Newtered

Newtered Late last month, following House passage of the central and most contentious element in Washington's pending budget deal, Newt Gingrich was euphoric. He'd been having a rough time of it,...

...Two words: Newt Gingrich...
...Then Congress went home for the July 4 recess...
...As one House Republican explained it to the New York Times, they decided at the last moment that bringing down the speaker might "jeopardize the tax cuts and balanced budget," which would be even more frightening than keeping Gingrich in his chair...
...That would be "welfare," House Ways and Means committee chairman Bill Archer insists...
...For some people, it turns out, the child tax credit has a child tax penalty built right in...
...Steve Forbes, for instance, wants a cap-gains rate of zero and thinks the existing top rate of 28 percent is a travesty—a "get lost" message to "the budding Bill Gateses and Andy Groves of the world...
...And we fear there's little the Republican party might do to forestall such unpleasantness...
...Truth be told, the tax bill is already perfectly "middle-class," and it is nothing to sniff at...
...By about $63,000 of family income— roughly the national median for married filers with three or more children—the child credit will be worth only about 60 percent of its face value...
...Washington is all abuzz over the House Republicans' aborted coup against their speaker...
...It will not save them from their Gingrich trouble...
...His aides went around Capitol Hill handing out brightly colored smiley-face stickers to all takers—"to show how happy we are...
...It seems likely to come down a bit this year...
...In another conservative corner, there are spending hawks outraged that the budget deal takes a powder on the government's domestic programs...
...So pointless...
...The only significant partisan issue that remains, so for as we can tell, is taxes...
...We do so advise—but we're not holding our breath...
...I don't want to start talking about veto now," he says...
...How did Republicans come to this pass, a situation that's bound to hurt them short-term, and probably won't much benefit them in the future...
...No, it seems the GOP pulled back from regicide . . . well, ostensibly to protect the budget deal...
...We bet Clinton next turns around and signs an only slightly altered tax bill into law, having faked the Democratic party's class-conscious activists into believing he's determinedly on their side...
...So if Bill Archer does get his way on the earned-income tax credit, our hypothetical family of five will not get the child credit until it earns at least $25,000...
...The tax cuts involved, the capital-gains rate reduction in particular, strike them as insultingly small...
...The "AMT" is a sinister part of the federal code that establishes an income-adjusted floor on tax liability...
...If hotter Republican heads prevail, however, we bet Clinton does veto the tax bill—just once, for show...
...But as it moves up higher still, the alternative minimum tax will begin to reduce that family's child credit...
...We bet he then spends a couple of weeks brutalizing the GOP for being too solicitous of the "very wealthy...
...But let's face it: Few Republicans are currently willing to set themselves on fire for a radical cut in capital gains...
...On June 27, White House spokesman Mike McCurry said Clinton would "veto legislation that blows a hole in the deficit...
...And no one's talking about changing it...
...This weird, unfair, give-and-take effect appears inevitable as long as the AMT isn't changed...
...In 1995, the speaker made a fetish of balancing the budget in the year 2002...
...And, weirdest of all, the AMT will hurt worse the more children you have...
...That is Gingrich's doing more than anyone else's...
...The bipartisan agreement reached two months ago approves only modest structural reforms of entitlements like Medicare, and instead saves money for that program primarily by squeezing its payment schedules...
...Above this income level, in the next-highest tax bracket, the child credit will then be slowly and perversely increased, until you reach $110,000 in annual income...
...Gingrich now promises that he will withhold the spending bills necessary to fund basic federal operations until the president signs a tax bill Republicans want...
...The Republicans are hell-bent on their "historic" budget goal, and chances are they'll get it...
...Worse, the budget deal endorses five years of above-inflation growth in so-called discretionary spending...
...But Treasury secretary Robert Rubin has sent Congress a ridiculously long letter outlining dozens of complaints about the House and Senate tax bills...
...Any part of the child credit that would cut a family's taxes below this floor will thus be disallowed...
...Now, with progress toward tax cuts to brag about, Gingrich thought he might finally be out of the woods...
