Money Angles

By Andrew Tobias

"AH, YES," SAID ABDUL, WHEN SOMEONE EXULTED THE morning after Bill Clinton's election. "But now we have to help him."

Doormen have seen it all, and Abdul, our particularly excellent doorman, is as wise as they come. So I repeated his comment to a cynical Wall Streeter I'll call Mac, who replied cheerfully, "I'll support any sacrifice -- so long as it's someone else's sacrifice."

He was joking of course (wasn't he?), but it did pretty well sum up the mess we're in.

Everyone agrees we have to reduce the deficit (though not necessarily eliminate it -- a healthy, growing enterprise can borrow a little more each year, if it's borrowing to make prudent investments). And everyone is certain that it's someone else's government benefit, not his, that should be eliminated, someone else's taxes that should be raised. ("I will support any measure to trim the deficit," Mac continued, warming to his subject, "so long as it doesn't cost me anything.")

It's not so much that we're selfish or shortsighted; it may be more that we believe our neighbors are -- and we'll be damned if we make sacrifices if they don't.

Clinton's challenge is to spread the pain in a way that's perceived as fair; and to make it part of a vision that gives the pain a purpose.

-- For starters, we need to redouble the effort to trim government waste, unpleasant as that will be for its beneficiaries, and to get people off welfare, because without the feeling that their money is being well spent, taxpayers will be loath to ante up more of it. If you're part of the waste being eliminated, do Bill a favor: don't write your Congressman. If you're a college grad who's welshed on his student loan, do Bill a favor: pay up.

-- We've got to stop giving government benefits to people who don't need them. It's bankrupting us. Social Security was conceived as a bare-minimum safety net for those who, through irresponsibility or misfortune, were not able to provide for their own old age -- which typically, back then, lasted only a few years after retirement. We must always preserve that safety net. Absolutely. (Privatizing Social Security won't work, because you'll still have to provide for folks who end up with nothing.) But to give benefits -- partly tax-free, no less* -- to people who don't need them? We simply can't afford it. If you're over 50, perhaps the greatest thing you could do for Bill Clinton is rip out this page and send it to Lovola Burgess, president of the American Association of Retired Persons (601 E St., N.W., Washington, D.C. 20049). Otherwise, the minute Clinton proposes anything that would pinch affluent retirees in any way, the AARP leadership will squelch it -- along with America's chance to get its house in order.

-- We need to raise taxes. And the first taxes to raise, even if it's not good economics (and it may be), are mine. Because if those of us who earn a lot won't pitch in, why should anybody else? For someone who makes a million bucks a year to pay an extra $50,000 in taxes, or someone who earns $200,000 to pay an extra $5,000 -- well, when you compare that with life in Somalia, or even life in America until 1980, when the top bracket was 70% -- it's just not worth crying over. (Adding higher brackets would also make it easier to justify a much needed capital-gains break -- a 0% tax, but on new investments in newly issued stock only.)

-- The other taxes to raise are two voluntary ones: tobacco and gasoline. In Canada and the United Kingdom the tax on a pack of cigarettes is more than $3. Here, with state taxes, it's 50 cents. If we added a buck (still lower than Germany and about the same as France), we'd raise $20 billion a year. Anyone who didn't want to pay could switch to one of the cheaper "generic" brands (only 13% have so far) and save much of the tax that way; smoke less; or quit. Side benefits: high prices deter kids from becoming smokers; the more people who quit, the better their health and the lower America's health-care costs.

As for gasoline -- which costs about $3.75 per gal. throughout Europe -- Ross Perot was right. Phase in a 50 cents tax over five years, and you raise $50 billion a year. But it's voluntary, because, to avoid that tax, one need only drive more efficiently -- moving, five years from now, to a car that gets 28 m.p.g. instead of 20. (Not to mention taking the train, tuning the engine, or even choosing to live closer to work.) Side benefits: less pollution and a lower trade deficit.

Are these sacrifices we're willing to make to fix America? Drive more efficient cars, switch to generic nicotine, forswear government aid we don't really need and pay more tax if we're at the top of the heap?

Abdul says yes. Mac doubts it. In the end, it's up to you and Bill.

FOOTNOTE: *I know you paid taxes on the money you paid into Social Security, and thus expected tax-free benefits. But you were also expected to die when you were 72, not 92 -- so we all have to bend a little to make this work. Our kids need Head Start, and we can't afford it if you don't help.