TIME: Almanac 1993/TIME Almanac 1993.iso/time/102990/10291011.000

Text File | 1992-08-28 | 12.3 KB | 265 lines

                                                                                NATION, Page 38

Not 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


    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%