Give to the Rich--Again

"THE party's over! Time to tighten our belts, America. With a little bipartisan compromise and self-sacrifice, we can bring down the deficits," say Wall Street's investment bankers and stock brokers.

The ballooning federal deficit must be brought under control to restore confidence in the markets and to ensure our economic future, argues Former Secretary of Commerce Peter G. Peterson and a host of corporate moguls and other well-heeled supporters in their purportedly bipartisan, equitable plan to slash the deficit and pay for the fiscal excesses of the Reagan Era.

The Peterson plan, endorsed by more than 250 investment bankers and other members of the financial establisment, was featured in The Atlantic and publicized in two-page advertisements in several major newspapers. The ads stated: "We have joined together to urge our fellow Americans and this nation's leaders to rise above politics as usual to set aside differences--of party, region, ideology, and even immediate self-interest--in order to resolve our worsening economic problems before its too late." Peterson asserts, quite correctly, that the nation has been living beyond its means: spending and consuming too much, collecting and producing too little, and borrowing the difference.

Peterson's prescription demands that the nation magnanimously take on the burden of Reagan's extravagance: that all domestic spending--including entitlement programs--be cut, and that defense spending be "restrained" or allowed to grow only modestly. Peterson would assent to a tax increase only as a last resort, and then only "in ways that discourage consumption and encourage investment."

So what's wrong with Peterson's plan for recovery-through-self-sacrifice? Because of the simple fact that he and his supporters will not have to make the sacrifices. His hypocritical plan is motivated by the selfish interests of Wall Street and is nothing more than another round of Reaganomics in disguise.

JEFF Faux of The Nation exposes three serious shortcomings in the Peterson plan. First, it seeks to bring down the deficits too fast. Peterson's goal of a $30-40 billion reduction in the first year equals a net public sector stimulus of zero, which increases the risks of recession. Second, it uses fiscal austerity as a pretext for undermining the role of government in domestic investment, especially in terms of human resources.

But the most outrageous aspect of the Peterson plan is that it would force the burden of paying for the profligacy of Reagan's economic policies on those who benefited least from them. Both the proposed spending cuts and the possible tax increases of Peterson's plan are designed to soak the working class and spare the wealthy. Under Reagan, the financial establishment threw a massive party on Uncle Sam's Master Card, and now they are handing the bill to those who weren't invited.

The essence of the Peterson plan is that "we" must make sacrifices for the public good. This is analogous to a general in Washington radioing his troops in the trenches to say "We are going to fight this one to the last man."

Peterson proposes slashing entitlements and public works drastically, while modestly increasing defense spending. Under Reagan, defense spending grew as a percentage of total outlays, while entitlements declined by the same measure. Peterson would have us re-accept the Reaganomics that caused the problem to begin with, continuing the military buildup and forcing non-defense programs to suffer the burden of paying off the Reagan deficits.

Even more cruelly ironic is the tax proposal of the Peterson plan. Peterson advises raising taxes only in a manner that would discourage consumption and encourage savings and investment. In the tradition of Reagan and his supplyside philosophies, this would shift the tax burden from the rich to the poor, assuming that the rich will invest it in ways that build the economy.

ALREADY, the economic policies of the Reagan era have redistributed $129 billion in income from the poorest 90 percent of the nation's families to the wealthiest 10 percent, as Robert Kuttner points out in The New Republic. Although the stock market has more than doubled in real value since 1981, the wealthiest 10 percent of people own 90 percent of all stock, 88 percent of all bonds, and 95.4 percent of all trusts. At the same time, the amount of revenue brought in from corporate and income taxes on the top incomes has actually dropped. America's poorest have missed out on the hollow prosperity of the 1980s.

Just like the gurus of Reaganomics, Peterson asserts that lifting the tax burden from the shoulders of the rich discourages consumption and promotes savings and investment. Really? Despite the generous taxation and spending policies of the Reagan administration, real fixed investment by corporations has increased only 2.6 percent per year under Reagan, compared to 7.1 percent under Jimmy Carter.

It is intolerable that the working class should have to pay such an inordinate amount of the cost of Reagan's extravagance. While multi-millioniares like Pete Peterson may righteously demand self-sacrifice, they have no concept of what such policy means to the tens of millions of Americans who have already suffered economically under Reagan.

A truly fair and equitable solution to the Reagan deficits must derive the bulk of its revenues from the big gainers of the last eight years: wealthy citizens and corporations. Kuttner suggests, among other things, holding the top income tax rate at 38.5 percent, rather than allowing it to drop to 22 percent as prescribed by the new tax laws.

The wealthiest Americans have garnered enourmous gain from the profligacy of the Reagan administration. Now that the time has come to pay the bills, they should not expect the people that benefited least and suffered most from the Reagan economic policies to make sacrifices unless they themselves are willing to do the same.