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- NATION, Page 38Not a Class Act
-
-
- After one last round of partisan wrangling, Congress clears the
- way for a budget deal by playing the politics of resentment
-
- BY NANCY GIBBS -- Reported by Dan Goodgame and Nancy Traver/
- Washington and Priscilla Painton/New York
-
-
- Before dismissing the 101st Congress as entirely useless,
- voters might consider some of its more notable achievements.
- During their three-week wrangle over the federal budget, the
- lawmakers exposed a decade's worth of economic gospel as
- falsehoods while inventing a new set of myths to replace them.
- They transformed the budget-making process, usually about as
- gripping as watching weeds grow, into a demolition derby. They
- invited the middle class to divorce its interests from those
- of the rich and its sympathies from those of the poor. And they
- reinforced the suspicion that in a crisis, the first instinct
- of elected representatives is to plant a time bomb and run for
- cover.
-
- But last week Congress at least cleared the way to passing
- a budget, thereby averting what would have been the second
- government shutdown since Columbus Day. After a bitter partisan
- fight, Congress struggled to reconcile House and Senate
- versions of a bill designed to cut $500 billion from the
- deficit over five years. The final plan was bound to extract
- more revenues from the most affluent taxpayers than the
- bipartisan proposal that was dumped by the House two weeks ago.
- But it was also certain to inflict pain on middle-income
- earners, who were already outraged at the lawmakers'
- willingness to tax them more heavily than the wealthiest
- Americans.
-
- Once the budget agreement is safely tucked away, probably
- this week, the lawmakers will be free to go home and schmooze
- with their constituents -- but given the mood in the land, they
- may dread the prospect. "Look, you tell me, when is the last
- time you saw a Senator walk into a bar to sit down and talk
- with the working people?" asks Frank Gasparik, a California
- salesman and part-time songwriter. "Never. They're probably
- afraid somebody'd hit them with a bar stool." A reasonable fear,
- if pollsters are right about the level of voter disgust with
- the budget debacle. "Will I pay new, higher taxes, even if I
- think they're unfair?" asks Will Brennan, a business
- representative for the electrician's union in Chicago. "What
- choice do I have? I can't go throw tea in the harbor."
-
- The rising middle-class resentment to new taxes, especially
- those perceived as unfair, provided the backdrop for last
- week's budget denouement. In a belated rush to present
- themselves as the champions of working people, House Democrats
- seized every chance to portray their Republican colleagues as
- lackeys of the well-to-do. These Democrats rammed through a
- plan that did not include any increase in the tax on gasoline
- but did retain regressive levies on alcoholic beverages and
- cigarettes. They proposed a smaller increase in Medicare
- premiums than the defeated pact would have. Most important, the
- House Democrats would have taken a whack at the rich by hiking
- the marginal tax rate for couples earning more than $78,400 to
- 33% from 28%, with an extra 10% surtax on earnings above $1
- million. "What we're doing is getting our house in order,"
- boasted Dan Rostenkowski, chairman of the Ways and Means
- Committee. "Tonight, equity and fairness make a comeback."
-
- It was a take-no-prisoners document designed to embarrass
- Republicans, and some Senate Democrats would have loved to
- embrace it. But George Bush, burdened by his many flip-flops,
- promised to veto any such bill. White House officials privately
- conceded that the veto threat was mostly bluff: Bush could not
- afford to shut down the government again. Still the gambit
- worked on Senate Democratic Leader George Mitchell, who joined
- his G.O.P. counterpart, Robert Dole, to fight off amendments
- from left and right.
-
- The Senate debate was marked by sharp exchanges from both
- sides of the aisle. Democrats cheered when Maryland's Barbara
- Mikulski declared that "the middle class have no more to give.
- The poor have nothing to give. So, let's go and get it from
- those who've got it." To Republican applause, G.O.P. Senator
- Bill Armstrong of Colorado proclaimed that "raising taxes in
- the face of a recession is a hare-brained idea."
-
- In the end, 31 Democrats joined 23 Republicans in approving
- a plan, favored by the Administration, that would pare
- projected Medicare spending by $51.6 billion over five years,
- raise taxes on gasoline, liquor and cigarettes and leave income
- tax rates unchanged. A House-Senate conference committee then
- set to work ironing out the glaring differences between the two
- proposals by Oct. 24, when a short-term resolution to keep the
- government running expires. The Democrats predict that the
- final plan will probably contain a gas tax increase, combined
- with an increase in the top marginal tax rate to 31%. Fearing
- the cost of continued deadlock, Bush is likely to swallow his
- lips and sign the bill.
-
- All the self-congratulatory bombast on Capitol Hill could
- not mask the fact that no matter what compromise is eventually
- reached, the middle class will end up footing most of the bill.
- Democrats tried to camouflage that unpleasant reality by
- larding their proposals with provisions that appeared to soak
- the rich but would only add $60.4 billion to the government's
- coffers over five years. Republicans attempted to disguise it
- by denouncing even small increases in income taxes for the
- wealthiest citizens as an attempt to foist higher rates on
- everyone. Such maneuvers missed the point: both parties are
- responsible for the current mess.
-
- Democrats are fond of blaming Reaganomics for the fiscal
- debacle without acknowledging that they voted during the '80s
- to raise regressive Social Security payroll taxes 30% while
- preserving such loopholes as the tax exemption on inherited
- capital gains. That exemption alone costs the Treasury $5
- billion a year and benefits mostly wealthy heirs. The fiscal
- prestidigitation has not abated: the Rostenkowski plan would
- have socked it to middle-income families by delaying inflation
- adjustments for a year. That step was needed because the House
- scrapped a 9 1/2 cents-a-gallon hike on gasoline that would not
- only raise $45 billion but also encourage conservation and help
- the environment.
