The Washington Times

The lesson of the Bush tax-cutting record is that what matters is structural change and political leverage down the line. What matters not so much are the projected dollar “costs” of the tax cuts and, accordingly, the deficit.

There are, of course, lawmakers for whom the dollar costs, reckoned over the 10-year horizon of federal budget projections, are crucial. Their position [especially within the GOP] was thought to represent a huge obstacle to President Bush’s ability to get a 2003 tax cut of the size he wanted.

But there’s a problem with this green-eyeshade focus: Those articulating it voice no objection in principle to the tax cuts proposed, and often profess that they would support them if only they were affordable.

This opens the door for legislation with the kinds of sunset provisions that were the essential feature of most of the cuts in this package. Tax cuts take effect but are scheduled to expire at some date within the 10-year horizon, thus reducing the overall “cost” of the package by eliminating the reductions in revenues from a particular cut in the final years.

Now, one may decry this as the sheerest of budget gimmickry if one wishes. In this view, the sunsets are essentially fictitious devices: Everyone knows full well that the political pressure to extend the tax cuts will be overwhelming when the time comes. And indeed, for many tax-cut proponents, today’s sunset provision is tomorrow’s urgent case for making the tax cut permanent.

What’s new here, however, is the way in which sunsets have supplanted another notorious way in which lawmakers have attempted to put 20 pounds of stuff in a 10-pound bag, the chief characteristic of the first Bush tax cut in 2001: phase-ins. There, the approach is to lock in reductions that become greater over time, essentially pushing most of the “cost” of full implementation outside the 10-year budget horizon.

The politics of the phase-in is similar to that of the sunset in two ways. First, a phased-in tax cut enacted today turns tomorrow into a call to accelerate the provisions: What’s good three years out is good now, by gosh. Second, it tempts opponents to call for blocking the phase-ins, which proponents of the cuts can portray as support for de facto tax increases. Democrats who opposed the first Bush tax cut and wished to continue to articulate opposition after it passed faced the question of whether or not to call for a halt to the phase-ins. They generally decided this was too politically risky en route to the 2002 elections.

But the politics of phase-ins is also subtly different from the politics of sunsets. Among Democrats, the play-it-safe strategy of 2002 is now widely regarded as a failure of nerve: If Democrats can’t unite around opposition to the implementation of further cuts in top tax rates, what can they unite on? So Republicans have raised the stakes. There is a difference between blocking something that has not yet happened [the phase-in] and undoing a tax cut that has already taken effect [by allowing a sunset provision to expire]. If the former is arguably a tax increase, it is also arguably not a tax increase. But if you are called upon to vote on a measure extending beyond its initial sunset a tax cut that has already taken effect, and you vote no, you are certainly voting for a tax increase. This is the position Republicans want Democrats in.

But it’s not merely the politics that is different. It’s the policy impact. With a sunset, you get the policy changes you want sooner. With the phase-in, you wait. I think the Bush White House realized fairly quickly that the problem with its 2001 tax cut was the long delay in implementing the reductions.

If you sincerely believe that economic growth is the main goal and that tax cuts will be a spur to achieving it, then you want your program changes in place as quickly as possible in order to start working. Sunset provisions give you the bulk of your policy changes up front.

And what about the deficit? Well, for starters, no budget forecasters predicted the budget surpluses of the late Clinton years until they were happening. This is important because if you want to lay the credit at the door of a particular policy change, such as Mr. Clinton’s 1993 increases on top rates, you have to show that the result was foreseen. It wasn’t. The surpluses can probably be attributed to the surging economy, and especially the stock market.

That’s what Republicans are after: a surge that will have an impact beyond the limitations of budget forecasting. These tax cuts are their recipe. As for the interim deficits, oh well.

So, is the next Ross Perot waiting in the wings to divide the core GOP constituency by giving the deficits political salience again? Or can Mr. Bush ride them out, as Ronald Reagan did? There’s no doubt where the White House has placed its bet.