Now it's time for Congress to read voters' lips on tax increases - editorial

Nation's Business, Feb, 1989

Now It's Time For Congress To Read Voters' Lips On Tax Increases The presidential candidates uttered millions of words during the 1988 campaign. But just three of them probably made more of a lasting impact than all the others combined: "Read my lips."

Candidate George Bush used that now-famous remark to emphasize his opposition to tax increases to eliminate the federal budget deficit. The answer to the deficit, he said, is not higher taxes but spending discipline. That discipline, Bush added, could be achieved through his "fair and flexible freeze," which would limit spending increases to the inflation rate, exempting only Social Security and interest.

By avoiding tax increases, the Bush plan would allow continuing economic growth, which, in turn, would generate the added revenues needed to balance the budget by 1993.

Voters read his lips, liked his message, and gave him a landslide victory.

But there are those who do not accept the election results as a national consensus on the new president's basic fiscal position. For them, the tax-increase question is still open.

They argue that the historic tax-relief act of 1981 resulted in excessive revenue losses and massive deficits. The obvious solution, they insist, is to increase taxes to restore the revenue flow. That depiction calls up a vision of a legislative dam that reduced to a trickle what had been a torrent of revenues flowing to Washington prior to 1981.

But that simply did not happen. Federal revenues were $600 billion in 1981, have since incresed 76 percent--to more than $1 trillion--and will be nearly $1.3 trillion by 1993. Those numbers certainly don't suggest a shortage of income.

The basic flaw in the tax-increase argument is its failure to recognize the relationship between revenue growth and inflation.

The 76 percent income increase for this decade compares with a 40 percent increse in inflation. It follows that holding spending growth to inflation would permit elimination of the deficit within the existing revenue structure. The president's budget plan shows how income and outgo can be brought into balance by 1993.

Tax increase should be considered only if you believe that there should be no limits on federal spending and that it is acceptable fiscal policy for the government to spend every dime of available revenue and then demand more when that runs out.

The American people rejected that idea in overwhelming numbers last November. The president promised that he would eliminate the deficit without raising taxes. He has a workable plan to do just that. It's now time for Congress to read his lips.