As Republicans and Democrats resume their trench warfare over the budget, one basic fact remains: the substance of the debate continues to be defined in Republican terms.
Partisan rhetoric to thhe contrary, the sterotyped bigspending Democart has all but vanished from the scene. Despite a recession and 9 percent unemployment, there is no serious consideration in the Democratic House of a jobs program to put people back to work. The Federal Reserve's tight money policy has come under modest fire, but nothing like the attack that could be expected from liberal Democrats in their prime.
Instead, one of the fundamental budget conflicts last week was whether to cut non-defense programs by $35 billion (the Democratic stance) or by $60 billion (the administration position.).
For House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.), the starting point in the bargaining was the acceptance of $35 billion in reduced federal spending for social programs over three years.
O'Neill, the quintessential Democratic liberal with the Boston accent and wheel-horsephysique, who has been characterized in Republican political commercials as the symbol of deficit spending, had accepted a basic Republican tenet: that federal spending for social programs had to be cut.
This remarkable situation results from the key victory of the Reagan administration: the $749 billion tax cut enacted last year.
The supply side theories behind the tax cut may be in disfavor among many legislators, but the consequences of the tax cut remain the dominant factors in the debate.
The 1981 Economic Recovery Tax Act effectively mandates that legislators seek additional ways of cutting federal spending to avoid economically and politically disastrous deficits. The tax cut will result in a growing erosion of federal revenues -$37.7 billion in the current fiscal year, $150 billion in 1984 and $267.7 billion in 1986.
This erosion represents the fulfillment of conservative dreams. The tax cut explaind why the debate has stayed within the terms defined by Republicans, despite the deterioration of President Reagan's popularity in public opinion polls.
And that is the reason Reagan has remained so firmly behind the third year of his individual tax cuts. "We had to reduce the share of the people's earnings the government was taking in taxes," the president said in his televised speech Thursday night. "Because government always finds a need for whatever money it gets, the cost of government continues to go up."
While making concesisons in the budget negotiations on theneed to raise new revenues, administraton representatives generally sought temporary taxes on energy or on individuals, which would not permanently set back the reductions mandated by the 1981 legislation.
In addition, Reagan is now strongly pressing for enactment of a constitutional amendment to balance the budget. This would function not only to deflect some of the political embarrassment resulting from the record deficits during his own administration, but also to protect the stragegy of forcing continued reduction of the federal government:
"With the stick of a balanced budget amendment, we can stop government's squandering, over-taxing ways and save our economy," the president said in his speech.
While Reagan is working to keep the economic debate structured in essentially conservative terms, Democrats are having difficulties in substantially capitalizing on what is emerging as their best issue: fairness.
As public opinion polls have shown growing voter perception of the Reagan administration as favoring the rich and disregarding the poor, Democrats have repeatedly mounted verbal attacks on alleged inequitable policies.
But one of the key sources of public discontent has been the Reagan tax bill, particularly provisions that are seen as giving excessive benefits to corporations and the very wealthy. Whether or not the complaints are justified on economic grounds, public opinion polls show opposition to the breaks for oil companies and to corporate tax leasing running well over 75 percent. Support for a tougher corporate minimum tax runs over 80 percent.
In the case of the corporate tax leasing and minimum tax, however, the initiative has been taken by, of all people, a Republican -Sen. Robert Dole of Kansas, chairman of the Finance Committee.
Not only has Dole taken these issues for his own, despite the fact that they would appear to be gold mines for Democrats, but he also has seized the tax reform issue generally, developing a multibillion-dollar list of loopholes largely benefiting the affluent, many of which he plans to propose to his committee for closing in coming weeks.
In contrast, Rep. Daniel Rostenkowski (D-Ill.), chairman of the House Ways and Means Committee, has remained silent on specific tax initiatives. He has, in fact, indicated that he will defer to Dole, apparently calculating that the policical liabilities of initiating new taxes outweigh the benefits of taking the lead at a time of public discontent.
Rostenkowski is giving serious consideraton to closing the committee sessions when final decisions are made, to focus attention on Democratic opposition to the administration.
In addition, the Chicago Democrat has indicated that he may support repeal of the third year of the tax cut for individuals. This would help the deficit situation, but is does not necessarily address equity issues.
The 10 percent rate reduction scheduled to go into effect on July 1, 1983, is the least beneficial to the very wealthy, who have already benefited from first-year features of the act -the reduction inn the capital gains rate from 28 to 20 percent, and the reduction off the maximum rate on unearned income from 70 to 50 percent.
For those making over $200,000 a year, repeal of the 1983 tax cut would mean the loss of only 5 percent of the total benefits from the act. For everyone else, particularly the working class and middle class the Democrats are attempting to bring back into the fold, loss of the third year means the loss of about 40 percent of the total tax break.
In another quirk of political strategy and ttax distribution, mos Democrats have been strongly opposed to indexation of the system -adjusting rates to compensate for inflation.
If, however, indexation were limited to a one-year experiment, and substituted for the 1983 individual rate cut, it would result in a more progressive distribution of the tax cut as well as a significant reduction of the revenue loss. Both of these results should appeal to Democrats.
This proportion of the cut going to the lower-middle class would increase by about 3 percent, the share to the middle class would stay the same, and for the wealthy it would drop by about 4 percent. This shift results because indexation also increases the standard deduction and personal exemption, both of which function to give more of a tax break to the working poor and lower-middle class.
It is clear that the current debate over tax policy will in large part define the future political posture of Republicans and Democrats, because of the magnitude of the tax revenues that must be raised to reduce budget deficits; both sides agree that more than $110 billion must be raised over the next three years.
While there is no coherent tax strategy among Republicans or Democrats, the stance among Democratic leaders in Congress has been conspicuously more negative and passive than Republican leaders. Sen. Pete V. Domenici (R-N.M.), chairman of the Senate Budget Committee, who has joined Dole in seeking closure of a number of tax loopholes, is exploring ways to place controls on tax "expenditures" or tax preferences, many of which benefit the wealthy.
If this continues to prove the case, Republicans will have co-opted an issue most readily available to the Democrats.