Forgetting the Present

Forgetting the Present

Forgetting the Present

Making government work better.
Oct. 12 1996 3:30 AM

Forgetting the Present

Never mind the past. Politicians can't even remember what's going on now.

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George Santayana predicted an unfortunate fate for those who cannot remember the past. What would he say about political leaders who cannot even remember the present?

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Take, for example, President Clinton's promise in his Democratic Convention speech--repeated more than once in Sunday night's debate--that he would offset the harsh effects of the recently passed welfare rollback by giving "businesses a tax credit for every person hired off welfare and kept employed." What a can't-miss idea. The very words fairly glow: "tax credit," "businesses," "off welfare," "employed."

Trouble is, we already have such a tax credit--it just got renewed as part of the minimum-wage bill, and it's a proven failure. The Targeted Jobs Tax Credit (a k a the Work Opportunity Tax Credit) has been a ghastly disappointment ever since it was enacted in 1978. Early analysis showed that most employers using it didn't hire more or different people. Instead, they simply got their accountants to review personnel records at year's end to see who among recent hires might qualify for the tax credit.

Tighter rules have, presumably, curbed that abuse, but far more damaging findings emerged from a couple of controlled experiments in Dayton, Ohio, and two cities in Wisconsin. To their surprise and dismay, researchers found that when eligible job seekers (welfare recipients and other categories of "disadvantaged" workers) were sent off to potential employers bearing in hand the tax credits or vouchers that labeled them as high-risk cases, they were less likely--far less likely--to find jobs than if they just applied on their own. And that was back when the tax credit was considerably more generous than it is now. From these and other studies, says Brookings economist Gary Burtless, who participated in many of them, "we can safely conclude that sending someone out in the market saying, 'Hire me, I'm for sale,' is a bad idea."

For that matter, so are all the efforts to engineer social and economic behavior through the tax code of which Clinton is so enamored--the embellished tax preferences for buying and selling homes, having a child or putting one in day care, sending the kids to college or going back yourself, saving up for a nursing home, and so on. There's so much evidence on this point that in 1986, both parties in Congress agreed that tax subsidies are, at best, an inefficient way to promote desired behavior, since most of the money goes to pay for things that are going to happen anyway. At worst, they are a complete rip-off, since they are almost impossible for the IRS to monitor. Congress gave the tax code a much-needed cleanup job, with lower rates as the reward, and everyone promised they wouldn't junk it up again.

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But that was 10 long years ago, and no one would expect a politician to remember that far back. Let's return to the forgotten present.

Attention-deficit disorder is also afflicting the Dole team. On the campaign trail, Dole was still calling for the misbegotten Homemaker IRA a week after it had passed into law. Dole has apparently not forgotten his own past record on taxes--he correctly, if ineffectually, pointed out during Sunday's debate that his 1982 tax bill was not a true tax hike, as normally understood, but primarily a canceling of corporate tax breaks not yet in place and crackdowns on cheaters to collect taxes already owed. (He did fail to note that the Social Security bailout of the early '80s, about which he also bragged repeatedly, included a large tax increase.) But Dole's grasp of specifics seemed a lot less secure when it came to defending his current plan to cut taxes by some $550 billion over the next six years while still balancing the budget. (Clinton also managed to forget the incredible elements in his own seven-year budget-balancing plan, as he touted it repeatedly during the debate.)

The architects of Dole's tax plan argue that critics have paid far too much attention to the relatively modest "supply-side" feedback effects counted on to pump up tax collections by promoting growth and reducing tax avoidance. The real guts, they contend, lie in the promised budget cuts, which, since they amount to a mere nickel out of every dollar of cut-able programs over the six-year period, are surely an easily achievable target.

A mere nickel? Piece o' cake. Or at least you might think so if last week's action in Washington escaped your attention. Congress and the president indulged in a round of mutual self-congratulation over their agreement on an appropriations package for the new fiscal year. "You guys did such a great job," President Clinton told congressional leaders as they finished up on their work, "You should really be proud."

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Gee, and they didn't have to close down the government even once. Just one small detail that might have given Dole and his illustrious advisers a moment's pause: The appropriations measures, while restrained by recent standards, nonetheless weigh in at probably $16 billion over the target the GOP Congress set for domestic discretionary spending only a year ago. The Republicans will argue the shortfall isn't that big, because they are going to cover some of it by onetime savings: dipping into the bank insurance funds--never mind the S&L collapse, that was eons ago--and, of course, selling off part of the broadcast spectrum-- the most oversold commodity since the Brooklyn Bridge. Didn't anyone remind them that Dole had already reserved the spectrum sale to help pay for his tax-cut plan?

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A $16 billion discrepancy may not seem much when measured against the total budget, with all its sacrosanct or unavoidable obligations. But it's a significant shortfall if you are sufficiently present-minded to recall that Congress (and the president) have separately committed themselves to mammoth--and almost entirely unspecified--cuts in the magical year of 2002, when the budget is to alight, if only for a moment, on balance. And it is on top of these cuts--before the first small step of which the Congress and the president just blinked--that the additional Dole cuts are to be made, an amount totaling close to 40 percent of the vulnerable part of the budget. Assuming the bare-bones basic functions of government are to be maintained, where then will be the room for any border-control guards or anti-terrorism measures, or Head Start or education grants or peanut subsidies or national parks, or disaster relief--let alone the enhancements that Congress deemed so necessary this October?

No doubt--as former Congressional Budget Office Director Bob Reischauer points out--with all the election-year pressure on Republicans to show they really aren't so bad and the temptation for Clinton to show his newfound muscle, the final appropriations package isn't bad. That is, as Reischauer quickly adds, "if budget balance is your prime desire and you believe that cuts in discretionary spending are the way to go."

But that, of course, is the real and present issue that neither congressional party addressed, transfixed as they and the media are by the fantasy budgets offered on the campaign trail by their respective standard-bearers. A budget is not a mere political prop: Whether by design or inadvertence, it's the end product of politics, the actual blueprint for government's role in society.

This budget makes some big--if dubious--choices, if only implicitly. The Pentagon gets an extra $9.4 billion this year (with more to come) for weapons systems and other sundries it doesn't want, only a few weeks after another set of committees decided to cut $21.2 billion from programs for the needy over this and the next two years. But most important choices were not made. Social Security's problems won't be manifest until the next century, but it would be both easier and kinder to start making modest reforms now. Medicare, on the other hand, is exploding right now. So, for that matter, is the world's population. But overseas family-planning programs, despite minor restoration, were left at a funding level more than a third below that of a few years ago.

Political leaders are often faulted for living in the past or ignoring the future.

We'd be lucky if ours simply got a firm hold on the here and now.