The President Plays the Fairness Card : Economic reform is likely to hang on the public’s perception

T o tax and to please, no more than to love and to be wise, is not given to men. --Edmund Burke Bill Clinton should take comfort in these words of the 18th-Century statesman. The President confronted hard choices in shaping his controversial economic plan, which includes massive tax increases.

Taxation has been imposed by governments since ancient times as a means of distributing individual wealth to provide for the common good. Inherent in it is some degree of inequality. As part of the social compact, citizens are taxed to pay for services needed for the mutual good, such as highways. In exchange, government seeks to provide the common benefits and services. When the compact holds up, the common good is viewed as more important than how much an individual taxpayer directly benefits.

Is Clinton’s economic plan fair? Given the political and economic realities of forging a deficit-reduction plan that is pragmatic and doable, the plan has the virtue of spreading demands across the board. But many, especially those hit the hardest, will find it fair only if it leads to the serious deficit reduction and economic stimulus that the electorate clearly yearned for last November.

The Administration has come up with a progressive program with sacrifice spread across age, geography and wealth. Of the higher taxes, 30% would be paid by those with incomes below $100,000; 70% would be paid by those with incomes above that. It is the biggest change in the direction of government since Ronald Reagan occupied the White House.

Clinton’s plan calls for $325 billion in deficit reduction over the next four years, through $274 billion in new taxes and $80 billion in net spending cuts. His program is most vulnerable on spending cuts because they are far exceeded by tax increases. Skepticism abounds on whether Congress will cut spending enough to make a significant dent in the $300-billion-plus deficit. The President said there will be no new taxes without spending cuts. Indeed, he has said he is willing to negotiate more cuts before pressing for passage of his $16.3-billion stimulus.

Clintonomics is an exercise in spreading the pain of deficit reduction, with the assumption that those who make more can afford to pay more. For the wealthiest 1.2% of taxpayers, the tax burden would rise.

For families with two children with a collective income of no more than $30,000 a year, the President has proposed increasing the earned income tax credit. This means, in effect, that poor working families would have a smaller tax burden.

The most broad-based of the tax proposals, the energy tax, would add less than $20 a month to the bills of a family of four, according to Administration estimates.

As a deficit-reduction program, the Clinton plan was designed to help nudge long-term interest rates lower. That has begun to happen. If the move continues, lower rates would make home buying and mortgage refinancing cheaper. The Treasury would save too. The Administration assumes that $32 billion less would be spent in interest on the national debt over four years.

To the individual taxpayer, fairness often is a computation of what he or she gains or loses. But as the President said, what Americans have to gain together is what really counts. Clinton, ever the political pragmatist, is attempting to play the fairness issue to prod Congress toward a dramatic change in U.S. domestic economic and social policy. Whether he succeeds may ultimately depend on public perception.