The Art of the Deal (Continued) : Budget accord is least Washington should do

Two separate but related issues face the nation as Washington grinds toward a budget. The first is economic: What will be the final menu of increases in revenue and decreases in expenditures, and what are the economic objectives of those changes? The second is political: Has the process been equal to the challenge?

THE ECONOMIC ISSUE: The degree of hard economic reality in the competing arguments between Democrats and Republicans is a great deal less than the sound and fury out of Washington would suggest. Should top-income Americans be hit with a surtax or a reduction in exemptions? At this point the White House and Congress, in a kind of Alfonse and Gaston act, are largely splitting hairs.

The final package needs to move the Treasury toward a less unbalanced budget without adding to recessionary pressures. Some economists argue that the economy is poised on the precipice of a recession, if not worse, and that any spending reduction or tax increase will push it over the edge.

This argument is speculative. It is also counter-intuitive. The enormity of the federal deficit, with all its interest-due bills, is such that the government’s voracious borrowing appetite competes perversely for private capital that could go to more economically productive uses. The real-world goal is not so much to eliminate the deficit (at best only a theoretical possibility) as it is to eventually reverse the ever-stratospheric trend line. The economy will be liberated, not suffocated, if the trend is reversed.

In theory, the crafting of the final economic package by Congress should reflect the golden rule of greater progressiveness in taxation. It is a most wonderful and inspiring notion indeed to speak of a tax system that taxes according to the ability to pay. In truth, alas, no tax system America has ever devised has achieved that goal convincingly. As Times’ Washington correspondent Tom Redburn reported Monday, “For all the current political firestorm over taxes, one unsettling fact remains: The tax system has proven largely ineffective in overcoming widespread disparities of wealth and income among Americans.”

THE POLITICAL ISSUE: Washington ought to do its job and be done with it. And that means agreeing on a budget. Families do this all the time. Corporations have to do it, too. So do churches. Girl Scout chapters. PTAs. Coffee shops.

The political issue, then, is the question of institutional competence. The currents of discontent muddying the political waters these days derive from that sort of question. Oklahoma recently passed a term-limitation measure in protest, and many polls show that may occur next month here in California as well.

Nothing that has happened in Washington these past weeks is likely to stem the rising tide of voter frustration. Washington must overcome its divisive partisanship and reach for statesmanship. A budget accord must be achieved. Congressmen returning home to campaign for reelection may also find that a posture of statesmanship is good politics--assuming it’s not too late to fool the people.