The New Tax Law is a striking signal of the sharp reversal in political purpose that made the 95th Congress extraordinary. It abandoned the orthodoxies that its predecessors had followed for nearly a generation. This dramatic change in attitudes reaches well beyond taxation, and it is being generated by a stagnation of the economy that has already run at least five years.
Successive Congressess had whittled away at the tax code for years, making it generally a little more progressive, shifting the burden slowly to the wealthier taxpayers. Throughout the 1960s, but particularly during the Nixon years, presidents and Congresses had joined in a massive expansion of social benefits to citizens, most notably in old-age pensions and medical care. The numbers of people living in poverty steadily declined. It was all financed out of economic growth - which, during the long boom of the 1960s, was phenomenal. As long as the size of the pie kept increasing, it was never necessary to reduce the incomes of some in order to give more to others. The only question was over the distribution of the dividends of growth.
But that pattern of growth ended in the early 1970s. Last week the Labor Department published figures showing the earnings of wage and salary workers, corrected for inflation, have not increased over the past year, in fact, remain lower than they were in 1973 before the recession. If the pie is no longer growing, then the political implications of the old policies change profoundly. In order to give more to some, it would become necessary actually to reduce the incomes of others.
In retrospect, it looks as though the curve of prosperity began to flatten out about a decade ago. But the country had other preoccupations: Vietnam, Watergate, a presidential election. It was only after they passed that the country began to take account of what seemed to be happening.
Even during the recovery from the recession, unemployment stayed high, and gains in labor productivity - the key to higher standards of living - stayed low. Business investment was below expectations, and an American loss of competitiveness was visible in world markets. The 95th Congress was forced to wonder if there wasn't some substance to the rising complaints from business. That concern underlies not only the business tax cuts, but the failure of most of the labor movement'a bills over the past two years, and the new sensitivity to charges of over-regulation.
The 95th was cautious. Most of the business world urged large relaxations in environmental and safety rules. Congress considered the subject, and decided to make no significant retreats. But the same Congress took very seriously the claims that risk-taking and investment were being penalized to a self-defeating degree, and it cut the capital-gains tax substantially.
An assembly of 535 people does not change its political direction easily or unanimously. The evidence of ambivalence, and the warfare between old and new purposes, was everywhere - but never clearer than in the Humphrey-Hawkins bill. Ludicrous though it turned out to be, it is also deeply interesting. It became the point at which Congress tried to reconcile explicitly the conflict in values that informed the whole life of this Congress. The bill sets a goal for unemployment, and another for inflation, and others for budget balancing and ending the trade deficit and the economic equivalent of sunshine on Sundays but rain for the crops. Nobody thinks that all of those conflicting targets will be reached - or indeed any of them. The bill will stand as a naked illustration of the tensions that ran through this Congress's work.
But it's the tax laws that are the working definition of social equity in this country. It's there that you will see the clearest expression of the 95th Congress's policy, and its sense of political direction. The tax bill was the last, literally, in the deluge of legislation that it passed. When it cut the income-tax rates, it gave more than three-fourths of the benefits to taxpayers with incomes above average. The time for experiments had ended, the 95th said, and the time had come to take care of the better-off.