
urging of President George Bush. The
appeared to be, it was probably worse.
rejection vote was 254 to 179. despite
The reason is that it was only an out-
the lobbying and begging of the presi-
line of taxes and cuts. Each individual
dent and House leaders to take the
item still would have had to be taken
package as an admitted bad deal but
up by congressional committees for
'the best we can do at this time."
separate decisions. And there was ev-
The whole thing was a fraud per-
ery reason to believe meddling with
petrated to try to cover up gross irre-
the bad package to do special favors
sponsibility now and over many past
would have made it even more un-
years.
sound.
The stated purpose was to "cut the
But what now?
deficit." The package was supposed to
Will there be some quick juggling
reduce red ink over five years by $500
to make up another plan?
billion. But even if approved and car-
Will the president and congression-
ried out, the plan would still have al-
al leaders let the government grind to
lowed a new $1 trillion in deficits to be
a halt so furloughing federal employ-
added to the current $3.2 trillion na-
ees and cutting federal services will
tional debt.
create chaos to force the people to
The plan called for raising taxes
make Congress devise some new
("No new taxes" was forgotten) by $134
makeshift scheme?
billion over five years (gasoline, ciga-
Will the Gramm-Rudman-Hollings
rettes. beer, liquor, wine and fees being
deficit-reduction law force across-the-
the main sources), along with $119 bil-
board cuts in defense and domestic
lion in benefit cuts, among other
programs (Social Security and some
things.
entitlements being exempted) to bring
But when the scheme was re-
the deficit down?
vealed, citizens across the country be-
Or what?
gan to condemn the tax levies and to
We are in a situation of serious cri-
scream against the proposed benefit
sis - brought about by many years of
cuts, particularly those involving
Congress' failure to meet its responsi-
Medicare. House members, all of them
bilities, as it has bought our votes by
up for re-election Nov. 6, were
irresponsible spending.
spooked. They didn't want to go home
Whatever happens won't be good.
and defend a vote for such a package
The question is just how bad a harvest
that imposed pain and yet did not real-
we will have from the seeds of finan-
ly address the overall problem of gov-
cial folly that have been planted and
ernmental overspending.
now have matured.
Cuts? (Not Really)
As the nation watches and wond-
ing would have totaled $222 billion
ers about what comes next in the budg-
more than 1990 spending.
et-deficit crisis. one thing should be
After the supposed $1.3 billion
made clear. The réjected plan was ad-
"cut" in farm handouts, spending
vertised as providing for "cuts" in
would have been $700 million higher.
spending. That is not true.
After the supposed $4.6 billion
Under the plan, spending would
Medicare "cut," spending would have
still rise! The cuts were only in the
been $4.4 billion higher.
growth of spending.
The whole deal is a fraud.
The proposed 1991 budget - with
The best solution is to freeze all
the "cuts" - would have been $55 bil-
spending - and then cut or eliminate
lion more than the 1990 budget.
every function and department not es-
The rejected plan was supposed to
sential for national security, basic gov-
run five years. But the "cuts" were not
ernmental operations, or life, food and
real because the proposed 1995 spend-
shelter for our people.
San Francisco Examiner
Thursday, October 4, 1990
Soak the middle class
Although the deficit deal is a necessary evil, it still
contains some of that old voodoo economics
RESIDENT BUSH and
But people with incomes of between
P
the Democratic leader-
$20,000 and $50,000 will be hardest hit.
ship are right, of course.
If this sounds familiar, it is. Remember
We should all beat the
trickle down? Reaganomics? (Once decried
drums for the deficit re-
by George Bush as "voodoo.") "No parallel
duction plan. It may be
upsurge of riches has been seen since the
an ugly child but it's the
late 19th Century," writes conservative
only child we've got. Its terrible beauty is
commentator Kevin Phillips about the
that everyone shares the pain.
Reagan decade. The beat goes on.
