Observing its performance since last November, good people everywhere view the future of the Democratic Party with growing indifference. It is run by lawyer-operators with no commitment to any particular political values. It is filled with politicians who will do or say anything for a word or a dollar of support. It represents a dwindling collection of special interest groups whose interests are less and less those of either the general populous or the tired and poor. In the face of the conservative ideological revival, the Democratic Party has collapsed not just politically but morally.
The party's abjection can be measured by studying the economic program that is taking final shape on Capitol Hill, and by comparing it with the original Reagan proposals of last February. The two are quite similar, of course. Reagan has gotten his way on most things. This is a measure of the Democrats' political humiliation. The moral humiliation is that the final program is worse for traditional Democratic values than Reagan's initial plan. The poor, the working class and indeed the country would have been better off if the Democrats had played no role at all in shaping the forthcoming tax and budget cuts.
The Democrats have done practically nothing to mitigate the general unfairness of Reagan's scheme. Instead, they have concentrated on saving or inventing various special goodies. This is less a strategy than a panicky surrender to lobbying pressure by politicians desperate for support from any quarter. Indeed, the Democrats have sabotaged their own best strategy. Reagan's millions of middle-class supporters don't yet realize that his economic plan, proudly billed as "not a redistribution program," in fact, redistributed money from people like themselves to a thin stratum of the economic elite. Democrats should be roasting the Reaganites with language like this:
"They went out and gave 2,500 wealthy speculators on the floors of the Chicago Boards of Trade and other commodity exchanges a tax break of $400 million. Now, couple that with what they've done in the oil field, offering the oil producers 1,000 barrel-a-day exemption from windfall profits [tax]. They don't have a poor man's bill. . . . They're trying to buy their way to victory over us."
Sound good? Too bad. It was Treasury Secretary Donald Regan talking about the House Democrats on CBS's "Face the Nation" last Sunday. Leaving aside the potential social uses of $400 million, the political futility of the whole exercise makes you want to cry. How many of those 2,500 wealthy commodity speculators, do you suppose, are actually going to vote Democratic?
The House and the Senate have passed slightly different versions of Reagan's budget cuts for fiscal 1982. The House, you may recall, has a Democratic majority, but Reagan was so pleased with what they produced for him that he asked the Republican Senate to accept the House version. The senators declined, and the bills are now in conference. There will be no unseemly quarrels over social welfare. In February, the notorious "Stockman Hit List" proposed cuts of $1.8 billion in the food stamp program. The House graciously cut $1.9 billion. Reagan wanted to change the rules for Aid to Families with Dependent Children in order to prune $520 million. The House came up with over a billion. After such fine frugality, the members may perhaps be forgiven for cutting only $1.5 billion from the child nutrition program when Reagan has asked for $1.6 billion.
Lesser programs for the poor also fared badly. Reagan wanted to reduce subsidized housing construction from 260,000 units in 1982 to 225,000 units. The House knocked it down to 162,000 units. (The Senate won this particular Dutch auction with a low bid of 150,000.) The low-income home weatherization program disappeared without a trace, as Reagan wished. The Legal Services Corporation was saved, but at greatly reduced funding. Only a few health and social service programs were rescued from plunging into those black holes labeled block grants to the states.
But let it not be said that the Democrats stood idly by while all the great edifices of government were dismantled. When one has only limited influence, one saves it for important things like, um, agricultural price supports. The administration proposed saving the government a billion dollars, and consumers even more, simply by not raising price guarantees for dairy farmers. The House courageously rejected this callous idea. House Democrats also got an implied promise from Reagan to cooperate in an expanded sugar price support program. High sugar prices are something every decent society should guarantee its citizens, don't you think? And no farmer should be expected to pay today's high interest rates just because everyone else does. So thank goodness the House found enough mnoney, against Reagan's wishes, to continue, and even expand, the subsidized loan program of the Farmers Home Administration.
Nor was the House deaf to the hungry sobs of large exporters like Boeing. Reagan wanted to limit Export-Import Bank loans to $4.4 billion, but the House found another $600 million in its heart. Carter domestic adviser Stuart Eizenstat broke his silence on Reaganomics to plead for this one in The Washington Post, so you know it must be an important progressive issue. In these difficult times, Medicare patients must expect to pay a larger "contribution" for their health care, but David Stockman went too far in proposing higher user fees for government services to private airplane and yacht owners. Reagan quietly ditched this shocking proposal, with the Democrats' blessing.
Is this inventory unfair to the Democratic leadership? After all, the final House budget was the product of a coalition between Republicans and dissident conservative Democrats, who overturned an alternative budget worked out by the Democratic majority. "These are the times that try men's souls, and make no mistake about it," said Speaker Tip ONeill shortly before the vote. The defeat of O'Neill's budget, on June 26, was treated in the press as an epochal shift of the political wind. Perhaps it was, but the defeated Democratic budget was a pretty tattered pennant for liberal hopes to rally around. It proposed slightly smaller cuts for AFDC, for Medicaid, for education and for other social programs. But most of the matters for which the Democrats took their historic dive were the very sorts of things that give big government a bad name.
