Inflation changes the political rules−and reform seems a lost cause
Who ever heard of voters demanding a smaller tax cut than the President wants to give them? The Congressmen who are now debating Jimmy Carter's tax package, that's who. They are getting a message from the folks back home that defies all conventional political wisdom. Its essence: voters are so frightened by inflation that they are against anything that might make it worse−including cuts in their own taxes that would swell the federal budget deficit. Such feelings can only be deepened by last week's news that consumer prices in March shot up at an annual rate of 10%.
Says Connecticut Democrat William Cotter, a member of the House Ways and Means Committee, which writes tax legislation: "This is the issue, inflation. I'm one of those who goes home every weekend, and I find that people are fearful. They tell me that hamburger cost $1.29 last week, and now it's $1.69." Adds Ways and Means Chairman Al Ullman: "When people realize that every dollar of a tax cut is another dollar of deficit, and when they relate that to inflation, I think that by and large they would rather have less cuts and therefore less deficit."
Polls show that the public is thoroughly confused by Carter's proposal for a net cut of $25 billion in individual and corporate taxes. Though a Harris poll in March turned up a 55% majority in favor of the program, people questioned earlier by Gallup pollsters declared 9 to 1 that it was more important to control inflation than to trim taxes. As a result, strong pressure is building in Congress to reduce the cut to $18 billion or $20 billion, and perhaps to delay it by three months as well, making it effective Jan. 1. Those two moves would pare the fiscal 1979 deficit from the $61 billion that Carter has budgeted to less than $50 billion.
Along the way, Congress probably will knock out nearly all the revenue-raising reforms that the President has proposed. Many of those changes would strike at corporations and rich people, but two major ones−tightening medical deductions and eliminating deductions for state sales taxes−would hit middle income individuals. Those proposals have fanned hostility to the whole program.
Two weeks ago, when congressional leaders told the President that his program was heading for a mangling, his reply was, "I am shocked." At his press conference last week, he came out swinging. He insisted that his reforms were necessary for establishing equity, repeating a horror story of a surgeon who legally deducted $14,000 "for entertaining other doctors on his yacht."