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Gramm Says GOP Efforts Timid, Calls for Social Cuts

By Melissa Healy and Edwin Chen
Los Angeles Times
WASHINGTON

Senate firebrand and GOP presidential contender Phil Gramm chastised fellow Republicans on Monday for being too timid in efforts to shrink the government, and called on Congress to make huge reductions in social programs to pay for new tax cuts.

In an interview with the Los Angeles Times, the Texas Republican said the new GOP-dominated Congress will create an unnecessary and potentially damaging controversy if it tries to use creative accounting to finance tax cuts for investors and middle-class families.

Instead, he urged fellow Republicans to adopt a budget that simultaneously cuts taxes and slashes discretionary spending, a category that includes aid to education, public health, highway construction and other domestic programs.

"There are many Republicans who want the blessings of limited government but who are unwilling to vote for limited government to make those blessings possible," Gramm said. "And I think we're coming to the moment of truth."

Later in the interview, Gramm complained that when it comes to deficit-reduction, "there's been a constant gap between (Republican) rhetoric and the reality of our actions. Now is the time we're going to have to stand and be counted."

Gramm's proposal could open a Pandora's box on Capitol Hill because it runs headlong into budget rules that prevent Congress from paring back domestic programs to offset tax cuts that otherwise would widen the deficit.

Those "pay-as-you-go" rules, adopted during the Bush administration, were initially supported by many GOP lawmakers because they prevented Democrats from financing expanded social programs by raising taxes. Now, with Republicans about to take charge of both houses for the first time in 40 years, those rules are a potential obstacle to GOP tax cuts.

Gramm's comments are the opening salvo in the looming congressional budget-balancing wars. In a wide-ranging interview in his Senate office, Gramm reflected not only sharp divisions between Senate Republicans and Democrats, but potentially deep rifts among congressional Republicans themselves.

Those splits are certain to become more pronounced as GOP lawmakers such as Gramm, preoccupied largely with deficit reduction, struggle for domination of the congressional agenda against Republicans intent on increasing defense spending, pressing divisive social policies such as school prayer and abortion, and instituting accounting practices known as "dynamic scoring," which are grounded in supply-side economics.

"You've got a lot of people who've been in the minority for many years, and who have got these pent-up little agenda items," Gramm said. "And I think what we're going to have to do is have the leadership to say to them, We're going to be in power for many years to come, let's stay with our agenda now.' "

He proposed that Republicans avoid becoming embroiled in a debate over "dynamic scoring," which assumes that tax cuts will spur new economic growth and increase, rather than decrease, federal revenues. Democrats, including President Clinton, have charged that the technique is a budgetary trick that allows Republicans to claim they are cutting the deficit when they are driving it up.

If Republicans insist on justifying their tax-cut proposals with dynamic scoring, said Gramm, "the media is going to clearly accuse us of trying to keep phony books and trying to defy Milton Friedman's law on free lunches" - which argues that there are none.

The solution is to take accept the budget calculations favored by Democrats, "but with the proviso that if we are right and they are wrong, that the additional resources go to deficit-reduction and to additional tax cuts," Gramm said. "Now why would you object to that? Only if you don't have the courage to control spending."

Under Gramm's plan, Congress would pay up-front for a family tax cut by cutting funds from the Education Department, Housing and Urban Development and Health and Human Resources. To offset a capital-gains tax cut, Gramm called for cuts in what he called "corporate subsidies," including subsidized interest rates and direct loans from the Small Business Administration.

Only when the tax cuts start creating new wealth and bringing in new revenue should Republicans take credit for them, Gramm said.

"I think if we can do it, we're going to have to do it now, while the public is ready for dramatic change. This is not the time for incremental thinking. This is a time to be bold."