[Extensions of Remarks]
[Pages E1534-E1535]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

THE DOLE ECONOMIC PROGRAM--BEEN THERE! DONE THAT! IT DIDN'T WORK!

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HON. TOM LANTOS

of california

in the house of representatives

Thursday, September 5, 1996

Mr. LANTOS. Mr. Speaker, a few days after the Congress adjourned for
our August recess, the Republican presidential candidate, former
Senator Robert Dole, unveiled his economic program. Although the fight
over abortion at the Republican platform meetings in San Diego at the
same time upstaged the unveiling and dominated the news coverage that
week, Mr. Dole nevertheless continues to press forward with his
economic program, which includes a 15-percent tax cut.
Unfortunately, Mr. Speaker, we have been there. We have done that. In
the words of the distinguished Senator from South Dakota, Mr.

[[Page E1535]]

Daschle, who I believe deserves the credit for the most remarkable and
descriptive phrase for this program, this is ``deja voodoo economics
all over again.'' We saw all of this when Ronald Reagan was elected
President and his supply-side economic advisors brought us the tax cuts
of 1981 and the budget deficits that plagued our Nation throughout the
1980's. Now, after President Clinton and the Democratic Congress made
some extremely difficult decisions in 1993, we have succeeded in
cutting in half that Reagan/Bush-era legacy of huge annual budget
deficits. It truly boggles the mind to contemplate the serious
consequences that would follow the enactment of the Dole economic plan.
Mr. Speaker, one of the best summaries and analyses of the Dole
economic program appeared in an article by Matthew Miller which was
published in the September 2 issue of the New Republic. I ask that this
article be placed in the Record and I urge my colleagues to give it
careful and thoughtful consideration.

[From the New Republic, Sept. 2, 1996]

Charades

(By Matthew Miller)

