Bare cupboard

Outside editorial

Posted: Tuesday, July 24, 2001

The following editorial appeared in today's Washington Post:

The president's tax cut has begun to limit his ability to deliver even on his own campaign promises. The House the other day passed a version of his proposal to give "faith-based" organizations a larger role in delivering social services. It included a provision to let non-itemizers deduct charitable contributions just as generally higher-income itemizers do.

But because there wasn't much room left in the budget, the proposed deduction had to be limited - to $50 a year on a joint return, rising gradually to $200. The maximum savings for most affected households, who are in the 15 percent tax bracket, would be $7.50 on next year's taxes, and $30 by the year 2010. That's tokenism.

A far more serious collision lies ahead, having to do with defense. The president recently raised his defense request for next fiscal year by $18 billion. Defense officials call that only a down payment on the strengthening and restructuring of U.S. forces that the president called for in the campaign. At one point there was room in the budget for such an increase next year, in addition to the tax cut. Then the economy weakened. It's no longer clear the money will be there, unless Congress uses Medicare reserves, which both parties, though not the White House, have vowed not to do.

Future budgets are likely to be even tighter. Assuming the tax cut stays in effect, Democrats say that to cover costs it will likely be necessary to reach into Social Security reserves as well - and that's before taking into account the full defense increase the president is expected to seek. At a Senate Budget Committee hearing, Chairman Kent Conrad said he agreed there should be a defense increase, but asked Deputy Defense Secretary Paul Wolfowitz how the administration intended to cover the cost. Perhaps through other spending cuts, Mr. Wolfowitz replied, but he didn't specify.

Mr. Wolfowitz said "no need . . . is more important than ensuring" the national defense. That's right, and we think the administration is also right that defense spending needs to rise again. But paid for how? There are only so many alternatives. They can tap the old-age trust funds, but those are already inadequate to cover the baby boomers' retirement. Or they can make other spending cuts - but the votes don't exist in either party to do so. Or they can begin to back off the tax cut. That's the right choice. The tax cut was a huge mistake, whose costs have only begun to become apparent.



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