Congressmen Clash Over Cure for Deficit

Ventura County is represented by two congressmen with strikingly different views. Rep. Elton Gallegly, a conservative Republican from Simi Valley, and Rep. Anthony C. Beilenson, a liberal Democrat from Los Angeles whose district includes Thousand Oaks, agree that cutting the federal deficit should be a top priority. But they disagree sharply on how to do it.

At the request of The Times, Gallegly and Beilenson sat down together last week in Washington to spar over President Clinton’s deficit reduction plan. Alan C. Miller, Times staff writer, acted as moderator. Here is an edited transcript of the often lively exchange. CONGRESSMAN BEILENSON: For close to 10 years, I’ve been speaking out strongly about the problems that I see our country getting into because of our going so deeply into debt. For the first time we’ve got a President who, in all the years that I’ve been here, is serious about reducing the deficit and who comes forward with a set of proposals to do so.

I give the President a lot of credit for putting . . . his presidency on the line--and to a certain extent the political fortunes of the Democratic Party on the line--by trying to do something serious and substantive about the deficit problem. It’s been obvious to anybody who’s serious about the deficit problem that you can only solve it, either partially or in toto, by some combination of tax increases and budget cuts. It cannot simply be done with cutting programs.

So I support the proposed tax increases. I voted for them. And with respect to the budget cuts, I’m supportive of those too. They’re not things one wants to cut, but it’s a necessary part of the full process.

CONGRESSMAN GALLEGLY: I couldn’t agree with Tony more on the issue of the importance of the deficit and the growing national debt. Where the difference comes is how we resolve the issue. When you take a look, Tony, at what the President campaigned on, talked about, for every dollar of taxes we’re going to have three or four dollars in cuts, and now there’s no one that argues that the package that went to the House (does that). The cuts for the most part, other than national defense, were smoke and mirrors.

The other issue is that the cuts, other than defense, really don’t kick in for three or four years. . . . We need to find methods to stimulate the economy and create jobs, real jobs, and provide the entrepreneurs of this country with the tools that they need to put people to work who will pay taxes and buy goods and services.

BEILENSON: The single most important thing the government can do, and ought to do, is to reduce the deficit. In and of itself, that will give all kinds of benefits to everybody. Whatever the ratio of spending cuts to tax increases in this particular bill--I think it’s probably fair to say that it’s about one-to-one--over a five-year period--the deficit will be $500 billion less than it otherwise would have been. And this is terribly important.

I don’t put a lot of faith in talk about generalities. If you want to argue that you should not raise A tax or B tax or C tax, but should in the alternative cut A program, B program or C program by that amount, I’d be happy to argue that. People back home don’t want taxes raised. As you know, 75% of the taxes are going to be raised on people whose income exceeds $100,000. I happen to believe that such people can afford it.

GALLEGLY: That’s not the truth, though.

BEILENSON: That is the truth. We actually reduce the deficit by $115 billion over the next five years by raising the top rates from 31% to 36% on taxable income in excess of $115,000 for an individual, $140,000 for couples. If you don’t want to raise taxes on people who are relatively well off, but you also want us to get the same amount of deficit reduction, then you have to be supportive of votes to cut middle-class spending programs, whether it’s veterans benefits or Social Security or Medicare benefits, by $115 billion. That’s the kind of trade-off that we’re facing.

So, if you want to suggest right now, for example, some specific spending cuts greater than the ones that we voted for in the House, I’ll be happy to talk to you about them. But I don’t like to talk about what the ratio of tax increases to spending cuts ought to be because I find that meaningless.

GALLEGLY: The No. 1 problem with our economy today is public confidence in government. We have the lowest interest rates we’ve had in 30 years. We have a tremendous number of people working in this country but yet they’re afraid to do anything because they’re afraid the sky is going to fall.

If we go to them today and say, ‘Hey, we need to tax now, and we’re going to make cuts later,’ who’s going to believe that, Tony? In every one of at least the last six years, there was more revenue coming in than money going out, had it not been for the interest on the national debt. Until we deal with that, I see this as being absolutely endless.

BEILENSON: How do you propose to deal with it?

GALLEGLY: You’ve got to regain the confidence of the American people. . . . Of course, California is in a much different and much more difficult situation because of the drastic cuts in national defense. There’s certainly room to address our defense cuts, but when you do it with a meat ax like we’re doing in California, we’re devastated . . .

