MOST of the key players shaping American domestic policy are
expecting 1991 to be more contentious and politically scrappy after
the relatively friendly and productive past two years.
Two themes expected to emerge early on:
- Taxes - from tax hikes on million-dollar incomes to tax cuts
for capital-gains earnings.
- Civil rights - with a louder, rougher debate over affirmative
action and racial quotas.
The Bush years have mostly been marked by a softening and
fine-tuning of the Reagan revolution. A president with historically
high public approval built relationships with Congress, passed a
long-languishing Clean Air Act, enacted child-care subsidies and
credits, and managed - if not to actually shrink the deficit - then
to cinch the belt tighter than it might have been over the next five
But now a faltering economy and the threat of war are threatening
to disrupt peace and prosperity.
White House aides working on domestic policy plans expect
domestic politics to be a mere sideshow to the more riveting
war-and-peace questions centered in the Persian Gulf.
They are less certain what to make of the economy. As of
mid-December, many Bush administration officials, along with Federal
Reserve chairman Alan Greenspan, suspected that the recession's bark
might be worse than its bite. Since the White House was also leery
of taking any action that might contribute to the recession
psychology of fear and retrenchment, it was not yet embracing any
policies in response to recession.
In fact, the White House response to economic recession came last
year with the deficit-cutting budget deal. Budget director Richard
Darman believed that if the deficit could be cut, then the Federal
Reserve Board would lower interest rates enough to keep the economy
humming. The Fed didn't move fast enough. White House chief of
staff John Sununu blames Democrats for forcing the process to take so
The budget and its staggering, still growing deficit will
dominate the legislative landscape and is likely to stifle any
government plans for costly programs.
As the administration has been working through the 1992 budget in
recent weeks, staff members say they have been struck by how much
leverage the new agreement gives them to hold down spending.
"It's almost the equivalent of a line-item veto," says a White
House aide. "I think that will be fully realized very, very
THE Democrats who control Capitol Hill have the apparent
initiative on the most politically charged issues coming up.
Republicans acknowledge they were outmaneuvered politically on the
question of taxing the very rich this fall. Democrats immediately
began plans to revive the issue in the 102nd Congress in January.
The Republican response is shaping up along these lines: The
president and his party will not support raising income taxes any
more on anybody at any level - including those who earn more than $1
million a year.
The administration is probably going to bring back its proposal
to cut capital gains tax rates as a spur to economic growth. Many
Democrats have argued that the capital-gains tax cut is a tax cut
for the wealthy. In this growth versus fairness debate last year,
the Democrats won the most political points, according to opinion
polls last fall.
This debate will return. It may open up some new aspects, too,
such as Democratic proposals to cut payroll tax rates for Social
Security, perhaps making up the lost dollars by raising the level of
Some Democrats are eager to send another civil rights bill up to
the White House for a veto that was obviously painful for a
president who has tried to expand his party in the black community. …