Back to Deficits

When Congress was debating the cost of the president's proposed tax cuts earlier this year, administration officials and the president said not to worry: The surplus would provide the necessary funds for the tax cut and the operations of the government besides. Now the tax cuts have been enacted, the economy is in recession, the country is at war and the same officials are lamenting that deficits are in sight for at least the rest of the president's term. The surplus, which, as the president's own advisers well understood, was never more than an accounting mirage, has disappeared.

The newly projected deficits seem not to be just cyclical. They would outlast the recession. The administration claims to want to minimize them. Budget Director Mitchell Daniels, in describing the problem the other day, summoned Congress and the country to act - to distinguish between those things the country had to do and have, and those that it could do without. But it turns out that Mr. Daniels and the president, for whom he speaks, do not intend all aspects of the budget to be subject to the scrutiny for which they rightly call. Mr. Daniels calls for spending cuts. But the tax cuts of last spring would seem to be writ in stone; not a word about canceling them, and least of all the juiciest, which have yet to occur.

No matter that they were unaffordable at the time. No matter, either, that they are a principal cause of the prospective deficits that Mr. Daniels deplores; nor that they are mainly a generous gift to the richest people in the country, who least need them. Those tax cuts are what this administration is determined to protect. To talk of fiscal responsibility after having pocketed the tax cuts is a sham.

Indeed, the administration seeks in the stimulus bill to advance the tax cuts, again at the expense of other interests. The parties had seemed to agree early on in the stimulus debate that any bill should include about $14 billion in one-time-only Treasury payments - called rebates - to low-income households that could be counted upon to spend the money. They disagreed about other features, including the accelerated tax cuts. To help resolve the disagreement, Sen. Pete Domenici proposed a one-month Social Security tax holiday, presumably as an alternative to some of the tax cuts. Now, however, Republicans are talking about it as an alternative to the rebates instead. The rebates for the poor would go; the tax cuts for the better-off would stand.

It's the tax cuts that ought to go as the economy recovers; that's how to solve Mr. Daniels' deficit problem. He expressed the hope the other day that "people who [were] not able really to separate must-do from nice-to-do items before [Sept. 11] will find it more clear now". Good advice, and we hope the administration takes it.