President-elect George W. Bush is being advised by his political foes to abandon tax cuts. This step, they tell him, is the only way to heal the wounds caused by weeks of legal wrangling and partisan rhetoric. Yet abandoning tax cuts would be a big mistake, both politically and economically.
From a political perspective, Mr. Bush should regard this "healing" solution with suspicion. His opponents, for the most part, either have ideological objections to tax cuts or hope to drive a wedge between him and his conservative supporters.
It seems unlikely that Mr. Bush will fall for this siren song. He surely remembers how his father's administration was sabotaged. Back in 1990, President George H. Bush was urged by his opponents to abandon his no-new-taxes pledge as a sign of bipartisanship. In exchange, liberal lawmakers promised to reduce spending.
What really happened? President Bush was lured into a bad deal. The tax burden rose, but spending increased even faster. The deficit climbed, and the economy shrank. When the dust settled, Mr. Bush lost his 1992 re-election battle - a result some people clearly hope will be replayed in 2004.
But the tax-cut issue is about much more than political posturing and election battles. It reflects fundamental judgments about the role of government. It demonstrates whether we intend to keep the United States competitive in a world economy. And it reveals whether we will finally take an important step on the road to fundamental tax reform.
Politicians currently are awash in a sea of surplus tax revenue. They are collecting an extra $200-plus billion in taxes this year, and excess revenues could reach $4 trillion over the next 10 years. Unfortunately, one side effect of these surpluses is that politicians have lost the will to say no to special interest groups. With so much additional money floating around, politicians have doubled the inflation-adjusted growth of federal spending.
There can be little doubt that failure to enact broad-based tax relief will undermine fiscal discipline in Washington. Put bluntly, it is unrealistic and foolish to assume politicians can resist the temptation to use the additional money, as shown by this year's bipartisan rush to increase spending. …