Don’t Cut the Tax Cut to Pay for Kosovo


Last month Congress was awfully eager to approve U.S. involvement in the war in Kosovo, but now it's highly secretive about exactly how we're going to pay for that war. Democrats seem to agree they will oppose cuts in social programs to finance the air raids. Republican military hawks, like Sen. John Warner of Virginia, say they would protest even a dime of cuts in other military programs. So where will the money for this $40 million a day military adventure come from?

The likely answer: from yet another "emergency" supplemental spending bill.Simply inflate the already obese budget to accommodate another unforeseencrisis. Of course, unforeseen crises-floods, droughts, famines, currencydevaluations, the Y2K problem and the like-are becoming as predictable as aGreg Norman swoon on a Sunday afternoon at the Masters. Emergency fundinghas made a mockery of the budget process in Washington and it shouldstop-starting now.

But will it? Many members of Congress seem content to pay for Kosovo bytrimming back the already tiny tax cut that Congress approved in the budgetresolution last month. In that resolution, Congress promised a $150 billiontax cut over the next five years-not much out of an expected $10 trillion intax collections. But Kosovo imperils even that minimal tax relief, becausethe cuts were supposed to be "paid for" out of anticipated "non-SocialSecurity" surpluses. Every extra dollar for cruise missiles, F-14s, NATO'smunificent salaries and expenses and, God forbid, U.S. ground troops is onedollar less for cutting tax rates, ending the death tax or expanding IRAs.There is only one way out of this box: Congress must cut other governmentspending to make room for tax cuts.

The money at stake here is anything but trivial. The cost of Kosovo isrising daily and is now estimated at $2 billion. Since there doesn't seemto be a quick peace settlement in sight, as the Clinton administration hadhoped, and given that the prospect of deploying ground forces is becomingmore real every day, that $2 billion price tag could multiply quickly.

Adding to the problem, both Republican and Democrat appropriators arealready clamoring to bust the 1997 spending ceilings on the domestic side ofthe budget.

To pay for Kosovo and other extra spending lawmakers have in mind, Congressshould trim the $1.75 trillion we spend on everything else, not the tax cut.Here's one idea that would have broad public support: cut corporate welfare.The Cato Institute has identified more than $70 billion a year spent byCongress on business subsidy handouts. The Commerce Department, which hasbecome nothing more than a Clinton administration slush fund for its privateindustry supporters, could be cut to pay for the entire Kosovo escapade.Eliminating the Energy Department would pay for Kosovo three times over.

Alternatively, we could take the money out of such programs as the ExportImport Bank. Congress will simply have to tell the lobbyists from GeneralElectric and Boeing, "We're sorry but your welfare check is going to have tobe a little smaller this year in order to pay for the Kosovo war effort."Surely, those Fortune 500 companies would be eager to do their part.

James Madison once declared that "crisis is the rallying cry of the tyrant."How right he was. Every modern crisis has meant bigger government. Overthe past decade, federal "emergencies" have averaged some $3 billion a year.Last year Congress crammed a whopping $21 billion into an emergency fundingbill, with hardly a peep of protest. It's hard to believe we're in a periodof prosperity and (until last month) peace.

Republican John Shimkus of Illinois in the House and Democrat BobGraham of Florida in the Senate want to end the emergency spending gambit byrequiring a supermajority vote to approve such budget busters. "Just asprivate citizens are warned against falsely dialing 911," declares SenatorGraham, "Congress should be restrained from misusing its emergency spendingpowers." He's right. In addition, all emergency spending should be paidfor through across-the-board or specific spending cuts.

In just the past five years, while the emergency sirens have been soundingall over Washington, the combined income and payroll tax rate has quietlyrisen from 22 percent of wages to just under 27 percent. When will Congressdeclare that an emergency?

The entire Kosovo venture has been a costly and foolhardy mistake.Shrinking the tax cut to pay for the war would only compound that mistake.

Stephen Moore

Stephen Moore is director of fiscal policy studies at the Cato Institute.