...The budget deal's no big deal...
...The president himself has been careful to demur on this question...
...It's a problem so complicated that only a single newspaper, the Wall Street Journal, has noticed it...
...That top rate is too high, no question...
...It's a band-aid cure, and before anyone knows it, the band-aid is bound to fall off...
...Senate Republicans and the White House disagree, and Archer may yet have to give way...
...Inflation will make its bite more severe over time, sucking more and more families, over a greater spread of incomes, into the maw...
...Then, as that family moves up the income ladder and owes more income tax, it will get increasingly more of the credit...
...The fetish of 2002 remains everything...
...Just as Gingrich himself still thinks that the budget deal will help save his job—and improve his abysmally low public standing...
...But that possibility looks increasingly remote, and advising the GOP to abandon the deal looks like an increasingly impractical project...
...David Tell, for the Editors...
...The Republican party in Congress, alas, now stands for almost nothing if it doesn't stand for a budget deal...
...But there is a similar problem with the per-child credit further up the income scale...
...The most important bit of relief, a $500 per-child credit, may not be available to most families earning less than $25,000 a year...
...The president is "deeply concerned" about any number of "unacceptable" provisions, Rubin reports, and Clinton will have "major objections" if those provisions are not repaired to his satisfaction...
...For the moment, at least, the rest of us may have to muddle through as well...
...It was on precisely that basis that The Weekly Standard opposed the deal when it was first announced in May...
...But that doesn't matter to the current GOP...
...For everyone else, the child credit is probably better than nothing...
...The federal administrative behemoth will expand, a result that contradicts everything the Republican party and conservatism are supposed to embody...
...Gingrich is a big problem, in other words, but Republicans still generally think that a popular budget deal will help mitigate that problem...
...But it's not all it's advertised to be, either...
...Dream on...
...The budget deal will not save Republicans from their obligation to stand for something...
...And if the deal should eventually fall apart, it'll be okay by us...
...It'll never happen...
...Oh, good: another government shutdown...
...If you are a married couple with three or more children (or a single parent with two or more children), and you have child-care expenses but no itemized deductions, the new child tax credit may well force you to file an "alternative minimum tax" return...
...given the economy, it would probably be balanced without a deal sometime late next year...
...We bet Clinton will claim—and receive—the bulk of public credit for fashioning a "truly middle-class tax cut...
...Two weeks later, the smiley faces have all turned sour...
...It will not save Newt Gingrich from himself...
...Why did the anti-Newt plot fail...
...A relatively small but by no means atypical class of taxpayers is involved, in families comprising maybe 2 million children...
...The "earned-income tax credit" those families already receive erases their federal income tax liability, and some House Republicans do not want to reimburse them for Social Security and Medicare payroll taxes...
...In his messianic way, convinced that he might govern America from the House of Representatives, like Henry Clay in 1812, he managed to impose that fetish on his entire party...
...Not because Hill Republicans love the man...
...He'd been having a rough time of it, given all those persistent stories about bitter discontent among backbench Republicans...
...And Newt appears beyond salvage...
...In simplified form, the problem works as follows...
...There are conservative supply-siders who want to scrap the entire emerging budget and start from scratch...
...After all, the actual Bill Gateses and Andy Groves of the world somehow managed to become billionaires under the existing cap-gains regime...
...But it's much too slapdash to merit praise as "tax reform...
...Having failed to secure it by force majeure in 1995, Gingrich and the rest of them are doubly determined to deal it into existence in 1997...
...The coolest Republican heads on Capitol Hill want to delay final tax action this year until after they've got a bill the president has promised to sign...
...It's been clear for at least a month that they would oust him in an eyeblink if they could figure out a way to do it cleanly...
...They're right, of course...
...Republicans no longer need a deal to balance the budget in 2002...

Vol. 2 • July 1997 • No. 45


 
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