Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Businessweek Archives

The Budget Deal Shames The Gop

Economic Viewpoint


No commodity has been oversold more than budget deals. The benchmark on bad deals established by former budget directors David A. Stockman and Richard G. Darman has been exceeded by the catastrophe engineered by President Clinton and the Republican Congress. For a small tax cut, welfare reform has been gutted, socialized medicine has been implanted, and the unequal application of law has been endorsed.

Clinton and the Republicans claim their deal balances the budget. In truth, it keeps the budget unbalanced until 2002. Thanks to economic growth, the deficit for the current fiscal year, which ends this September, is only around $30 billion. Had the politicians made no deal, the budget would have come into balance next year. Instead, the deficit is expected to rise for several years. In effect, the deal prevents economic growth from balancing the budget by disbursing a windfall $290 billion surge in tax revenues on new spending programs and tax credits.

The political ineptitude of Republicans is legendary. Irving Kristol coined the sobriquet "the stupid party" for the GOP, but even this is a euphemism. Welfare reform is the only achievement of the Republican Congress, and the budget deal destroys it. The agreement restores $12 billion in welfare spending on resident aliens. Worse, it guts the welfare-to-work programs that states are using to reduce their welfare rolls.

PROHIBITIVE. Governors from both parties are blasting the budget deal for foiling their efforts to introduce welfare recipients to the world of work. When President Clinton was forced to sign the welfare reform bill, he vowed to kill it in practice. His method was to undermine the legislation with regulation. His Labor Dept. ruled that all federal workplace regulations would apply to "workfare." That means payroll taxes, workers' compensation, family leave, job protection, and the Davis-Bacon requirement to pay prevailing union wages. Obviously, this is too expensive a package for employers to give unskilled, undisciplined, and unproven workers.

The Republican Congress responded by trying to block the Labor Dept.'s purposeful gutting of workfare. However, Clinton told House Speaker Newt Gingrich (R-Ga.) that he would veto the budget deal unless Congress allowed workfare's regulatory destruction. Gingrich preferred a budget deal headline to real accomplishment and permitted the GOP's single achievement to bite the dust.

After successfully blocking (with public approval) Hillarycare in Clinton's first term, the Republicans have decided that they like socialized medicine as long as it buys them a balanced budget deal. The party that decries open-ended entitlements has now collaborated in the creation of a new one--"Kid Care."

UNCONSTITUTIONAL. Back when Hillary Rodham Clinton was presiding over the creation of a universal health-care system, she had a "Kids First" plan. Documents from her working group obtained by The Washington Times describe a plan to achieve universal health care by starting with children and then phasing in other populations. If Republicans can't object to Kid Care, they can't object to Mom Care. Robert M. Goldberg of George Washington University medical school called the budget deal the "first step toward universal health care."

Another casualty of the budget deal is the constitutional requirement that laws apply equally to all citizens. It is not permissible to single out any citizen or group for legal privileges or disadvantages. Since 1913, this requirement has been violated by progressive income taxation that singles out successful people for punitive treatment. The budget deal adds new layers to the unequal application of law. For the first time, progressive rates are explicitly introduced into the taxation of capital gains, and a special tax credit for the purchase of a house has been created solely for residents of Washington, D.C.

It violates the Constitution for the federal tax code to contain geographically based tax privileges. If the federal government can hand Washington residents and no one else tax credits for home purchases, it can hand out geographically based lower or higher income tax rates and deny successful suburbs the mortgage interest or other deductions.

"Ability to pay" has been so ingrained into our consciousness by redistributionists that it has replaced equal treatment as the mark of fairness. People who favor the unequal application of tax law would recoil in horror from criminal statutes that punished felonies differentially according to income class.

The real message of the budget agreement is the bipartisan disdain for limited, constitutional government. The Republicans have proven that they don't make a difference.BY PAUL CRAIG ROBERTS

blog comments powered by Disqus