Can taxes be a winning issue for Democrats? The widespread opinion in both parties remains otherwise. When Tom Daschle gave a speech on Jan. 4 criticizing President Bush’s tax cut, the Senate majority leader stopped short of arguing that future installments of it should be canceled. Even so, Daschle’s speech made many of his Democratic colleagues extremely nervous and Republicans ecstatic. Bush himself responded the next day from California, where he told an audience that those folks in Washington wanted to “raise your taxes” and threatened to lay his body on the tracks to stop them. After Sen. Ted Kennedy made the implication of Daschle’s argument explicit, suggesting that planned tax cuts for people earning more than $130,000 a year be postponed (beginning in 2004), conservative tacticians gloated openly about the political gift the other side was handing them.
But other than superstition, it’s not clear what supports the assumption that Democrats must always lose on this issue. It’s certainly true that it predominantly benefited the GOP in the 1980s. Complaining about “tax-and-spend” Democrats elected Ronald Reagan president twice and helped the GOP at every other level. But the post-Reagan period presents a very different picture. Bill Clinton was elected in 1992 while arguing directly for a tax increase on the rich. And though raising taxes may have hurt Democrats in 1994, Clinton was re-elected in 1996 as someone who would continue to block excessive and unbalanced Republican tax cuts. At the congressional and gubernatorial levels, the examples are plentiful on both sides. In 1997, James Gilmore, a Republican, was elected governor of Virginia on the basis of anti-tax demagoguery. In 2001, Mark Warner, a Democrat, was elected while arguing for fiscal responsibility.
If the politics of the issue no longer crudely favors Republicans, it may be for a straightforward reason: Democrats have changed. Well into the 1980s, it was not a grotesque distortion to accuse the party of wanting to “tax and spend.” Many Democrats frankly advocated higher taxes to pay for a substantially larger federal government than most Republicans wanted. But during the Clinton years, Democrats shifted to become the party of fiscal responsibility. Today, the essential difference between Democrats and Republicans on fiscal matters lies not in how big the federal government should be—the 2002 budget bills Bush signed increased spending 13 percent and early indications are that his 2003 budget will ask for more huge increases. The main difference is that Democrats want to pay for all the government they want, while Republicans don’t.
That shift in the Democrats’ orientation opens much more favorable possibilities for them on the tax issue. An ABC News poll taken just this week asked the question, “Would you support or oppose canceling the tax cut that Congress passed last year, if doing so helped to avoid a deficit in the federal budget?” Respondents supported canceling the tax cut by a 20-point margin. A Wall Street Journal/NBC News poll shows a 24-point preference for delaying tax cuts over reducing spending. There are other indications of a political readjustment in the works. One is that congressional Republicans, who until very recently argued for more tax cuts, now aspire merely to save the ones they’ve already passed.
However much the tax issue favors them on substantive grounds, though, Democrats still face a problem in framing the issue in a way that helps them politically. The first thing they need to do to win the issue is get off the defensive. Tom Daschle derives little benefit from a debate about whether he is really calling for a tax increase or not, in part because it prevents him from explaining what Republicans want to fuzz up—including the fact that only the wealthy would be affected in any case. Luckily, the president’s brother has given Democrats a spear to puncture this silly “tax hike” charge. Because of his state’s deteriorating fiscal situation, Gov. Jeb Bush has postponed scheduled tax reductions in Florida. Now Democrats can respond, “We aren’t raising taxes any more than Jeb Bush is raising taxes in Florida. We want to postpone future tax breaks for the wealthiest Americans because circumstances are different than when we passed them.”
To use such a line, of course, Democrats will have to quit mincing words and spell out what they intend to do. They will also have to unify behind a single position, which they’re far from agreeing about today. Sen. Daschle was probably right that it made sense for Democrats to focus attention on the problems Bush’s tax cut caused before accepting sole responsibility for solving them. But once Bush formally releases his 2003 budget, which promises a second year of deficits in the $100 billion range, it will be time for Democrats to spell out their affirmative proposal and the reasons behind it. Otherwise, they’ll risk reviving the perception that they simply dislike lower taxes on principle.
Once they’re off the defensive, Democrats should re-examine Bill Clinton’s 1992 playbook for a plausible line of attack. The key term to use is one of Bush’s favorites: “responsibility.” A central argument against Bush’s tax cut (significantly smaller, by the way, than one he tried to get) was that it left no cushion in case of emergency or worse-than-expected economic conditions. Both concerns were borne out in a matter of months. According to the latest figures from the nonpartisan Congressional Budget Office, the projected 10-year budget surplus has fallen in one year from $5.6 trillion to $1.6 trillion. Bush’s budget proposal will knock it down to $1 trillion. At this rate, the surplus will be a memory by Memorial Day. But Bush and the Republicans simply refuse to reconsider their anti-tax dogma in the light of dramatically changed circumstances—something that even Ronald Reagan was willing to do when he reversed part of his 1981 tax increase in 1982.
A New Democrat-friendly version of the responsibility argument might contain an appeal, similar to the one Clinton used in 1992, to the idea of shared sacrifice. Bush has been an effective war leader in diplomatic and military terms. But he hasn’t been willing to tell the public that wars are expensive and have to be paid for. “It’s nice to think that the only sacrifice we have to make is going shopping,” a Democrat like Sen. Joe Lieberman might say. “But the war on terrorism involves sacrifices of many kinds. All we’re asking is that the wealthy Americans, who have already gotten big tax cuts, settle for smaller ones in the future.”
The danger here is that calling for sacrifice may make it sound like Democrats want middle-class people to give something up, when in fact they don’t. Lower-income workers have already gotten most of the benefit they’re ever going to get from Bush’s tax cut. Despite the desire of Republicans to make it appear otherwise, between 95 percent and 99 percent of taxpayers would be giving up nothing at all under various Democratic proposals. And for that reason, a more populist case for freezing part of the tax cut may be more effective. I’m envisioning a series of 30-second spots featuring he likes of Steven Spielberg and Jay Rockefeller saying, “Sure, I’d like another tax cut, but I don’t need it. We do, however, need to pay for the war on terrorism. Let me pay my fair share.”
But however they couch it, Democrats need to hammer away at the point that the deficit, which Reagan created, Bush 41 expanded, Clinton eliminated, and Bush 43 brought back, is bad for the economy—bad, among other reasons, because it paralyzes the government, raises interest rates, and jeopardizes Social Security. “It took the public a long time to believe that deficits matter, but they do understand it now,” says Jim Jordan, executive director of the Democratic Senatorial Campaign Committee. “People hear the words deficit spending and it’s an intense negative.” Thanks to the Bush tax cut, they’ll be hearing those words a great deal in the coming weeks, months, and years.