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Budget Forecast: Continued Squalls

A mere seven days ago, congressional Republicans seemed ready to put the screws to Bill Clinton. The president had finked out on his promise. He had said he’d recommend ways to restrain spending growth by $812 billion between now and the year 2002. Instead, he released a proposal producing only $465 billion in so-called “cuts.”

In the process, he took a hammer to right-wingers. He accused the GOP of plotting to make life solitary, poor, nasty, brutish and short for women, children, senior citizens and just about every living creature but Socks the Cat.

He criticized specific Republican proposals but offered zilch in the way of detail for his own scheme. He said he’d achieve his “savings” the painless way - by making the welfare system operate as efficiently as the White House Office of Legal Counsel.

Livid Republicans vowed revenge.

But just as buzzards from the press began to circle the scene, in swooped the deux machina known as the Congressional Budget Office. The CBO released an economic forecast that prophesied slightly higher than expected economic growth over the next seven years. Its oracles said the federal government would haul in an extra $135 billion, mainly because of growth stimulated by lower interest rates.

The budget-office revisions gave Democrats and Republicans a chance to dash for cover. Both sides could negotiate a seven-year deal that gave the president some of his cherished social programs and preserved the GOP’s $245 billion tax cut.

Amazingly, neither party realized that the CBO report predicts slow death for all. It guesses that the economy would grow at a 2.3 percent annual clip between now and 2002. To put that in perspective, the economy expanded at a 2.2 percent yearly rate during the 1929-1940 span known as the Great Depression.

That sobering factoid helps explain the nation’s much-discussed economic “funk.” While the political classes amuse themselves by chatting about CBO statistical tricks, actual working people want assurances that they can get better jobs in the future.

But Republican leaders have fallen victim to Stockman-Darman disease. Rep. John Kasich and Sen. Pete Domenici, chairmen of the House and Senate budget committees, talk almost obsessively of eliminating federal deficits.

They, like Herbert Hoover, believe that “nothing is more important than balancing the budget … (which) is indispensable to the restoration of confidence and to the very start of economic recovery.” They laud themselves on their courage, and boldly predict that the markets will go bazooties the moment the president signs a balanced-budget bill - as did Hoover.

One problem: There is no historical correlation between low deficits and high growth. The record shows that low taxes, not low deficits, send an economy soaring.

Here’s where the CBO re-enters the picture. Conservatives could give workers a 10-percent, across-the-board cut in federal income taxes today - no fuss, no muss. They could “pay” for the change by accepting the updated budget-office estimate, tossing out the proposed $500-per-child tax credit and adopting Sen. Daniel Patrick Moynihan’s recommendation of shaving a half percentage point from the consumer price index.

If you doubt that American voters would accept the deal consider this: Steve Forbes ranks second among Republican presidential contenders in the early primary states of Iowa, New Hampshire and Arizona. His campaign centers on one idea - a 17-percent federal income tax, applied to all earnings above $36,000 for a family of four.

His stump speech talks about hope and opportunity and bears a subliminal message: “I trust you, and I know you can do better things with your money than Uncle Sam.” In practical terms, he’d take virtually all senior citizens and working poor off the tax rolls and impose some real fiscal discipline on Congress.

Last week’s report by the CBO seems to have disarmed Republicans rather than inspired them. Despite the occasional shouting match between administration and GOP negotiators, there’s plenty of deal-cutting talk in the air.

Yet if the president pulls another fast one on the GOP, conservatives should understand that they have a trump card - a 10-percent tax cut for everybody, effective Jan. 1.

Politics is the art of drawing distinctions, not of blurring them. And what could be more tempting (for conservatives) than the idea of forcing Bill Clinton to oppose tax cuts when Washington’s official economic seers predict the seven most sluggish years since the Great Depression?