The Tax Bill End Game
Jude Wanniski
June 24, 1993


The Senate will pass the President's tax bill on a party line vote, everyone agrees. It is also agreed that the Senate-House conference committee, which convenes next week to compose the differences in the two versions of the deficit-reduction plan, will face a nearly impossible task. Senate Minority Leader Bob Dole has miraculously kept the Republican Party united throughout, which means the President has to pass whatever monstrosity that comes out of the conference committee solely with Democrats. The only way this can be accomplished is if the 38 Democrats in the Black Caucus of the House swallow the package which has been handed to them. The assumption going into this process is that Rep. Charles Rangel, the most important member of the Caucus and the man on the margin, will succumb to the partisan pressures rather than "break the President." Given the assumption that terminal gridlock of the President's plan would "break the President," it may well be true that Rangel and the Black Caucus would cave, despite the indignities they continue to suffer at the hands of the "Boll Weevil" wing of the Democratic Party. This is the wing from which the quintessential boll weevil, the President himself, emerged, which is what being a "New Democrat" is all about.

It continues to escape the notice of the Establishment media that Rangel now has better cards to play on behalf of the Black Caucus and his constituents in Harlem. In his closely-watched column in The Wall Street Journal, Paul Gigot last Friday noted that the only chance of stopping the Clinton tax plan was in the Black Caucus. Everyone in Washington knows Gigot is right, but that one sentence in his column is all the mass media has been willing to say about the subject. They will soon have to address the subject as Rangel's discussions with Sen. Malcolm Wallop, the Wyoming Republican, are ripening into an alternative one that has the tentative blessing of the other key members of the Black Caucus and the encouragement of Senator Dole. Dole has now discussed the initiative issue with Rangel and followed with a let's-get-together letter. The alternative is built around Fed Governor Wayne Angell's idea of combining indexation of capital gains with an end to the "step-up" provision at death, an idea that adds $100 billion to the negotiating pot in a way that would have positive effects on the economy a "tax increase" that actually does spur entrepreneurial activity and economic growth. Angell, a Dole protege, explained his plan Tuesday morning before a meeting of the Joint Economic Committee.

Few people in Washington are taking any of this seriously because they have yet to realize that a political revolution is taking place under their noses. In yesterday's New York Times, the President's deputy budget director, Alice Rivlin, asks "Where Is The Old Bob Dole?" the good old boy who used to be willing to cut a deal with responsible Democrats, as he did in 1990 at the behest of such responsible Republicans as Nick Brady, Dick Darman and George Bush. It was a plaintive wail, read with considerable hilarity by Dole's staff in the Capitol, who understand that the Dole of yore is a figment of the White House imagination. Dole was at a crossroads concerning the kind of party he wants the GOP to be going into 1994 and beyond. He has chosen the path of Main Street, not Wall Street, and has further decided that Main Street runs through Harlem. This does not mean the Black Caucus is going to bolt to the GOP. Party realignments do not require the movement of politicians across party lines, only the movement of ideas that attract voters. For the first time in half a century, the GOP is now competing for the votes of Black Americans, not by offering new handouts, but by asking Black America to advise the GOP what it needs to get to the promised land of entrepreneurial capitalism.

This is an offer the Black Caucus cannot refuse. Rangel this week told Clarence Page of the Chicago Tribune that at the grand banquet of the Democratic Party, black Americans have been assigned seats next to the kitchen, while the Republicans have thrown them into the kitchen. His discussions with Wallop, which he told Page involve support for capital gains in exchange for GOP support of the Black Caucus urban agenda, puts Black America at the head table. The details are still being worked out by the Rangel/Wallop staffs. We do know that Rangel has advised Wallop that he will leave it up to him to decide the shape of any tax measures required to hit the $500 billion bogey. That is, Rangel will support a plan that does not require an increase in personal income-tax rates if his GOP partner prefers another source of revenue. I'm also informed Rangel would happily pitch out the President's "millionaire's surtax" on the grounds that it would be too costly to collect and too easy to avoid. This is in line with Rangel's assertion that the Black Caucus has never had a problem with capital gains, that this has been a problem for the white liberal intellectuals in the party. Once black Americans are politically liberated from dependency on the Democratic Party, it should be clear we would see a weakening of the class-warfare politics that has characterized the Democratic Party. Democrats have always been able to say it is "fairer" on the liberal plantation than on the conservative plantation. No more.

One possible scenario that could play out in the next few weeks would be for Rangel and Wallop to jointly announce their alternative once it is clear that the Senate-House conference is spinning its wheels. Rangel, who will be a member of the conference committee, will be in a perfect position to decide on the timing. Wallop, a member of Senate Finance, may also be in the conference. There is no intent to be confrontational. The best possible outcome would be for the conference to inform the President that it cannot come to satisfactory terms, knowing that the Rangel-Wallop alternative is at the ready, and could be endorsed by the President and the GOP leadership as a way out of the dilemma. My understanding is that Rangel and Wallop are trying to fashion the plan in a way that will win immediate public approval. If the extremes can agree, the center has no choice but to follow.