The staying power of the governing class amidst the menance of the Reagan revolution was demonstrated when one of its audacious operatives, Alice Rivlin, proposed to solve the budgetary crisis with a $156.3 billion, five-year tax increase.
Considering the election returns, it is a wonder that Dr. Rivlin keeps her key post as director of the Congressional Budget Offict. With presumably conservative leadership taking over both the House and Senate Budget Committees, her days seemed numbered after Nov. 4. In a feat of bureaucratic brinksmanship, she has kept her job -- and more.
She outdoes the Abbe Sieyes, who, when asked how he spent the French Revolution, replied: "I survived." Not content with surviving, Rivlin is captain-general of the tax counterrevolution. At a time when anti-tax sentiment is a major element of President Reagan's electoral mandate, Rivlin is using the prestige and facilities of the supposedly bipartisan, non-political CBO to maintain the governing class that lives off big government: bureaucrats and their satellites, plus numerous elected officials. g
But she may have gone too far. CBO's 187-page document of Feb. 3 on "reducing the federal budget" is so blatantly counterrevolutionary that it revived efforts to replace her. Rep. Jack Kemp, chairman or the House Republican Conference and a new addition to the House Budget Committee, says that "she must go" -- a sentiment many other Republicans privately second.
The Feb. 3 document was in response to a request from the House Budget Committee for possible cuts in both fiscal year 1982 and the next five-year budgetary span. CBO's nearly $50 billion in proposed cuts for 1982 received news media attention as a helpful bluepring for President Reagan. No news accounts pointed out and few congressmen perceived that the Rivlin strategy undercuts the Reagan revolution.
Of the $50 billion for fiscal 1982, $21.4 billion actually is in extra revenue picked up by charging the Internal Revenue Code to eliminate various tax deductions. Over five years, that amounts to a $156.3 billion windfall for the federal Treasury.
But how is it possible to include tax increases in a document titled "reducing the federal budget"? The answer is found in the old bureaucratic euphemism "tax expenditure" -- the amount of money a deduction or credit cost the Treasury. Inplicit in this terminology is that all funds inherently belong to government so that any deduction becomes a gift or an "expenditure" to the taxpayer.
Specifically, Rivlin suggests ending these "expenditures": deductions of interest on consumer debt ($6 billion for fiscal 1982 and $39.6 billion for five years); home mortgage interest deductions over $5,000 ($4.3 billion and $35.6 billion); medical expense deductions less than 10 percent of income ($12.2 billion and $14.3 billion), and the extra tax exemption for the elderly ($2.5 billion and $15.6 billion).
Almost all of this falls on middle-income taxpayers who itemize their returns. Thus, Rivlin's strategy not only undercuts the Reagan premise that the aggregate tax burden is too great but is concentrated on the beleaguered middle class, which enjoys neither the capacious tax shelters of the rich nor the multiple welfare benefits of the poor.
Yet the governing class stubbornly adheres to the notion that Reagan can resolve the economic crisis only by breaking faith with the middle-income voters who supported him. Robert J. Samuelson, the esteemed economics writer for the National Journal, has proposed an anti-inflation program with eight tax increases -- mainly for the middle class. a
Rivlin does not echo Samuelson's 30-to-60-cents-a-gallon gasoline tax but outdoes him quantitatively with 15 separate tax increases (not to mention extra IRS agents to bring in $1.5 billion in new taxes over the next five years).
As unpopular as Rivlin's counterrevolution is on Main Street, it gets respectful treatment on Capitol Hill. Rep. James Jones of Oklahoma, the House Budget Committee's supposedly conservative new chairman, commented favorably on ending the deduction on consumer interest. n
Friends of Jones had inferred from his private comments that Rivlin's head would roll at CBO after a moderate-conservative coalition elected him chairman over liberal opposition in the House Democratic Caucus. But Jones now says he has found Rivlin quite cooperative and has no intention of firing her. That makes the cautious Republican chairman of the Senate Budget Committee, Sen. Pete Domenici of New Mexico, even more fearful about sacking Rivlin, pleading lamely that he does not want to "politicize" CBO.
But Kemp, Sen. Orrin Hatch of Utah and other Republican Budget Committee members believe CBO must be scrupulously non-partisan in a divided Congress, not the vanguard of the tax counterrevolution. Whether they persist or not will be a test of the Reagan revolution's tenacity and future prospects.