Cutting the tax cut

Sen. Edward Kennedy’s speech Wednesday at the National Press Club gives both parties plenty to argue about as Congress reconvenes next week. And while the political opportunities in the senator’s call for rescinding parts of last year’s tax cut are obvious, serious questions about the nation’s priorities, the government keeping its promises and the long-term health of the economy are imbedded in this proposition and deserve respect.

In his speech, Sen. Kennedy proposed keeping the estate tax for estates valued over $4 million and (worth $130 billion over 10 years) and postponing marginal tax rate cuts scheduled for 2004 and 2006 (worth $220 billion over 10 years). Polls, according to the Democratic Senatorial Campaign, show a majority of Americans favor using that money for strengthening the military, providing a prescription-drug plan for seniors or shoring up Social Security over providing the tax break to the wealthy. As an immediate counter, The Washington Post reports Daniel Mitchell of the Heritage Foundation saying Republicans were thrilled with Sen. Kennedy’s speech – “I can’t open my e-mail without finding 10 messages saying, ‘Let’s exploit this – Kennedy’s giving us just the opening we need’,” the newspaper reports.

But even as the chance to stick it to the other party is clear enough, there is the matter of the people who actually pay the taxes, who rely on a strong economy and who do not appreciate the use of their tax dollars by members of Congress to beat each other up. This serious issue deserves more than mere emotional opportunism in substituting the chance for popular programs or shouting “Tax hike!” as often as possible.

A third, calmer voice in this discussion comes from Federal Reserve Chairman Alan Greenspan, who last week commented on the cost of long-term interest rates staying higher than expected, observing that “some of the firmness of long-term interest rates probably is the consequence of the fall of projected budget surpluses and the implied less-rapid paydowns on Treasury debt.” Those higher rates makes, for instance, doing business or buying home more expensive. Mr. Greenspan’s position, it should be emphasized, does not match the Democrats who advocate using the money scheduled for the tax cut instead for important programs. The savings in Mr. Greenspan’s comment are put to reducing the debt, a habit for which many economists credited, at least partly, the boom of the 1990s.

The recession alone is not reason enough to revisit the tax cut passed last May – the possibility of recession was considered closely enough at the time – but the September 11 attack, the cost of the resulting retaliation and added security certainly are. What should worry the public is the zeal with which some members of Congress and their loyal spinners establish the discussion of the tax cut solely in relation to its effect on the next election. If they cannot rise above this, it would be better if they stayed in recess until after the November election.