-
- Republicans were no more eager to make unpopular decisions.
- Their preferred alternative to higher taxes was lower spending,
- but during the summer negotiations they managed to agree only
- on a paltry $6 billion in cuts when $40 billion was needed.
- That failure did not stop Idaho Senator Steve Symms from
- decrying what he labeled a Democratic effort "to make this
- national crisis into some kind of a modern-day version of the
- French Revolution where the poor people are facing off against
- the royal aristocracy."
-
- Most taxpayers were not beguiled by false promises of
- fairness or mobilized by calls to class warfare. Many have long
- since lost patience with politicians from both parties who
- called for sacrifice and then voted themselves a pay raise, who
- lauded fiscal responsibility and then refused to cancel
- gold-plated weapons systems such as the B-2. Their cynicism was
- deepened by the Ways and Means Committee's refusal to divulge
- that it was grafting dozens of tax breaks for industries --
- ranging from fisheries to nuclear power-plant owners -- onto its
- budget proposal during secret closed-door sessions. "People
- are tired of bailing out politicians," says Rutgers University
- pollster Janice Ballou. "The public sees one disaster after the
- next, and it's always, `O.K., taxpayer, that's another $8
- billion that we messed up with. But it's O.K., you can just pay
- us back.' After a while, the frustration just builds and builds
- and builds."
-
- The spectacle of the past three weeks was all the more
- disillusioning given the dreams of the roaring '80s. Many
- middle-class voters genuinely believed the Reagan theme that
- tax breaks rained onto the wealthy would eventually trickle
- down to the economy as a whole, that lower taxes would generate
- so much investment and rapid growth that spending on defense
- and entitlements could mushroom, and that gaping deficits would
- not matter. But a looming recession, quickening inflation and
- mounting evidence that the rich have got richer while much of
- the middle class has enjoyed no improvement in living standards
- have changed the equation. "Middle-income Americans feel
- aggrieved, and rightly so, because they aren't getting as much
- from government as they used to, and they're paying more for
- it," says Bruce Fisher, research director for Citizens for Tax
- Justice. "They're been encouraged to direct their resentment
- at the poor, especially poor blacks, whom they see as the major
- recipients of government services."
-
- There is, in fact, plenty of anger directed down the social
- ladder. John Budzash earns $30,000 a year as a mail carrier in
- New Jersey and is leading a campaign to fight higher state
- taxes. Like many working people, he resents squeezing out more
- money for gasoline in order to fund social programs that he
- finds wasteful. "I work with one guy who works four jobs," he
- says. "He gets up in the morning, delivers a paper route, goes
- back home, picks up his next newspaper route, then he goes to
- work at the post office, goes home and sleeps for a couple of
- hours and then tends bar at night. When you see that other
- people don't have the gumption to work one job, and you're
- telling that person who's breaking his butt that he's got to
- pick up the tab for someone who doesn't work -- I have strong
- objections to that."
-
- If the great budget battle has proved anything, it is that
- after a decade of political and fiscal sleight of hand, neither
- party can convincingly claim to be the party of the average
- American. Democrats may gain a short-term advantage through a
- "soak the rich" crusade, but in the long run it is likely to
- backfire if the G.O.P. can convince the electorate that the
- other party is reverting to its tax-and-spend traditions. The
- politics of resentment leaves a bitter aftertaste that
- demagogues can exploit. As the rhetoric escalates between now
- and Election Day, neither side will earn much trust or support
- from voters whose anger is aimed directly at Washington's
- feckless ways.
-
-
- ____________________________________________________________
- SOAKING THE RICH v. MILKING THE MIDDLE
-
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- Soaking The Rich
-
- Under a plan crafted by Ways and Means Committee Chairman
- Dan Rostenkowwski, the House proposed raising $58 billion over
- the next five years by lifting the marginal income tax rate
- for the wealthiest taxpayers from 28% to 33% and imposing a 10%
- surcharge on taxable income above the level of $1 million a
- year. But the proposal would also have hit the middle class by
- deferring inflation adjustments to tax brackets and personal
- exemptions for one year. For a family of four with an income
- of $34,000, such a delay would add $313 to next year's taxes.
-
-
- Milking The Middle
-
- Though many Democrats in the Senate found raising taxes of
- the rich politically alluring, they lacked the votes to buck
- a threatened presidential veto. Republican leader Bob Dole
- joined Democratic leader George Mitchell in pushing through a
- plan that would leave income tax rates unchanged, while cutting
- deductions of those with taxable incomes of more than $100,000
- by 5%. Unlike the House, the Senate also voted for a
- $0.095-per-gallon increase in gasoline taxes that would raise
- $45 billion.
-
-
- Percent changes in federal income taxes according to the
- two plans:
-
- House Senate
- Democrats Plan Finance Plan
-
- $10,000 or less -1.3% 0.0%
-
- $10,000 to $19,999 -1.6% -2.3%
-
- $20,000 to $29,999 1.0% 2.7%
-
- $30,000 to $39,999 1.0% 1.0%
-
- $40,000 to $49,999 0.8% 0.8%
-
- $50,000 to $74,999 1.4% 1.9%
-
- $75,000 to $99,999 1.5% 2.5%
-
- $100,000 to $199,999 0.7% 3.5%
-
- $200,000 or more 7.4% 3.7%
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