Magazine article Insight on the News
Treasury Can Enact Policy
With any luck, the economy will stumble before President Clinton and his confused advisers can sort out their conflicting goals of fiscal stimulus and deficit reduction. That will let Treasury Secretary Lloyd Bentsen step in and save Clinton's bacon by using the Treasury's authority to index the cost basis of capital gains for inflation.
Last year, George Bush refused to save his presidency by taking this step. He was deterred by Treasury and Justice Department officials who claimed it would not be proper, although they admitted he could get away with it.
Bentsen does not share the Bush administration's very narrow view of regulatory authority. Indeed, even while the Bush Treasury was decrying its inability to index capital gains, Bentsen and House Ways and Means Committee Chairman Dan Rostenkowski were persuading Bush to use Treasury's administrative authority to renew a research and development tax credit for multinational corporations.
The tax credit was slated to expire in June, and under the 1990 budget deal its renewal by legislation would have required the static revenue loss (about $1 billion) to be offset by a spending cut or a tax increase on some other activity. Congress did not want the credit to expire, but it did not want to face the problem of cutting spending or raising someone else's taxes.
The solution was for the Democrats to conspire with the Bush administration to evade the budget controls. Congress argued that Treasury had the authority to preserve the tax break through regulation and urged then-Secretary Nicholas Brady to use his authority. Bentsen and Rostenkowski sent Brady a letter in which they wrote: "We expect and in the strongest possible terms urge that the Treasury Department permanently amend its allocation regulations consistent with stated administration policy. …