The Democrats, for example, wanted to keep giving out federal student loans to everyone, regardless of income. The Republican administration asked for, and got, a means test in order to limit these heavily subsidized loans to those who need them. Which position is more progressive? Reagan will save $900 million by adjusting federal pensions for inflation only once a year instead of twice. Social Security is only adjusted once, and the vast majority of private pensions aren't adjusted at all, yet the Democrats fought and died in a failed attempt to preserve this perk, along with subsidized school lunches for middle-income and affluent children. The Speaker waxed eloquent that evening about the cruelty of denying million of old people the Social Security minimum payment. This is a controversial provision that benefits some worthy unfortunates, some who could qualify for other government help, and some federal retirees who are "double-dipping." No one knows for sure how many of each. But the Democrats didn't really propose to save this equivocal bit of distributive justice. They proposed to let present retirees keep it and future retirees do without. The Republicans declined to pay hush money to the elderly lobby. Which approach was more principled?
The progress of the tax bill since February has been even more startling. Someone ignorant of American politics, observing the debate, would assume that the Democrats were quite literally the party of millionaires. Reagan amended his original proposal once in attempt to get Democratic support. That version has passed the Senate Finance Committee. But last week the House Ways and Means Committee passed its own version, and the Democratic leadership is planning an all-out fight to avoid another defeat on the House floor.
The Democrat's proposed two-year personal tax cut is skewed ever-so-slightly more toward a moderate income people (a matter of $45 to $60 for someone making under $30,000). They hope to get great political mileage out of this, though the Republicans are waiting in ambush with the message that their three-year cut is bigger for everybody in the end. Both plans give the most dramatic cuts to investment income of people in the top brackets. For business, the Democrats are adamant in their assurances that they have matched the Reagan offer dollar-for-dollar, though they have done it in different ways. "Under our proposal, those people can buy a Mercedes Benz in only four years," Rep. Kenneth Holland (D-S.C.), bragged last week. In fact, the Democratic plan eventually will let a Mercedes be written off in one year. The Democratic plan makes marginally more sense. After a long phasing-in period, it would in essense impose no tax at all on the profits from business investments. The Republicans, by contrast, would have negative tax rates (the government pays you) on some investments, positive tax rates on others. Both plans represent a dramatic shift in the tax burden from capital to salaried labor.
President Reagan was prepared to stop there, for the moment. But to assauge the Democrats -- the Democrats! -- the administration-approved Senate bill now also includes a huge reduction in the estate tax; a tax break for business executives who get stock options; and tax exclusion for $750,000 and more of income earned abroad. Rep. Wyche Fowler (D-Ga.; successor to Andrew Young), pointed proudly to this last tidbit last week as an example of the Democrats' concern for "Americans in upper income brackets." The Senate bill also includes the ludicrous "All Savers" tax-free savings certificate pushed by the savings and loan industry. Far from benefiting "all savers," the provision will give a tax break only to a typical taxpayer making more than $40,000 a year. To pay for it, the bill eliminates a $200 interest deduction that really was available to all savers. The savings and loans themselves admit that of the $230 billion they hope to bring in with this gimmick, only $5.5 billion will be new savings.
Daniel Rostenkowski, Democrat of Illionis, chairman of the House Ways and Means Committee, is not going to sit idly by while the Republicans give away millions. Why should they get all the credit? He is determined to match every offer in the Senate bill, and raise them on a couple. The question, he said last week, is "whether you want to lose courageously, or to win." On the estate tax, for example, he outbid the Republicans by adopting all their changes and adding a 28 percent tax cut for estates over $2.5 million. The Senate proposed a $2,500 credit against the windfall profits tax for oil royalty owners. The windfall tax, says the committee report "may impose a hardship on may low- and middle-income taxpayers." No dount it is some sort of hardship to pay $2,500 in taxes, though this hardship is mitigated by up to $30,0000 in oil revenues such a tax represents. But why stop there in your concern for low-and-middle-income taxpayers? Rostenkowski wants to exempt a thousand barrels a day from the windfall tax. This represents a cool $12 million a year per operator.
The Republican-controlled Senate Finance Committee, in a moment of dizziness, actually voted to close a complex loophole known as the comodity tax straddle. Rostenkowski's committe, hearing the pleas of those 2,500 commodity speculators, voted to narrow the loophole but not close it.
What is the point of a political party with so little sense of its own constituency that it behaves in this way? Charles Mannatt, the Democratic Party chairman, is a Sunbelt-style lawyer from Los Angeles (real estate, entertainment, banking, and so on). I suspect he knows precisely how a commodity straddle works, and hasn't a clue about the eligibility rules for AFDC. But his firm's Washington office will propser, just as that of his predecessor, Robert Strauss, is prospering. Al Ullman, Rostenkowski's predecessor as chairman of Ways and Means, is now a Washington "consultant" and hired lobbyist for the group working to gut the estate tex. Rostenkowski may think a similar niche awaits him. But if the Democrats keep devaluing their own souls, others may conclude that this merchandise is no longer worth buying.