Editorials
Thursday, July 31, 1997AFTER years of wrangling, it's a pleasant change to find a Democratic president and a Republican Congress reaching agreement on a deal to balance the budget and cut taxes. Both sides -- especially House Speaker Newt Gingrich -- got the message that the people were fed up with posturing and government shutdowns. And nobody is going to object to having his or her taxes reduced, even a little. Tax-cut package
could rekindle inflationThe process was much less painful than it might have been because the economy -- the national economy, not Hawaii's -- is in such good shape that the budget deficit is already negligible and might be erased completely in a few years even without changes in current law if the good times continue to roll.
However, a key to the health of the economy is low inflation. This deal, which combines $140 billion in tax cuts and $50 billion in tax increases for a net cut of about $90 billion, could be mildly inflationary because the economy is already at or near full employment. Rekindled inflation would bring higher interest rates and an end to the party.
Another caveat: The deficit is expected to come back a few years after its scheduled elimination because of increased spending on Social Security and Medicare. But by that time President Clinton and a lot of legislators will be out of office, so what do they care?
The major features of the tax-cut package are a $400 per child credit, rising to $500, for children 16 and under; a college credit of a maximum of $1,500 for the first two years of school and a lesser amount thereafter; and a reduction in the capital gains tax from a maximum 28 percent to 20 percent.
The child credit seems fully justified but both the college credit and the capital gains tax cut are controversial -- the college credit because it will enable colleges to raise tuition even higher and capital gains because it will mainly benefit the rich. However, helping people pay for college and encouraging investment are worthy objectives.
On the spending side, $24 billion to expand health-care coverage for children in families that don't qualify for Medicaid are welcome. But it was a disappointing abdication of responsibility in the face of the elderly lobby for Congress to drop means-adjusted payments for Medicare.
There are supposed to be $115 billion in savings from Medicare by limiting payments to hospitals, doctors and other providers, but we'll believe it when we see it. To keep Medicare from going broke, affluent beneficiaries will have to pay more for their coverage than those of modest means.
Finally, whatever happened to the idea of tax simplification, which was embraced by the reforms of 1986? This package is replete with provisions that add to the tax code's complexity. So count accountants and tax lawyers among its beneficiaries.
MORE than five years have passed since the brutal Christmas Eve rape and murder of Dana Ireland on the Big Island shocked the state. Authorities seemed to be stymied in their investigation of the attack but finally have obtained a grand jury indictment. Other indictments may follow. The public awaits an explanation of what took so long. Ireland murder case
THE timing of the latest terrorist explosions in Jerusalem makes it obvious that their purpose was to sabotage Israeli-Palestinian peace talks, which were about to resume after four months of inaction. And the terrorists' goal is likely to be achieved. Outraged Israelis want to avenge their dead, not talk peace with the man many still consider the chief terrorist, Yasser Arafat. Terrorist explosions
Rupert E. Phillips, CEO
John M. Flanagan, Editor & Publisher
David Shapiro, Managing Editor
Diane Yukihiro Chang, Senior Editor & Editorial Page Editor
Frank Bridgewater & Michael Rovner, Assistant Managing Editors
A.A. Smyser, Contributing Editor
