Too bad the Blue Dogs didn't win

Posted: Thursday, December 27, 2007

Let's hear it for the Blue Dogs. That's the moniker for a fiscally responsible group of Democrats who led the charge Wednesday against a measure that would escalate the federal budget deficit by an additional $50 billion.

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The Blue Dogs took a principled stand on a politically difficult issue. That's become an increasingly quaint notion in Washington, especially when dealing with budget deficits that have hit record highs during the tenure of President George W. Bush.

The House voted 352-64 on Wednesday for a measure to spare more than 20 million additional households from falling under the alternative minimum tax, or AMT. The vote saved those households an average of $2,000 on their taxes.

All 64 voting against the measure were Democrats, with the opposition led by the Blue Dog coalition that favors a balanced federal budget - another quaint concept in Washington.

The Blue Dogs favored providing the tax relief from the AMT, which is a one-year fix. But they were opposed to hiking the budget deficit another $50 billion.

They instead supported another old-fashioned budget principle - pay-as-you-go, or "pay-go" - that was in vogue in the latter half of the 1990s when Democrat Bill Clinton was president and the federal government rang up budget surpluses for the first time in nearly three decades.

Here's how pay-go works: If Congress takes an action that cuts federal revenues, it approves some off-setting measure - such as tax increases or spending cuts, or a combination of both - so the budget deficit doesn't rise.

It's a common-sense principle that many Americans follow. If your personal income drops substantially, you might offset that by reducing your spending and taking a temporary part-time job so you can keep paying your bills.

The Blue Dogs proposed to offset the $50 billion revenue loss by closing loopholes for offshore tax havens and raising taxes on wealthy partners of hedge funds and private buyout firms who enjoy an extremely low tax rate of 15 percent on much of their ample earnings.

Many middle-class Americans pay substantially higher marginal tax rates on their upper levels of income.

Senate Democrats couldn't muster the 60 votes they needed to avoid a Republican filibuster against the pay-go approach on the AMT legislation. Most congressional Democrats therefore reluctantly abandoned pay-go to keep the 20-million-plus additional households from being socked with the AMT.

Republicans firmly opposed pay-go, and Bush said he would veto legislation that included any tax increase (even on wealthy partners in hedge funds and buyout firms with questionably low tax rates).

That's hardly surprising, because tax cuts for the rich have been a hallmark of the Bush administration. Once Congress approved the AMT relief without a pay-go provision, Bush said he would sign it into law.

What's really scary about the red-ink budgets under Bush is that they are coming at a time when Washington should be addressing huge long-term funding shortfalls for Social Security and Medicare.

Instead Bush and Congress have been willfully raiding surplus Social Security payroll tax revenues to pay for other federal spending. Meanwhile, foreigners keep lending us more money by purchasing government bonds. All that money has to be paid back.

"We are presently borrowing from foreigners a little over $20 million an hour," Blue Dog Rep. John Tanner of Tennessee said Wednesday. "When in the name of all that is holy are you going to stop?" he asked Republicans.

Hooray for the Blue Dogs. It's a shame, however, that fiscal sanity appeals only to an outnumbered minority in Washington.

• Jack Z. Smith is an editorial writer for the Fort Worth Star-Telegram. Reach him at

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