You’ve got to have a very good conversion program to deal with this thing rather than just cut it off all at once . . . I can see where we’re going to end up potentially just like we did after the Carter Administration. Had we not had the Ronald Reagan defense programs of the ‘80s, we certainly would not have had the success that we had in the Gulf a couple of years ago.

BEILENSON: Do you think he’s cutting defense too much? If you want program cuts rather than tax increases, where else do you cut?

GALLEGLY: I certainly would look at a freeze on government growth. Across the board.

BEILENSON: We have frozen domestic discretionary spending over the next five years. These are real and very serious cuts to all kinds of programs. . . . There’s almost nothing you can do that would truly bring down the size of the debt that an awful lot of people would approve of. They like the idea in general, but when you talk about cutting health care programs, or Social Security . . .

GALLEGLY: There’s an excellent way that I think almost every American would agree with, and that’s called economic growth. The way that you cause economic growth is you do things which stimulate small business. I know this isn’t something that some of the folks on your side of the aisle like to talk about as it relates to stimulating growth, but we get into the issue of capital gains. . . . The confidence from the American people plays a much greater role than anything else, and when the United States government comes out and says, ‘We’re from the federal government and we’re here to help you. We’re going to tax the hell out of you for the next four or five years, and then we’re going to cut some’ . . .

BEILENSON: We’re not taxing the hell out of anybody except wealthy people.

GALLEGLY: Well, that’s not true.

BEILENSON: It is true.

GALLEGLY: What about the senior citizen that has an income of $25,000 as a single person at 62 years old? If you’re a couple, it’s $32,000. So we have a disincentive for a husband and wife to be married. In other words, if we take a couple, they are going to be paying taxes on over $32,000, an individual is $25,000, so they have to get a divorce so they can raise it to $50,000.

BEILENSON: We’ve been talking for 20 minutes now about the importance of cutting deficits, and I don’t recall your having suggested to me, other than lowering tax rates to get the business incentives, any way to do it. What taxes are you for? You have not told me about any programs you would rather cut except squeezing the size of the federal government, which we’re all for.

GALLEGLY: That’s a fair question. . . . I don’t think taxes normally are going to help stimulate the economy. I have a problem with it, but I could support the taxation on those that are over $100,000. But . . . I can give you a stack of things. Bill Clinton during the course of his campaign talked about the subsidies to the beekeepers. It’s still in the bill.

BEILENSON: Elton, let’s talk serious.

GALLEGLY: I’m talking serious. But that’s just a small example of a list like that of the same things that we continue to subsidize to get you two votes from Kentucky on tobacco or to get you a couple of votes . . .

BEILENSON: I could argue with you on that, but we’ve been treading lightly around the big issues. The President himself pointed out that the great problem with respect to getting the deficit under control--even if we hope to pass his programs--over the next four or five years, the deficits would start growing again unless we control health care costs. They are by far the fastest growing part of the federal budget . . . You and I could agree on a whole slew of relatively modest-sized things which, because of parochial interests around the country, unfortunately, remain in the budget.

GALLEGLY: We have been in agreement, for the most part, on the issue of the illegal immigration. But for so long we have tried to be everything to everyone . . . We have a life boat with only so much capacity. We’re more compassionate probably than all the rest of the countries in the world combined, but there is only so much (compassion) for us. When somebody challenges you about cutting off public assistance and other economic benefits to those that have come here illegally, how can you deal with it?

BEILENSON: I deal with it very much in the way that you do, despite the controversy that arises. There are limits, and we are being overwhelmed.

MODERATOR: Congressman Beilenson, you have long favored a steep increase in the gasoline tax. You are also a strong proponent of raising the top income tax for high-wage earners. Won’t both of these tax increases have a disproportionate impact on your constituents in Thousand Oaks and the 24th District generally?

BEILENSON: I’ve long felt, and I hope people back home agree, that generally speaking, what’s good for the country is good for the people in Southern California. I do believe that what’s most important for this country is to get the deficit down. I happen to believe that we should raise taxes on energy of all kinds. I was a supporter of that BTU tax. We charge much less for energy in this country than we do in other industrialized nations of the world, and it’s already hurting us economically, it’s already hurting us competitively, and it’s going to more in the future.

