The great economic debate of 1996 is already roiled by divergent interpretations of budget plans, but now Jack Kemp and the National Commission on Economic Growth and Tax Policy, which just reported, are attempting to direct top attention to the still more volatile subject of tax reform.
The report arrives in a capital stalemated on economic policy. In 1992 the voters chose one concept of “change” for the White House and in 1994 voted for something nearly opposite for Congress.
The result is a kind of battle-in-place that seems likely 1) to silence those who keep saying that “there’s not a dime’s worth of difference between the two parties; 2) to give Wall street a perpetual case of nerves, because now the only real budget reflections will come in nonentitlement spending that Congress can control through “continuing resolutions” and, 3) to put off real budget and tax reform until at least the November election.
Given the Machiavellian nature of politics and the avoidance syndrome voters sometimes exhibit when confronted with complex trade-off, there is a fair chance that even this opportunity to debate the future of the economy could be lost. The election may be dominated by scandals (real and fake), showmanship in the autumn TV debates or the kind of distracting “October Surprise” in foreign affairs that incumbents sometime spring on challengers. But the stakes in the economic debate are so great for every voter that the country might just keep its attention focused long enough to sort out the contending claims and choices.
Republican presidential candidates already are talking tax reform and finding at least the conservative electorate extraordinarily attentive. Publisher and candidate Steve Forbes deserves special credit for undeviating emphasis on the theme of economic opportunity. It is one thing for Rep. Dick Armey of Texas and Sen. Richard Shelby of Alabama to propose a flat tax, and another for a well-financed presidential aspirant like Forbes to force every other contender to focus on it. The same may soon be said of Forbes’ proposal for using the private sector to rescue the Social Security system for the elderly and to allow ordinary young Americans to build up a truly generous retirement income – an idea that borrows from Chile’s recent experience and echoes a proposal by Sam Beard (founder of the P.I.’s Jefferson Awards and a Discovery Institute Fellow).
Nearly all the GOP candidates have a tax reform plan of their own and each can explain why his is better than Forbes’ but the main thing is that they all have to address the effectiveness and fairness of basic tax laws. That hasn’t happened before.
Now Kemp, a mentor of Forbes, is also pushing tax reform onto the national agenda. A popular former GOP legislative leader in the Reagan Revolution, a presidential primary contender in 1988 and maverick Cabinet secretary under George Bush – Kemp does not have any obvious ax to grind in presenting the economic report requested by House Speaker Gingrich and Senate Leader Dole. Indeed, his advocacy of the upbeat message of tax relief and economic expansion assumes greater authority in the media and the public precisely because he stands a bit above the fray.
Kemp has long had three big policy passions. Saving American’s families is one. Sharing the promise of opportunity with people of all races and classes is another. But leading them all is his commitment to economic growth. He saw in the 80s how Reagan defense increases (however necessary) and spending by the Democratic Congress overwhelmed the budgetary effects of the Reagan tax cuts. The economy as a whole flourished, but as Secretary of State George Shultz quipped, “The country’s doing great, but the government’s broke.” The reputation of the Reagan tax cut stimulus remains to this day submerge in undeserved controversy.
Kemp burns with desire to get the policy mix – budget controls, family tax credits and lower marginal rates of taxation – right next time. That will take greater consensus on the right than now exists. As a result, Kemp’s commission avoids nailing down many important details, but does try to define the principles – biased strongly toward economic growth – that should govern the debate. And it makes the debate itself imperative, regardless of the outcome of the primaries.
Meanwhile, by not running for President and yet making himself so useful to Bob Dole, the presidential front-runner, and Newt Gingrich, the right’s chief visionary and political hammer, Kemp personally is back on the national stage. In a few months he could find himself on the GOP ticket for Vice President.
It is a thought that could trouble and amaze his old friend Steve Forbes. Regardless, they both will be among the leading instructors in the great national economic teach-in this year.