For Everyone, Let Freedom Boom

The time has come for all good conservatives to praise the Clinton boom. Right-wing sayers of doom have waited five years for the U.S. economy to go in the tank, and it hasn’t happened. Moreover, there are few dark clouds on the horizon.

The stock market: up.

Consumer confidence: up. Investment in plants and equipment: way up. Unemployment: How low can you go?

Let’s be fair. Ronald Reagan gets credit for his economic boom, so give Clinton kudos for his.

Republicans ought to pay special heed to this advice. If the GOP could stop bellyaching about the supposed languor of this recovery, it might realize the president has provided the keys not just for his political viability, but Republicans’ as well.

The entire thing comes down to taxes. One of the president’s signal successes has been his ability to work with Federal Reserve Board Chairman Alan Greenspan in holding down inflation. The consumer price index has fallen from Bush-era levels of 5 percent to less than 2 percent. This trend has given Americans an across-the-board tax cut, in the form of lower interest rates and costs of living.

More importantly, the move toward sounder money has slashed the effective tax rate on capital gains - the money you make on a stock, mutual fund, home or any other investment. Lawrence Kudlow, a former Reagan administration official and a senior vice president at American Skandia Mutual Assurance Corp., notes that the inflation-adjusted “average” tax on capital gains now stands at 47 percent - far below the 200 percent rate that prevailed in the late 1970s.

Although the White House says it opposes a capital gains cut, the president has done more to slash rates than anybody since Jimmy Carter - and his covert capital gains cut has helped revolutionize the economy. Investors, who get punished most when capital gains rates are high, have come out of hiding. People are taking chances on risky, untested new businesses, setting off a high-tech gold rush that has produced such instant giants as Dell Computer and Netscape.

This is a very good thing. A century ago, a few corporate barons controlled much of our economy. Today, we enjoy democratized prosperity.s Thanks to mutual funds, pension plans and other investment devices, bigwigs don’t pull the levers; we do.

Cuts in capital gains rates thus help average Americans in two ways. They reduce the penalty people now pay for investing wisely and they create jobs. Those, in turn, pump up the value of our nest eggs.

Both parties say they want to reduce capital gains rates. House Ways and Means Committee Chairman Bill Archer and the White House just differ on the exact nature of the reduction. In any event, Kudlow thinks either reform will set off another tsunami of investor boldness - and send revenue pouring into the Treasury.

Herein lies a great opportunity. Suppose Kudlow is right. Suppose the boom continues and the money rolls in. Get really wild: Suppose the government will run a surplus next year. (Kudlow thinks it’s a distinct possibility.)

That being the case, Congress ought to write a promise into this year’s tax legislation: Politicians would return any “unexpected” revenue to taxpayers in the form of an across-the-board cut in federal income tax rates.

The vow would make big-government liberals explain why they don’t want to give the working public its own money. It also would give limited-government conservatives a constructive agenda.

That would be a change. In case you hadn’t noticed, the once-triumphant Party of Gingrich has become a Romper Room where grown men make childish mistakes and throw tantrums when they get caught - as they did after the predictable drubbing over “disaster relief.”

A tax cut promise would create a compelling counterpoint to the politics of forced compassion. After all, the entire project of creating “programs” to solve “problems” rests on the insulting belief that we, the little people, are numb not only to the suffering of our families and neighbors but that we also are numb to our numbness. Therefore, the government has to create new bureaucracies and dun us for the costs.

Lower taxes constitute a statement of faith in people’s natural enterprise and decency. They are Washington’s way of saying: “We trust you. We will get out of the way while you make this country greater.”

Republicans have learned that Congress serves an ornamental role when a president makes full use of his powers, as Clinton has done. But the upcoming budget/tax debate offers a chance to set a precedent that can help the president and the Gingrich Brigades. Establish the principle that when people work hard enough to produce more tax revenue than expected, the workers - not Uncle Sam - should pocket the extra change.

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