Everybody in this room's gonna get tax relief!''--Bob Dole,
August 5, 1996.
When respected politicians offer silly plans claiming to
fix big national problems, journalists are nonetheless
expected to give them the rational analysis only serious
plans deserve. The very effort legitimizes such proposals as
constructive additions to public debate. Especially when
these schemes are offered by a major party's presidential
candidate, there's no way around the conundrum, except to
note it. Which brings us to Bob Dole's new economic ``plan.''
Everyone knows that Dole's call to cut taxes $550 billion
over six years while also balancing the budget betrays his
lifelong claims to be a fiscal conservative in favor of the
``supply-side'' voodoo he's loathed. But you need to look at
the plan's ``details'' to really appreciate how it brings
budget chicanery to dizzying new heights. Indeed, if Dole's
team of job-seeking economists and GOP has-beens had set out
to discredit his career-long reputation for fiscal courage,
they couldn't have done it any better.
Begin, as Dole does, with the candy. Dole's basic
assortment (using his campaign's six-year cost estimates)
includes a phased-in 15 percent cut in income tax rates ($400
billion); a $500 per-child tax credit ($75 billion); a repeal
of Clinton's 1993 increase in the portion of whether Social
Security recipients' benefits that are subject to taxes ($27
billion); a cut in the top capital gains tax from 28 to 14
percent ($13 billion); and a potpourri of such savings
incentives as IRA expansions and tax-favored education
accounts ($27 billion).
To put Dole's new recklessness in perspective, these tax
cuts amount to more than twice what Republicans considered
``revolutionary'' in the budget the president vetoed last
fall, and nearly five times what the GOP specified in its
updated budget blueprint this spring. As Martha Phillips of
the Concord Coalition notes, Dole's projected revenue loss
for 2002 alone is what this year's Congress hoped to enact
for the next six years together.
Unfortunately, cost aside, the economics of the plan are no
better. Capital gains devotees say lower rates are needed to
spur savings and investment. Yet last time we ran that
experiment and lowered top rates from 35 percent to 20
percent between 1978 and 1985, savings and investment fell.
According to most economists, Dole-style IRA expansions give
people tax breaks for saving they're already doing, meaning
that or dismal overall savings rate would be unaffected.
Demagoguing Clinton's modest Social Security tax hike, which
affected only the best-off 13 percent of beneficiaries,
poisons the well for the kind of sensible means-testing that
Dole knows will son have to be considered. And even the
growth crowd admits Dole's child tax credit will boost only
current consumption--unless parents sock it away in Dole's
new education account, converting it, in effect, to a huge,
government-funded savings plan of the kind liberals would
blush to propose.
Of course, the income tax cut is the plan's ``crown jewel''
when it comes to supposed incentives for work and growth.
Assessing its likely impact means entering into the religious
war over the economic lessons of the 1980s. The mainstream
view is that, yes, Reagan's lower marginal rates spurred some
undetermined growth (though for most workers, subsequent
payroll tax hikes offset any income tax cuts). But the
``boom'' supply-siders love to tout, the 3.8 percent annual
growth between 1982 and 1989, came mainly because we were
emerging from a deep recession that left jobless rates in
double digits and much idle capacity. When easier Fed policy
and the demand-side boost from Reagan's unprecedented
deficits picked up this ``slack,'' we grew faster for a time.
Measured properly, however--from peak to peak in the business
cycle--the 1970s actually saw faster growth (3.4 percent)
than the 1980s (2.7 percent).
The supply-side elixir is an illusion, something Dole's
plan unintentionally admits itself. As Robert Reschauer of
the Brookings Institution points out, Dole's plan implicitly
assumes we'll get to about 2.5 percent growth from 2.2ish
today. That's a far cry from the 3.5 percent Dole and new
soulmate Jack Kemp peddle on the stump.
When it comes to paying for this bonanza, Dole offers a
hoax wrapped in a farce tucked inside a charade. He
conveniently extrapolates a mysterious current revenue blip
to bank $80 billion more than the Congressional Budget Office
now expects will come in. He says a third of his supply-side
tax cuts will pay for themselves via higher growth, nearly
twice the ``magic'' Ronald Reagan himself relied on in the
'80s. Dole also books, in advance, the so-called ``fiscal
dividend'' that a credible balanced budget plan might bring
(through lower interest rates and higher growth, even though
his plan is anything but credible.
Then, if possible, it gets worse. Dole assumes enactment of
$393 billion in spending cuts from the GOP budget that
Clinton vetoed last year. But tons of these cuts were
legislated by a mere spending ``cap,'' and thus never
specified at all. Even with this gimmick, dole still falls
$217 billion short of balance. That's trouble, since Dole has
irresponsibly sworn to keep the most expensive programs--
defense and Social Security--off the table, along with any
Medicare and Medicaid savings beyond what Republicans have
offered already. That leaves basically one area to slice: so-
called ``domestic discretionary'' spending, which makes up
just 15 percent of the budget, and which has already shrunk
from 5 percent of national income twenty years ago toward 3
percent today. This category includes everything we normally
think of as government, from national parks to NASA to the
FBI.
Follow the bouncing ball here. Last year, with its painless
``cap,'' the GOP pledged to cut such discretionary spending
25 percent in real terms by 2002. Now, Dole sees that cut and
raises it to 40 percent. If you assume Dole would spare R&D,
crime-fighting, veterans and education money, he'd have to
cut the rest--things such as airline safety, environmental
protection and low-income housing--an astonishing 60 percent.
This, when Republicans already say privately that last year's
proposed 25 percent cut is both politically impossible and
bad policy.
The bottom line? Its a fraud, covered up through deception
and double counting. Dole says he'd seek deep cuts in the
Energy and Commerce Departments, but those cuts (if
achievable) would already have been used by the GOP to meet
the zillions in unspecified prior savings Dole wants to count
in his own plan. His additional ``10 percent cut in
nondefense administrative costs'' preposterously assumes that
$150 billion of today's $265 billion in domestic spending is
``administrative'' (by Dole's reckoning, FBI and DEA agents
fit this category).
How does the campaign defend this? As all pols know, the
trick on television is to have two ``talking points'' that
sound ``credible,'' because after two nonanswers,
interviewers move on. So we see Donald Rumsfeld earnestly
explaining that with a line-item veto, Dole can do it--though
the ``pork'' such a veto could excise amounts, under the most
porcine estimates, to 1 percent of federal spending. Jack
Kemp sidesteps questions about whether Social Security or
Medicare will be touched with the usual blather on growth.
Since network interviewers-thanks to ignorance, time limits,
fear of offending ``star'' guests or eventual frustration--
usually tolerate such official dishonesty, the scam
invariably works. So the question of whether Dole's plan is
serious becomes, in the public mind, a legitimate matter for
debate, rather than being branded--as Newt Gingrich rightly
implores the media to dub Clinton's rhetoric about Medicare
``cuts''--a con.
Dole allies, putting the bet spin on their man's move, say
that he's still a budget-balancer and that his embrace of
whopping tax cuts is in the noble tradition of ``Nixon going
to China.'' They have it exactly wrong. Nixon's alchemy
turned a lifetime of dishonorable redbaiting into a historic
overture for peace. By contrast, Dole now squanders a
lifetime of honorable resistance to candy-cane politics in a
blatant pander that will only hamstring responsible
governance even if it works and he wins. If he needed to
energize Republicans, Dole could have proposed a reckless
plan like this, or named Jack Kemp as veep. Surely he didn't
have to do both.

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