Moynihan’s Plan to Cut Payroll Taxes Snags GOP in a Political Role-Reversal

If you happen to be a Republican, 1989 will go down in your book as the year the GOP lost one of the great political free rides of our time. For 16 years, Republicans enjoyed a luxury hard to better in politics: the opportunity to capture votes by attacking a policy they couldn’t change.

The issue, of course, was abortion. Republicans had supported the “pro-lifers,” but after the Supreme Court made clear that access to legal abortion might be in real danger, millions of “pro-choice” women who had been silent got worried and began punishing Republicans; the tables had turned. To the surprise of all, in 1990 they may turn again on another front, one of the Republicans’ most precious: taxes.

Sen. Daniel Patrick Moynihan (D-N.Y.) has startled Washington with a proposal to reduce the Social Security payroll tax. Under the policy now in effect, the Social Security system levies more in taxes than it spends on benefits. In principle, the excess goes into a government trust fund, but in practice it gets spent on general government. Moynihan calls the policy “thievery.” His proposal to get rid of the surplus would reduce taxes--and thus increase the budget deficit--by about $60 billion in the coming fiscal year. The real dimensions of our deficit problem, Moynihan says, would be unmasked. Social Security taxes would no longer provide the screen for sinful excesses.

Any proposal involving Social Security carries a jolt. But that is not the only reason Republicans are suddenly fearful. The words spreading through Washington have not been heard in years: Democratic tax cut . Just as much to the point, the brilliance of Moynihan’s plan is that this is a cut Democrats can propose in the name of fiscal responsibility--that is, to protect the integrity of Social Security and stop “hiding” the deficit.

Proposing tax cuts in the name of fiscal responsibility has become a treasured Republican gimmick. President Reagan did it in 1981, with a cut that was supposed, in the long run, to make revenues grow. President Bush makes exactly the same argument for his capital-gains cut. Republicans said, “If you want to be fiscally responsible, vote for a tax cut.” Democrats said, “If you want to be fiscally responsible, vote for a tax increase.” Not such a difficult choice.

Once upon another time, Democrats spent money and Republicans--insisting the budget be balanced--voted for higher taxes. At last, under Reagan, Republicans refused to continue being what supply-siders derisively called the “tax collector for the welfare state.” For “tax and tax, spend and spend” they substituted “borrow and borrow, spend and spend.”

This left Democrats a classic dilemma: How do you play when the other guy is behaving (in your view) irresponsibly? If a fellow passenger in a leaky boat stops bailing, should you press on? Do you really have a choice? So it was that Democrats became tax collectors for the welfare state. Year after year they were lambasted as tax lovers, with devastating political results.

Moynihan’s proposal could change all that. It could become the Democrats’ chance--after 10 years of playing Lucy holding the football for Charlie Brown--to say: “If you can cut taxes, we can cut taxes even more. Two can play this game.”

If that is what happens, then the Republicans can kiss their most valuable domestic issue goodby. Sure, they can accuse the Democrats of fiscal irresponsibility, but that is what Democrats have been accusing Republicans of for 10 years, without much electoral effect.

There would be a price, of course. The budget deficit would climb even higher.

Or would it?

For Democrats, the lesson of the decade has been how hard it is to make the other guy behave responsibly (meaning, to Democrats: support higher taxes to reduce the deficit) as long as you are willing to carry his share of the load.

Suppose that instead, the Democrats start cutting taxes and say “We’ll stop when you stop.” For Republicans, this would mean nothing but trouble. Either they start playing Mr. Responsible--just what the Democrats want--or engage in a bidding war to cut taxes and thus run up the deficit. And Bush, like the Democrats, has a lot to lose if the deficit goes up. For one thing, he could be forced to spend his presidency preoccupied with a monsoon of red ink. For another, the biggest target for cuts is the defense budget, which Bush wants to protect.

Still, a Democratic tax-cutting strategy is undeniably an economic risk. One thing the strategy is not, though, is a political risk. Keep a close eye on the Moynihan tax cut; if you are a Republican, start worrying.