When Teddy Roosevelt and his Rough Riders charged up San Juan HJill, no one could stop them. Their goal was clear, their strategy was set, they held their ranks and America emerged victorious.
Today we're fighting a much tougher battle--a battle against the inflation that has wracked our economy for the past 10 years. Ronald Reagan is leading the charge with an all-out campaign, and so far Congress has followed right behind. But now that we've reached the top of the hill, Congress has started to flinch. Will Congress falter? Will the House and Senate, in a last-minute panic, throw away our strongest economic weapon and cost us the battle?
The big question in Washington today is: will Congress actually scuttle the Reagan tax cut just when we need it most?
During the past few weeks, support for delaying the personal tax cut has grown. People are pointing to the 1982 budget deficit and they are talking in fearful tones about inflation, high interest rates and the 1982 election.
What Congress as a whole has yet to realize is that without the tax cut, a recession looms large on the horizon. In September, unemployment rose to 7.5 percent, and real gross national product has fallen slightly for two quarters in a row. Until now the slowdown has been concentrated in just a few industries, and general consumer demand has remained strong. It's fair to say that anticipation of the tax cut has kept us out of a real recession so far.
That's the way it was supposed to work. A decade of accelerating inflation has undermined investment, unbalanced the financial system and raised tax rates to the point where they destroyed economic incentives for work, saving and productivity. The Reagan program was designed to stop this economic cancer with a strong dose of monetary and fiscal restraint, But to minimize the effect this tough medicine would have on job creation and economic growth, it was coupled with a new dose of economic incentives --regulatory reform and, most important, a dramatic reduction in the personal tax burden. The idea was to cure a destructive inflation without undergoing an equally painful recession.
"Delay the tax cut and we can balance the budget." That's the new clarion call of the liberals in Congress. Yet if we delay the tax cut, we will only see a deeper recession and more unemployment. According to the Congressional Budget Office, for every 1 percent increase in the jobless rate, the federal deficit grows by $27 billion. When people are out of work, they can't pay taxes, and many have to turn to Washington for financial help.
Delay the tax cut and the deficit gets bigger, not smaller. Delay the tax cut and we will go into the 1982 election with inflation, high interest rates, high unemployment and a bigger deficit. Any way you look at it, the American people lose.
The analysis doesn't change when you couple a three-month tax cut delay with a three-month delay in entitlement cost-of-living increases. The result will still be slower economic growth, fewer taxes paid and more social spending. Yes, we need to take a serious look at reforming the cost-of- living increases for entitlement programs. But are we willing to hold the tax cut hostage on the slim hope that we can force dramatic entitlement reform through the House in the next few months? We could end up worse off than when we started--with a delay in the tax cut, no entitlement reform and a longer, deeper recession.
That's not to say that we shouldn't be worried about the size of the federal deficit. Government borrowing is keeping interest rates high, and Congress should take decisive action now to get the 1982 budget under control. We should take a careful look at the defense spending increases planned for the next three years. We should consider adjusting the cost-of-living formula for entitlement programs. We should keep the 1982 appropriations bills within budget guidelines. And if we have to increase revenues, we could raise a substantial amount of money through consumption-oriented taxes-- increase the excise tax on liquor and cigarettes, put a tax on imported oil or close some of the loopholes in our tax code.
But a delay in the personal tax cut won't solve our deficit problem. It would simply hurt our one chance to win the economic battle. When the administration first set out the economic program, it expected two-thirds of the personal tax cut to be effective by Jan. 1, 1982. As it turned out, tax rates will only be cut 5 percent by then, and that tax relief will soon be wiped out by previously scheduled Social Security taxes and bracket creep. If we delay the tax cut for another three months, we won't have any real cut in personal tax rates until fiscal year 1983. If we delay the tax cut, the true supply-side experiment won't start until Oct. 1, 1982. By then it may be too late.
Ronald Reagan was elected because he offered a hopeful new vision to the American people. He said there was nothing wrong with America that a little less government and a little persistence couldn't solve. He said it was time to unleash the creative and innovative forces of the American people, who had been held down too long by excessive taxation, inflation and government regulation. If we scuttle the tax cut now, this positive new approach to governing will never have a chance to work. We will return to the "root-canal economics" of the past--if it doesn't hurt enough, it can't be good for you. For years we were told that the only way to stop inflation was through a deep and painful recession--that we should balance the budget first and then give the people some tax relief.
Shouldn't we at least attempt a new approach to solving our economic problems?
So the questions remains. Will Congress take after the Rough Riders of old and stick with the Reagan program? Will we hold ranks long enough to win the fight against inflation? The American people could win this battle, too, if we just give the program a chance.