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GOP wake-up call.

Five months into the Clinton presidency and it's time to invite some prominent Washingtonians to the woodshed. Their halfhearted opposition to a president who has revealed himself as another, albeit smoother, tax-and-spend liberal is shameful.

Sure, there have been some exceptions, such as the alternative budget proposal put forward by Senate Minority Leader Robert Dole, R-Kan., which would have "cut" spending by $460 billion over five years without raising taxes. But the Dole alternative was a mere formality--elicited by Clinton's challenge to "put up or shut up."

When Clinton issued his challenge, my colleagues at The Heritage Foundation were standing in the wings with a specific plan for cutting $609 billion worth of waste and inefficiency from the federal budget. Did the minority leadership take this ball and run with it? It certainly could have.

Where is the spirited counterattack--the smart, comprehensive strategy that combines floor tactics, grass roots organizing and media campaigning--to expose the administration's tax-and-spend policies for what they are?

One would think, with the endless supply of ammunition the administration has provided--especially the huge tax increase (for the middle class)--that those on the other side would be having a field day. Instead, some of them seem to have taken their cues from the U.S. Chamber of Commerce and apparently see no evil in higher taxes and bigger deficits. Others plead that an early, all-out, supply-side attack on Clintonomics would have been poor political strategy. It would be smarter, these folks urge, to allow the administration to get its way so the voters will turn on it when the program ultimately fails.

This is nonsense. By not strenuously opposing policies that will leave the U.S. economy overtaxed, overregulated, and possibly price-controlled, Republicans have put politics above the well-being of the country. Besides, if Clinton's policies fail, and the U.S. economy staggers into another recession, it is the height of political naivete to assume Americans will turn--with hopeful gazes--to those who offered no realistic alternative to Clintonomics.

This weak response reveals a serious lack of faith in the free-market miracle that pulled America out of the stagflation brought on by Jimmy Carter's policies. To watch the proceedings on Capitol Hill, you might think Ronald Reagan never had been president.

Is America's memory so short that we have forgotten the double-digit inflation, stratospheric interest rates, and dismal economic malaise Reagan inherited in 1980? Have we forgotten how Carter disproved the Keynesian stimulus and deficit-spending nonsense President Clinton now palms off on the American people as "new"? And have we forgotten Reagan's in-your-face tax cut (against all advice from the most "eminent" halls of academe where the current administration gets its programs) and its result: the longest peacetime economic expansion in U.S. history and the creation of 21.5 million new jobs?

Perhaps those who like to think of themselves as defenders of the free market have been intimidated into silence by the media, which daily spin a mythology based on erroneous statistics. Such data is churned out by liberals frantic to debunk the legends of the Reagan era. One of the favorite media myths is that the 1981 tax cut caused today's $300 billion-plus annual deficits. Logically, then, if we want to reverse the flow of red ink, we must reverse the tax cut, they argue.

Of course, while their reasoning may be logical, the premise upon which it is based--that tax cuts necessarily result in decreased revenues--is false. According to my colleague, economist Daniel Mitchell, from 1983, when Reagan's 1981 tax cut fully took effect, until the 1990 budget deal, when Congress cajoled George Bush into agreeing to a record-breaking tax increase, tax revenues increased by an average of more than $61 billion per year.

According to the media mythology, when taxes were raised in 1990, revenue should have increased even more. Instead, revenue growth slowed--just as it will under Clinton's tax hike--to an annual average of less than $39 billion. And the deficit rose--just as it will under Clinton--both in dollars and as a percentage of gross domestic product. Prior to the tax hike, the deficit had been falling.

Why do tax increases raise the deficit? Because whenever Congress increases taxes, it increases spending even more. Due to the depressing effects of higher taxes, the hoped-for revenues don't materialize, but spending goes up anyway. Thus, from 1980 to 1993, federal spending rose by nearly 150 percent. How much did tax revenues increase over the same period? "Only" 122 percent. Deficits, anyone?

If opponents of tax-and-spend economics don't counter the rampant revisionism being used to sell the Clinton plan, America soon will be convinced that the '80s really was a decade of greed, when "the rich got richer and the poor got poorer." This is the lie that will enable big-government liberals to ensconce themselves in power for another generation and to deprive the American people of prosperity.

But here's what really happened in the 1980s: From the time Ronald Reagan took office in 1981 until his tax cuts went into effect in 1983, the Carter recession caused the deficit to spiral to record levels. When the tax cuts were fully implemented, two things immediately began to happen: The American economy took off, and the deficit started decreasing.

The media made a huge issue out of the fact that when Reagan left office the deficit was higher than it was when he came in. What they failed to notice was that as a percentage of GDP, the deficit had fallen from 6.3 percent in 1980 to 3.0 percent in 1989. This was the result not only of economic growth, but of the Gramm-Rudman-Hollings budget-control act, which at least slowed the pace of Congress' spending spree, the real cause of the deficit.

One of the nasty little facts that has been ignored by the media is that if Congress and the Bush White House had continued to comply with Gramm-Rudman, the deficit problem largely would be solved today. Instead, they trashed the act.

From 1980 to 1989, average income for all U.S. households rose 15.2 percent (from $33,409 to $38,493), compared with a 0.8 percent decline from 1970 to 1980. According to Wall Street Journal editor Robert Bartley in his book, "The Seven Fat Years--And How to Do It Again," the standard of living for all Americans grew in the 1980s by nearly a fifth.

How were the benefits divided between rich and poor? In The National Review, economist Alan Reynolds cites a U.S. Treasury Department study showing that 86 percent of those in the lowest fifth of the income scale and 60 percent in the second-lowest fifth in 1979 had moved into a higher income bracket by 1988.

In fact, more families moved up than down in every income bracket except one--the top one. There, 53 percent fell into a lower category. Reynolds also cites a study by the Urban Institute showing that the real incomes of those who started in the bottom fifth in 1977 had risen 77 percent by 1986--more than 15 times the increase in the top fifth.

The bottom line on the 1980s is that under the tax-cutting, less-government strategy of Ronald Reagan, the rich did get a little richer. And the poor got a lot richer. Unfortunately, America now seems poised to turn its back on this legacy. There are plenty of leaders in Congress and the business community who could mount a credible campaign to scare some economic sense into Washington before it's too late. The muddled economic thinking at the top is typified by a Clinton campaign promise, one he fully intends to keep: "First," he said, "we're going to raise taxes on the people who did well in the 1980s." As we've seen, that includes just about everybody.

Edwin J. Feulner, Ph.D., is president of The Heritage Foundation, a Washington, DC-based public policy research institution. He also serves on the boards of several other foundations and research institutes. Dr. Feulner is the author of "Conservatives Stalk the House."
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Title Annotation:Above the Beltway
Author:Feulner, Edwin J.
Publication:Chief Executive (U.S.)
Date:Jun 1, 1993
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