In the nick of time, the country that seemed no longer able to govern itself has a budget that will make real reductions in the deficit and do so fairly, for the most part. It is a better budget than the summit agreement President Bush couldn't sell even to his own party a month ago. From this one, the poorest Americans will receive an actual tax cut. The very wealthiest will pay the most, though it will still cost them only a tenth of the advantages they gained in the Gilded '80s. To raise so many taxes and cut so many programs within 10 days of an election could be called a triumph of leadership if it hadn't taken such a series of crises to bring it about. In the end, the fear of facing voters without a budget outweighed the fear of having to defend higher taxes on gasoline and beer and higher premiums for Medicare. To those members of Congress who did as they did for the right reasons _ party leaders George Mitchell, Tom Foley, Bob Dole, Robert Michel, negotiators Dan Rostenkowski, Sam Gibbons and others _ the country owes thanks and congratulations. There was significantly little help from Mr. Bush, who accelerates his fall from stature by going back on the campaign trail with partisan attacks on a Congress that has just saved his presidency from disaster.
As relief fades and reality sets in, it will become more widely apparent that there are some embarrassing flaws in the deal. Though Congress didn't cut the capital gains tax, the agreement to cap it at 28 percent reopens a too-tempting shelter for the wealthy, considering that earned income will be taxed as high as 31 percent. Congress didn't get rid of that devilish "bubble" after all, but merely pushed it up the income scale so that middle-class taxpayers won't notice it. Though it will affect only the well-to-do, the phasing out of individual exemptions still amounts to a perverse head tax on children. Though those earning over $200,000 will bear as a class the largest increases, averaging 6.4 percent, tax experts say a few of them will actually save money from having two points shaved off the "bubble."
The capital gains differential, it turns out, was the price paid to southern lawmakers who had promised it to their timber farmers. If the revenue loss is small, there is great damage to the principles of equality as expressed in the Tax Reform Act of four short years ago, and it means that the Washington lobbies will be lusting for more. The "bubble" and the child tax are fairly blamed on Mr. Bush's refusal to consider a straightforward 33 percent top marginal rate on the rich.
That this was a Pyrrhic victory for him and for the Republican Party is already evident in the polling data that shows Republicans trailing nationwide in races they were favored to win. After collaborating with Ronald Reagan in one of history's greatest income transfers from the poor to the rich, Democrats in Congress have re-established their image, at least for the moment, as the party of fairness. Though the Social Security tax remains largely regressive, both justice and necessity support the overdue decision to raise (to $125,000) the ceiling on wages subject to the Medicare tax. Applying it to interest, dividends and capital gains would have made it fairer still.
It is doubtful, however, that the agreement will produce the full $500-billion five-year savings that are claimed for it. Some of the economic estimates are still too optimistic. Because of this, and because the agreement came so late, it is also unclear whether foreign and domestic money markets will inspire the Federal Reserve Board to loosen interest rates to any significant extent. Congress may have won a victory, but it has not won the war. More budget battles remain to be fought before Americans can say with confidence that they have a responsible government and a sound economy.
It has become fashionable to blame our system of government, with its checks and balances, for this long national nightmare. But the truth is that even a divided government can act swiftly when it wants to. Democrats controlled the House when a Republican president wanted to cut taxes and lavish money on the Pentagon, and they could have said no. They cooperated instead, perceiving it to be popular. For some time now, the American people have looked to Democratic Congresses to keep benefits up and to Republican presidents to keep taxes low. A House so divided may still stand, but it is mortgaged far beyond the margin of safety. The time has come for voters to realize they cannot have it both ways.