Even Newt Gingrich and the right wing
And the enemy is us. In our headlong
of the Republican Party don't figure to
rush to emulate Tom Wolfe's masters of
undo the deal. We must cut the deficit
-otherwise we're headed for Recession
the universe, we've looked the other way
City and worse. Elements of the plan-tax
while the Republicans played reverse Robin
increases on gas, cigarettes, beer and liquor
Hood, redistributing the wealth from the
-support good public policy by getting
poor and middle classes to the rich. Here's
people out of their cars and discouraging
how: The typical poor family pays 14 per-
them from killing themselves quite so
cent more now than it would have under
quickly.
the more progressive 1977 tax code, accord-
But one facet of the plan is bad news. It
ing to one analysis. The typical middle class
hurts the poor more than the rich. True, it
family will pay 7 percent more. But the
largely spares the poorest citizens, but it
richest one percent pay 36 percent less
soaks the middle class. Families earning
today than under the 1977 rates.
$40,000 a year will kick in six times as high
But we still don't get it: Republican is the
a share of their income as wealthy families.
party of the rich. Not the wannabe rich.
Sure, there are new luxury taxes on yachts,
The rich. Until the middle class opens its
expensive cars and fur coats. And there's a
eyes to its own self-interest, it deserves to
deductions "floor" for wealthy taxpayers.
be soaked.
Rocky Mountain News
Fri., Oct. 4, 1990
Rocky Mountain News
Back to the drawing board
THE ISSUE:
T
he tipoff might have
means. As former budget director James
been when President
Miller pointed out the other day, "the taxes
The new budget
Bush warned that a re-
raised by the agreement would be used to
'solution' seeks
cession would result
finance spending, not reduce the deficit."
supporters In
should Congress vote
The fact is, the budget agreement itself:
Congress.
down his tax-boosting
acknowledges this intent, according to
budget plan. As colum-
Miller. It stipulates a 7.1% rise in revenue
OUR VIEW:
nist Tom Wicker (by no
for 1991 and a 8.6% rise in spending.
Only the insen-
means a friend of small
What Miller is saying - and he isn't
sate would kiss
government) pointed out
alone - is that this entire package is a
this frog
on national television a
sham. To which we respond: History re-
few weeks ago, raising
peats itself!
taxes is not the way to ward off a looming
We're thinking, specifically, of a similar
recession. Instead, it is somewhat similar to
situation a few years back. Ronald Reagan,
using blood as a shark repellant.
on the ropes for several of his missteps,
That's not the only reason to suspect
agreed to a grand compromise in which
that this was a bum deal, despite its biparti-
Congress was to cut $2 of spending for
san embrace. A cursory look at the sup-
every $1 it took in in new taxes. Reagan,
posed "cuts" in domestic spending finds
who really did trust people more than the
that they have a very high smoke content.
evidence would allow, seems to have be-
Some $4 billion of the $12.1 billion in
lieved Congress would keep its word. He
"cuts" are actually new user fees, hiding
was, to be sure, eternally naive.
behind the name of "negative outlays."
When the final tally was taken, Congress
Only in Washington and Orwell would a fee,
had indeed raised the taxes, but spending
or tax, be called a cut. Another billion in
also rose by $1.50 for every $1 taxed. This
"cuts" would replace a lump-sum payment
is one of those diversions that somehow
to civil-service employees with an annuity.
never earned itself a congressional inquiry.
This is so phony as to be beyond the scope
President Bush and the congressional
of euphemism:
leadership say this package is the best they
Meanwhile, spending "caps" were
could come up with, and we must believe
stitched with plenty of holes in them. Revi-
that they're telling the truth, at least for
sions are possible throughout the life of the
argument's sake. But the fact that this is
agreement if the president and
the best they could come up with is no
congressional leaders seek them; those
reason to buy it. Our advice to Congress:
caps can always be waived by a three-fifths
Don't kiss this frog. Put it in the blender
vote in both houses. You know what that
and try again.
THE PROVIDENCE
JOURNAL-BULLETIN
FRIDAY
OCTOBER 5. 1990
In whose interest?
