AMID THE PUBLIC displays of post-election euphoria and unity,
the Republicans who will assume control of Congress in January are
quietly positioning themselves for what they expect to be a bitter
intraparty battle over tax and budget policy.
The economic policy dispute pits moderate Senate Republicans
against more ideologically conservative House GOP leaders and seems
certain to reveal deep divisions within the party that had appeared
to have been closed by this month's electoral triumph.
The outcome could determine the success or failure of the
Republican campaign to turn Congress into a weapon capable of
bludgeoning Washington into accepting radical change.
The new House leaders, led by likely Speaker Newt Gingrich of
Georgia, are interpreting their electoral sweep as a mandate for a
reversal of President Bill Clinton's economic policies and a return
to Republican supply-side theory.
The Gingrich camp, energized by its success at gaining control
of the House for the first time in 40 years, so far has managed to
frame the terms of the economic-policy debate with its "Contract
The sweeping agenda calls for tax cuts for corporations and
individuals, an increase in outlays for defense, less spending on
welfare and other domestic programs and a balanced-budget amendment
to the Constitution. Incoming House Majority Leader Dick Armey,
R-Texas, who shares Gingrich's zeal for supply-side theory, says he
views the Republican strategy on taxes as an effort to launch a
"frontal assault on big government."
The contract also calls for congressional term limits, tougher
federal criminal-sentencing laws and a ban on placing U.S. troops
under U.N. command. But at heart, it is a conservative economic
manifesto, a loud restatement of Reaganomics.
The volume might turn out to be a little too much for Senate
Republicans. Generally far less ideological than their House
counterparts, some GOP senators say they find the budgetary and
economic arithmetic behind the contract frightful.
Many agreed with the Clinton administration's assessment that
the contract's mix of tax cuts and new defense spending would cause
the federal budget deficit to balloon, largely because many of the
offsetting spending cuts laid out in the contract would be nearly
impossible to pass through both the House and Senate.
What's more, the proposal for a balanced budget amendment would
force far deeper cuts, putting Republicans into a fiscal
straitjacket for the remainder of the century. The conflicting
signals on budget and tax policy could prompt the Federal Reserve
Board to raise interest rates, slowing the economy and widening the
deficit even more.
"The big issue that will very quickly confront the House
Republicans is that if they want these big tax cuts, they are going
to have to pay for them. If this contract is perceived as worsening
the deficit, that will drive interest rates up, and that would
negate any economic stimulus you might get from cutting taxes,"
said Barry Bosworth, an economist and budget analyst at the
Brookings Institution, a think tank in Washington.
Faced with that kind of picture, Senate moderates are likely to
force House Republicans to set priorities. Because they cannot do
everything in their contract at once without courting fiscal
disaster, the argument goes, they will have to choose which
elements they want the most. …