Magazine article The American Prospect

Democrats Adrift

Magazine article The American Prospect

Democrats Adrift

Article excerpt

Democrats are in a bind on taxes. And the fact that they're out of power at both ends of Pennsylvania Avenue is only the beginning of their problems.

Since the mid-1990s, Democrats have played a deftly executed but ultimately evasive game on fiscal policy. As surpluses began to appear on the horizon, they parried Republican calls for tax cuts with their own proposals for paying down the debt and "saving Social Security." This was effective--even ingenious--politics precisely because it ducked the root question of whether unspent revenues should be directed toward tax cuts or unmet social priorities. With Congress in Republican hands, Democrats were hard-pressed to do otherwise. But ballooning surpluses have rapidly undermined the efficacy of this approach. If you're not willing to spend projected revenues on substantial new programs or direct surplus revenues explicitly to buttress Social Security (as opposed to just "saving" it by hoarding surpluses), then there really isn't much else you can do but cut taxes. And that's right where Democrats are today.

Without control of Congress or the White House, it simply may not be possible for Democrats to prevent a substantial tax cut from becoming law. But a policy debacle needn't necessarily be a political one. In policy terms, the Clinton administration's 1993 tax-increase bill was a disaster for Republicans, since it substantially raised marginal rates on the highest-income earners and thus partly reversed the Reagan tax cuts of 1981. But politically the Republicans used their defeat to work wonders. By refusing any point of compromise and polarizing the debate along ideological and partisan lines, they were able to transform their defeat into party unity and congressional majorities that they still (albeit barely) hold today.

In other words, the medium- and long-term outlook for Democrats is not necessarily so bleak. Of course, it's much harder to maintain party unity to oppose a tax increase, as the Republicans did in 1993, than to resist a tax cut. That's all the more reason to emphasize popular new spending. Only by biting the bullet or/the fundamental question of investment in unmet social needs and deliberately polarizing the debate can Democrats hope to turn a near-term setback into a long-term victory.

It takes guts under any circumstances to oppose a tax cut with social spending. What's unfortunate for Democrats is that they are facing this moment of truth at a particularly inauspicious moment. Not only have they lost the White House and Alan Greenspan (their unlikely former ally in opposing tax cuts for much of the late 1990s); they've also endured a number of smaller tactical setbacks that have attracted less attention. In recent years, debt pay-down and targeted tax cuts have been the Democrats' tools of choice in fiscal-policy debates. But recent polls have shown that the effectiveness of each has diminished dramatically.

As Senate Democrats learned to their chagrin at a caucus meeting in early February, paying down the debt no longer trumps tax cuts. Moreover, Republicans seem to have won the political argument over targeted tax cuts. Last fall George W. Bush repeatedly charged that Al Gore's plan amounted to an insidious "picking and choosing" of who got tax cuts. And this tack turned out to be devastatingly effective, allowing the universality of Bush's tax cut--however targeted to rich--to trump the selective nature of Gore's.

The importance of losing these effective counterarguments is clear when you probe the anxieties underlying the Democrats' evident paralysis and disarray. Recent polls show support running at more than 60 percent for the president's tax cut--but those same polls also indicate that this support is soft, with numerous underlying contradictions in public attitudes.

Based on conversations with individual senators and their staffs, what is clear is that most Democrats don't so much feel pressure from their constituents to support the Bush plan or fear that they'd be punished at the polls if they opposed it. …

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