Whatever the national interest may be, it
good one, but would play in Peoria, too. Yet
is not especially popular in Washington these
packages such as this are not SQ quickly di-
days. The first serious, bipartisan effort in a
gested, and neither the President nor the con-
decade to cut the growing federal deficit, re-
gressional leadership have had a real chance
duce government spending, and raise new
to try their hand at salesmanship. Before the
revenues is now imperiled by the worst sort
debate has gotten underway, lobbyists, fear-
of special interest politics we've witnessed
mongers and special interest groups have de-
since the 'reform' of the tax code in the mid-
scended on the Capitol in righteous indigna-
dle 1980s. New Englanders are angry at Tex-
tion. And some members of Congress - in-
ans; pensioners are peeved; the left wing
cluding our own Claiborne Pell, Ronald
wants to soak the rich; the right wing seeks
Machtley and Claudine Schneider - have
to starve the Treasury. And the pressures on
chosen to put their own political fortunes
Congress are growing, not diminishing.
ahead of principle on this issue.
As we have said before, while the bipar-
Too bad. And too bad that President Bush
tisan budget deal is by no means the best -
must gaze upon the efforts of such congress-
that is inevitable in the spirit of compromise
ional party 'leaders' as House Minority Whip
- it's a pretty good deal for American tax-
Newt Gingrich. It must be disconcerting to a
payers. No segment of the population is sud-
Republican President to know that the House
denly vulnerable, and no quarter is exempt
member charged with marshalling GOP
from paying its fair share. Yes, the East will
troops is campaigning publicly to undermine
feel the pinch on heating oil, but the West
his chief. If Mr. Gingrich considers his per-
will pay more for gasoline, too.
sonal ideology to be more important than the
It could be argued that an income tax in-
fortunes of his President, that is fine; but he
crease might be marginally more progressive
ought to resign his post in the House leader-
than this package - and we have supported
ship. With friends like Newt Gingrich
the principle of such an increase in the past
Federal Reserve Chairman Alan Green-
- but an income tax increase is politically
span has declared that budget negotiators
impossible in Washington at this time. In-
seem to have "crafted what appears to be a
stead, taxes are raised where they should be
credible, enforceable reduction in the budget
increased - on alcohol and tobacco con-
deficit stretching over a number of years.
sumption, and the purchase of luxury items
That suggests two things. First, that an
- and important reductions in agricultural
agreement would probably drive down inter-
subsidies and defense appropriations will
est rates: Good news on the brink of reces-
make a real,difference.
sion; and second, that failure to reach agree-
Unfortunately, Congress waited a very
ment could send financial markets in a tail-
long time to come to an agreement. Members
spin: Bad news on the brink of recession.
of the House, where the deal is in trouble,
In our view, the benefits of agreement
face the electorate in four weeks. We happen
are real and substantial - and infinitely less
to think that this agreement is not only a
dangerous than the risks of a deadlock.
San Francisco Chronicle
THE VOICE OF THE WEST
THURSDAY, OCTOBER 4, 1990
EDITORIALS
Deficit Package
Merits Approval
P
RESIDENT BUSH laid it on the line in his
speech from the Oval Office: "This deficit
agreement is tough, and so are the times.
"This is the first time in my presidency that
I've made an appeal like this to you the Ameri-
can people. With your help, we can put this
budget crisis behind us and face the challenges
that lie ahead."
It is tough. Both sides - Democratic and
Republican - have
had to make conces-
We have got
sions to face up to the
to put this
exigencies of the mo-
ment. The president
budget
has had to abandon
his long-cherished
crisis
and basically con-
structive proposal for
behind us
reducing the tax on
capital gains. And,
while there will be no
increase in income taxes, the T-word has not
been completely avoided.
The Democrats would have preferred a pro-
gram that bit more deeply into the wealthy and
carried less potential burden for the elderly.
But sacrifice - from politician and citizen
alike - is the only way we are going to be able
to get at the deficit cancer that eats at our
financial vitals. The urgency of the situation is
quite clear. The latest Gallup Poll, for instance,
shows a sharp increase in worries among Amer-
icans about the state of the economy.
THIS IS AN agreement intended to give
small businesses a shot in the arm, and, as the
president said, such enterprises are "America's
best job creators." It is also meant to lower
interest rates - meaning savings for consum-
ers and more investment to produce more jobs.
Congress should move with alacrity to ap-
prove what is a sound and absolutely vital defi-
cit reduction package.
