The Republican Convention that begins on Aug. 17 once figured to be a coronation for George Bush, but now it is looking more like a free-fire zone. Running 20 points behind Governor Bill Clinton in the polls, Bush is now being pounded by the conservative wing of his party as well.
The latest salvo comes from supply sider Jack Kemp, who sits on Bush's Cabinet as Secretary of Housing & Urban Development. In a well-publicized memo to the Bush campaign, Kemp and six prominent congressional Republicans called on the President to repudiate his tax increase of 1990. Don't worry so much about balancing the budget, they say, the best way to boost growth is to cut everyone's taxes.
To a beleaguered Bush, the Kemp plan might seem tempting: a bold, politically popular way to recapture the conservative support that threatens to slip from Bush's grasp. Moreover, a massive tax cut would jar the economy out of its malaise, at least for a while, by putting more money into consumers' pockets, just as the Reagan tax cuts helped fuel the recovery from the recession of 1981-82.
But any attempt to recreate the boom years of the 1980s by cloning the 1981 supply-side tax cut is likely to backfire, raising inflationary expectations and pushing up long-term interest rates. The Reagan 1981 cuts, coupled with congressional overspending, helped create $2.3 trillion in cumulative budget deficits over the ensuing decade. The U.S. economy, already weakened by excessive domestic and international debt, cannot afford another round of tax cuts right now.
It is imperative for President Bush to resist the supply siders' latest siren call and put together for his second term a coherent economic policy that focuses on cutting the deficit while encouraging long-run investment and growth. If the GOP wants a bold conservative tax policy to stimulate saving and investment, it could offer dramatic cuts in personal and corporate income taxes and in the capital-gains tax. But to be responsible, those cuts ought to be offset by increases in taxes on consumer spending, such as the gasoline tax, and by an assault on the growth of spending for entitlements. Only by acknowledging our economic problems and tackling them head-on does President Bush have much hope of reelection--and of leading the nation in a second term.