Congress A Disgrace

Congress is a disgrace!

There is no subtle phrasing that can describe its rejection of seven (7) "compromise" budgets before rushing home for the Memorial holiday.

Oh, a minority of Congressmen is conscientiously trying to construct a realistic tax-spend blueprint.  The majority, however, is show-boating for the special interests they have come to believe keep them in office.  

The affable President Reagan has turned a little testy over the impasse.  

First he demanded there be no new tax increases.  But he yielded to $55 billion in new taxes over the next three years after House Leader Tip O'Neill wept for the poor.  

Then the born again House budget committee proposed still higher taxes with which to lower those recessionary deficits Congress had created by past spending excesses.  It all sounded so Reaganomic that the President endorsed $122 billion in new taxes - including a delay in the three-year tax cut he had counted on to rejuvenate the basket-case economy he had inherited.  

All of Reagan's compromising was in vain.  He was out-maneuvered by Tip and now has neither budget nor a credible supply-side program.  

"The budget process is taking a sharp turn toward confusion," Reagan charged.  "The Democratic leadership of the House seems to be bent on running a legislative process that will lead to no resolution of the 1983 budget.  

"The ... .program for arriving at a budget is about the most irresponsible, Mickey Mouse arrangement that any governmental body has ever practiced," growled the President.  

Budget experts estimate that if a resolution is not passed within the next few weeks, existing spending levels will drive up the deficit to nearly $200 billion.  This would be twice Reagan's original budget proposal, and even that is simultaneously attacked as

(1) dangerously high for economic reasons and
(2) cruelly low for humanitarian reasons.  

Figure that one out!

The hang-up in the budget debate revolves around the ability of wage earners and investors to cough up more tax booty.  The liberals want more social spending.  Conservatives want more defense spending.  Only Congressman Jack Kemp and a few other supply-siders still press for a balanced budget.  

In the hullabaloo a new idea is being discussed seriously in Capital cloakrooms - scrap the present graduated income tax system and replace it with a flat-rate tax on personal and corporate income.  No exemptions.  No deductions.  No credits.  No loop holes.  

The proposal was first made by William E. Simon, Secretary of the Treasury under President Nixon.  Simon suggested a 16 percent, across-the-board tax for everyone.  The idea was howled down as a rip-off of low and middle-income workers to benefit the rich and the big corporations.  

Since then there has been a realization by thoughtful Congressmen that the rich, by any standard, pay less than 5 percent of the taxes.  Corporations, in effect, pay no taxes inasmuch as business costs are passed on to consumers as part of a product price.  

Yet, a 16 percent flat-rate tax this year would balance the budget new year!

Paul C. Roberts, former assistant treasury secretary but now a researcher at Georgetown University, has refloated the flat-rate proposal.  He says the tax is not a partisan or uniquely supply-side solution.  Liberals now recognize that "bracket creep" resulting from the impact on inflation on the present graduated plan is inequitable.  

"Even Tip O'Neill knows that blue-collar workers do not belong where many of them are now - in the 40 percent bracket, a rate that applied only to millionaires a short time ago," says Roberts.  

The flat-rate variation now circulating in Congress retains some elements of progressivity.  A 19 percent flat tax, for example, would balance the 1983 budget and allow the first $6 thousand of income to be excluded from taxation.  That would drop the tax rate on a $10 thousand income to 7.6 percent, and on a $20 thousand income to 13.3 percent.  

Alternatively an 18 percent flat tax would balance the 1983 budget and allow all transfer payments, including Social Security, to be excluded from the tax base according to Roberts.  

It is not likely that Congress will alter the present chaotic income tax system, no matter the advantages of reform.  Special interest groups - from Social Security retirees to energy conglomerates - have carved out lucrative niches in the economy.  They will not give them up easily.  Nor will Congress abandon the system which provide favors to be parceled out for votes.  

One can only hope that the supply-side troops will prevail in the present budget hassle.  Partisan critics have just about killed aborning Reagan's brave recovery plan.  

The electorate seems already to have forgotten that they put Reagan in office to bring down inflation, double-digit interest and save failing industries.  

Congress, for its part, gave Reagan a fraction of his mandate and now wants to take even that back and return to the profligate spending that got us into the present mess.  

As we said, Congress is a disgrace.

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