THE CINCINNAT ENQUIRER Wednesday, October 3. 1990
THE CINCINNATI ENQUIRER
OCTRER
WILLIAM J. KEATING Chairman and Publisher
GEORGE R. BLAKE Editor, Vice President
THOMAS E. DUNNING Managing Editor
THOMAS S. GEPHARDT Associate Editor
DARRYL W. EVERETT Vice President, Advertising
A Gannett Newspaper
WILLIAM R. JOHNSTON Vice President, Circulation
MARK S. MIKOLAJCZYK Vice President, Production
JAMES A. SCHWARTZ Vice President, Finance
GERALD T. SILVERS Vice President, Marketing Services
The deficit
Congress must satisfy itself
about the budget compromise
Like most compromises, the budget
that a realistic attack on the deficit
plan hammered out by congressional
required additional revenue. Mr. Bush
and White House negotiators is thor-
has determined to focus on policies
oughly acceptable to no one. That's
that will generate economic growth.
why neither Democrats nor Republi-
He believes the formula agreed upon
cans on Capitol Hill are likely to
last weekend will do so.
swallow the recommendations of the
Some of his party stalwarts are not
budget summit without a whimper.
so certain. They think that the nation
The fact is that the budget confer-
needs anything but higher taxes when
ees professed to be concerned only
the economy is tottering on the brink
about the budget deficit and the ur-
of a recession, and orthodox economic
gency of removing a cloud over the
principles suggest they are right.
nation's economic future by trimming
But orthodox economic principles
it. But in an unspoken sense they
perhaps do not apply when the coun-
were really concerned about the phi-
try labors under the weight of crush-
losophy that is to guide the federal
ing budget deficits.
government for the next few years,
Within hours of the the agree-
and about who - the legislative
ment's unveiling, it was clear that
branch or the executive - is going to
Congress has some dissenters who
be in charge.
will insist on being heard. They will
On the surface. congressional Dem-
take a long, hard look at what the
ocrats have agreed to cuts in some
compromisers are proposing. Most
popular domestic programs. which
Americans will share their determina-
they were reluctant to do. And the
tion to find out. if they can, whether
president has agreed to higher taxes
the package presented to the nation
for cigarettes, gasoline. alcohol and
last weekend will do all that its spon-
some luxury items: the president has
sors say it will do. Nothing is more
also abandoned his longstanding ap-
important than trimming the deficit:
peal for a reduction in the rate for
nothing could be more harmful than
taxing capital gains.
using the prospect of new revenue to
Democrats have insisted all along
avoid the hard choices.
Dayton Daily News Tues. Oct. 2. 1990
Dayton Daily News
Gramm-Rudman doesn't cut debt
But things might be even worse without its threats
A few years ago Congress
was
passed the Gramm-Rudman def-
NEVER MIND
icit-reduction law. The law held
WHERE TO CUT.
FIRST LETS SEE
that the deficit would be reduced
IF THERE'S A
SNOOZE ALARM...
every year by a specified amount,
until it was finally eliminated. If
an annual target was not met,
automatic cuts would go into
place. Those cuts would be dra-
conian if the target was missed
by a lot. It seemed to make
GRAMM
sense, on paper.
CONGRESS
BOMB
But now, somehow, the deficit
SQUAD
is in danger of becoming bigger
BUDGET
than ever. The leaders of the
two-parties in Washington have
been forced to develop another deficit-
Why couldn't that have been done a
reduction five-year plan.
month or two ago?
So much for the case for Gramm-Rud-
The answer apparently is that only if
man. Well. not quite. Somehow the an-
the alternative was immediate chaos in
nual deadlines in Gramm-Rudman have
the delivery of governmental services
at least spurred action in Washington;
were the negotiators willing to be seen as
not necessarily responsible action. but
giving up on Gramm-Rudman. More im-
at least action.
portantly. only under the threat of chaos
This year. most particularly. the
were they willing to be seen by their con-
Gramm-Rudman deadline served as a
stituents as caving in on some of their
deadline for negotiators. This seems a
demands.
little odd. because one of the things the
In the absence of Gramm-Rudman or
negotiators decided was to give up try-
something like it. what would have cre-
ing to comply with Gramm-Rudman.
ated that necessary willingness to cave?