Industries in Japan and Germany and other industrialized nations where they’ve got to pay more for energy have found ways for energy efficiency, and they are able to produce the same amount of economic output for less than half the input of energy that we require. They’re able to produce machinery that’s much more energy efficient than ours, and they are selling this machinery around the world to developing countries, whereas we ourselves--because the price has been held unnaturally low compared to everywhere else in the industrialized world--are losing out competitively.

MODERATOR: Congressman Gallegly, in the interest of reducing the deficit, under what circumstances, if any, would you support higher taxes on the wealthy, or any increased taxes?

GALLEGLY: I think taxes in and of themselves are regressive. However, if you’re going to tax over $150,000 of income, that’s one thing. But if you’re taxing someone at $25,000 or $30,000 a year, or $50,000 or $60,000 or $70,000 a year--somebody that makes $60,000 a year in Southern California with the cost of living is not a lot different than taxing someone in some of the other states that have a much lower cost of living that make less.

But on the issue of gasoline taxes, or even more so, the energy tax. The inflationary effect that has on all goods and services causes us to be even much less competitive, Tony. If we’re going to focus on the issue of coming up with state-of-the-art equipment to be much more energy efficient . . . like some of our counterparts in different countries, those companies have all been subsidized by their government. We should come up with incentives, investment cash credits and so on in this country. That’s a much more effective way of doing it than regressively doing it through taxing people, particularly for those of us who have commuters who live in the suburbs and are dependent on the automobile to drive long distances to work. That’s certainly not going to help increase our productivity.

BEILENSON: If this bill passes, the deficit will be $500 billion less over a five-year period of time than it otherwise would have been. The financial markets have already realized that. That’s why interest rates have gone down, that’s why hundreds of thousands of Americans, including Southern Californians, have been able to refinance their homes at great savings, while a lot of businesses have been able to invest in new investments now because they’re able to borrow at lower rates than they were at almost any time in the past six or eight or even 10 years for that matter.

GALLEGLY: The interest rates came down before Bill Clinton was sworn into office. The interest rates, eight or nine months ago, were as low as they’ve been in 25 or 30 years. They have remained fairly static in the last six or seven months, which to me is encouraging.

So I submit to you . . . when the Senate turns the package over here, whatever comes out of conference is not likely to be overwhelmingly accepted by the Republicans, and probably not by all the Democrats as well. But the fact remains that if we do pass a package that in any way, shape or form resembles what we passed out of the House--not with my vote--I submit to you that inflation will go up just like it did in the years of Jimmy Carter. And we’ll see interest rates not at six and a half for a home loan, but at eight or ten or nine within six months, and that is not going to stimulate the economy. Just the opposite is true.

BEILENSON: If we defeat the President’s program, interest rates are really going to soar. They came down with the expectation that we were going to reduce deficit spending.

GALLEGLY: They came down during the Bush Administration.

MODERATOR: Congressman Gallegly, most of those who have looked at the deficit say that you can’t bring it under control without dealing with entitlements. How would you deal with them?

GALLEGLY: We dealt with some of those during the course of the Kasich Bill. They passed a means test (for Medicare). I don’t like that idea, but I understood the circumstances. On the issue of Social Security, as far as I’m concerned, that’s trust fund money that people have paid into all their lives. That’s their money. It should not be touched.

BEILENSON: If you don’t raise taxes, if you don’t reduce the deficit by $72 billion because we’re raising $72 billion over a five-year period with the BTU tax, what alternatives do you propose? I would prefer to have something other than a BTU tax, too, but give me some choices.

GALLEGLY: I’d rather see an increase in revenue, an increase in tax revenue rather than rates. If you provide an incentive to somebody by reducing the capital gains to go out and sell real estate or businesses and so on and so forth. It’s activity that creates revenue.

BEILENSON: You weren’t here in 1981, but Mr. Reagan persuaded a majority of our colleagues--I was not among them--to cut taxes by 25%. That was going to stimulate business, stimulate savings and stimulate revenue. All it did was create these huge budget deficits. I don’t know of very many people around here any more, or very many people around the country, who believe that kind of nonsense any more. If you think we can balance the budget by reducing taxes, if that’s what you’re telling me, then I tell you that you’re dead wrong.

GALLEGLY: We can’t balance the budget by simply reducing taxes. We cannot balance the budget by continuing the same level of government that we have today.