Back to the Future: Newt Follows Reagan's Lead A faction within the Republican Party seems to feel that it has strayed from the vision of its ideological leader, Ronald Reagan. However, the era of budget surpluses proclaimed by Newt Gingrich after the 1997 tax bill marks the GOP's highly successful return to the worst sort of Reaganism. Republicans have embraced Reagan's strategy of forcing future cuts in government by passing revenue-draining tax cuts rather than politically painful spending cuts. The full revenue crunch from the tax bill signed this summer by the President will not hit until the years after 2007, compounding the impact of soaring entitlement costs for the retiring Baby Boomers. After the signing of the tax bill, Newt Gingrich announced the dawn of a new era of budget surpluses and tax cuts. As a result, government spending will have to be slashed still further, crippling the federal government in the future. In 1981, Reagan discovered that the public would not support cuts in Medicare and other popular government programs. He instead pursued a strategy of cutting taxes and increasing defense spending while leaving middle class entitlements untouched, securing enough Democratic support to achieve his objectives. Even with significant reductions in discretionary spending, government revenues were reduced so much by these policies that huge deficits began to mount, reaching $200 billion by the end of Reagan's term. David Stockman, Reagan's CBO Director, called it "fiscal indiscipline on a scale never before experienced in peacetime." Future generations were set up to take the fall, forced to make painful spending reductions to pay for Reagan's scheme. By the 1990s, the deficits inherited from the Reagan years had already forced most people across the political spectrum to accept the necessity of cuts in government spending, leading to the 1990 and 1993 budget agreements, which also increased taxes but succeeded in reducing the deficit. In the process, however, our generation got a raw deal. Government funds already had been dramatically limited by the Reagan tax cuts before the first of us reached voting age. We grew up with a federal government unable to take on new challenges like improving education, broadening access to health care, or improving infrastructure. After their landslide victory in 1994, Republicans wanted to enact more spending cuts for ideological rather than budgetary reasons. In their haste to take the Reagan Revolution a step farther, Republicans failed to realize the degree to which they had overestimated public support for their anti-government agenda. They charged ahead, causing a government shutdown in their efforts to dismantle the federal government. Speaker of the House Newt Gingrich became widely unpopular with the American people and was forced to abandon further Republican cuts. In 1996, President Clinton won re-election resoundingly, in part due to the strong support of young voters. Thus, a somewhat chastened Republican Party faces the same situation in the 105th Congress as Reagan did in the 1980s: ideologically, it is committed to cutting government, but it lacks a popular mandate to do so. Republicans seem to recognize the parallel. Recently, a Republican media consultant, Keith Appell, said "we need . . . to go back to doing Reagan" and that is exactly what they began to do with the cooperation of the President in the 1997 tax and budget bills. The budget bill creates new government programs and fails to reform Social Security and Medicare, just as Reagan's budgets did. More importantly, however, the huge Reaganesque tax cuts in the bill, besides giving 78% of their benefits to the top 20% of Americans with the highest income according to Citizens for Tax Justice, do not reach their full cost until well after the five years that the budget agreement covers. Obviously, if the Republican Congressional leadership really cared about reducing the deficit, they would have rejected tax cuts and balanced the budget in the next year or two. Instead, the GOP is trying to hide the true costs of the bill from the public so that no one will fully understand the squeeze it will put on the size and scope of government in the future. In fact, the Center on Budget and Policy Priorities estimates that the cost of the Republican tax cuts will reach an incredible $500 billion in the second ten years after passage. These are significant long-term revenue losses that approach Reagan's tax cuts in size. What's worse, the tax cuts will kick in just as the Baby Boomers begin to retire and entitlement costs soar. At that time, when fiscal discipline will be needed to preserve our social safety net, the tax cuts will be draining the Treasury of much-needed revenue and consequently forcing more draconian spending cuts in federal programs. Moreover, in late October, Speaker Newt Gingrich announced support for a budget policy that would produces a budget surplus and tax cuts every year, even during the next recession. The budget surplus, expected in the next few years (before these tax cuts and entitlement costs kick in), would be spent on more tax cuts, paying down the national debt and boosting spending for transportation, science and defense. "We should sustain . . . the commitment to get a balanced budget and to stay balanced every year . . . It ought to be a surplus large enough that a reasonable recession won't hurt it." Maintaining such a surplus, as revenues are decreased each year with tax cuts, will mean a slash and burn of the federal government, especially as entitlement costs escalate. But, by again focusing on reducing revenues, Gingrich has sidestepped the painful spending cuts he can't pass now in favor of the ones others will have to pass in the future. The commitment to a budgetary surplus will seem appealing to people now, making it that much harder politically to abandon in the future. The American people as a whole will be devastated by the impact of this GOP strategy, but the Republicans have really stuck it to young people. We grew up with a federal government hamstrung by Ronald Reagan. Now, thanks to the GOP tax cuts and plans to maintain a budgetary surplus, we will inherit a smaller, weaker government crippled by an even greater lack of revenue. In the years after 2007, when the GOP calls for spending reductions to keep the government in surplus after the explosion of its time-bomb tax cuts, people our age and our children will suffer most, not the politically powerful Baby Boomers. One of Newt's associates, Grover Norquist of Americans for Tax Reform, once boasted that his goal was to be the last person across the 30th Street Bridge after blowing up Washington. Newt and the GOP have continued their work toward this goal with the tax bill and expectations of perpetual budget surpluses, but they still can be stopped. Democrats have to reclaim the rhetoric (and substance) of fiscal discipline from the Republicans, who have gone far beyond fiscal restraint into a dangerous Reaganesque crusade designed to further cripple the federal government. |
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