UNDERSTAND D.C. THESE DAYS? RESORT TO BUTCH & SUNDANCE

Our solons on Capitol Hill launched their long-awaited House-Senate conference committee on President Clinton's $500 billion "deficit reduction" tax plan this week. Hold onto your wallet. They have designs on it.

Reports from Washington indicate that savvy Democratic pols, both Senate and House, know several things:

1) This reprise of the 1990 "deficit reduction package" President Bush signed onto will not reduce the deficit;

2) It is political suicide to vote new taxes on a not-very-strong economy, the more so when deficit estimates are being revised downward, and draconian measures are less necessary;

3) There will be no bipartisan cover this time, as in 1990, when George Bush, Dr. Kevorkian of the Republican Party, went along with tax hikers George Mitchell, Tom Foley and Richard Gephardt in a bipartisan "deficit reduction" scheme;

4) Accordingly, estimates of Republican gains in the 1994 elections are being revised upward, to the range of 25-30 House seats and seven or eight Senate seats.

No economic theory none prescribes raising taxes on a weak economy, for deficit reduction or any other purpose. Remember, these are the people who brought you the "luxury tax" contained in that 1990 deal. The idea was to force the "rich" to pay their "fair share" by hiking taxes on cars, boats, airplanes, jewelry and other baubles costing more than $30,000.

The result was thousands of ordinary workers put out of jobs, as the American boat- and aircraft-building industries went into the tank. Unemployment in affected industries got so bad that even Mitchell and Gephardt moved for repeal of the "luxury tax" they had enacted to punish the successful.

There is an outside chance that the madness can be stopped, that enough Democrats will come to their senses in time to stop this suffocation of the American economy. Most likely, though, this will not happen; with Democratic hands on all the levers of power, it's most likely that the President's tax-laden "deficit reduction" package will pass.

Why? Why would congressional Democrats enact economic and political poison unredeemed by any economic theory possessing even surface plausibility? One reason is that their dominant ideology is statism: the belief in the power and efficacy of the government over against the private sector to "solve" any and all problems. But politicians are preeminently animals motivated by self-interest, by self-preservation. The question lingers: Why would they acquiesce in suicidal acts?

Almost none of them actually believes this witch's brew of tax hikes will "reduce the deficit". Few actually believe it will help the economy. What is the last refuge of supporters of the President's plan? That to kill it would cripple the young President's administration in its first year.

Why then, is passage likely?

The best explanation I've seen is a cinematic analogy. The irrepressible Georgia Rep. Newt Gingrich, House Republican Whip, likens congressional Democrats to Paul Newman and Robert Redford in the movie "Butch Cassidy and the Sundance Kid".

Recall that our rogue heroes are being pursued by the Bolivian army and have arrived at a steep precipice overlooking boulder-strewn white water far below. Turning back, they face certain capture, if not annihilation.

With seconds to decide their fate, Newman urges a jump, insisting it's their only choice. A terrified Redford answers, "I have to, and I'm not gonna." With the army closing in, Newman's counsel prevails, and the pair jumps off the cliff. Because it's the movies, they land in plenty of water, their daring escape accomplished, as they float down river without a scratch.

Think of that analogy as you watch our masters on the Potomac enacting economy-killing taxes in their "deficit reduction plan."

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A new investment newsletter explains, in an article entitled "Why Clinton Will Fail": "... Why we feel certain Clinton will make a very dangerous financial situation worse."

"Clinton seems intent on making all the same mistakes that bedeviled Britain and other Eurpoean countries years ago. He is attacking the rich and successful in the same mean-spirited manner that Britain's labor leaders used to rally their supporters. And he can expect the same miserable results.

"He is raising taxes. That too will have unexpectedly bad consequences. And he is attempting a measure of control and direction over the American economy which has been proven not to work in every nation that has tried it.

"... Presently, Bill Clinton is living in a fool's paradise. He is a popular new President in a country ... with low inflation, stock and bond markets at record levels ...

"He says he recognizes the threat posed by the deficit, but his programs will have the effect of increasing public debt, not decreasing it. Likewise, instead of boosting investment and economic activity, the economy will suffer. Only government spending will increase. ..."

Bill puts security of retirement accounts in limbo:

Proposed legislation imposes new limits on 401(k) contributions, reduces pension benefits

Buried in President Clinton's tax plan ... is a measure that could affect the funding and security of retirement accounts for ... Americans.

Little attention has been given to this provision because it is viewed as a change that would affect `fat cats' only. The proposal would reduce the amount of annual compensation that can be considered for calculating retirement benefits to $150,000, compared with the current limit of $235,000.

But it's not just the fat cats who would feel the pinch. `This is a good example of how a policy can be construed to affect one group namely the highly paid but in fact it has a very great impact on people in lower-income categories, often a much greater effect than it does on the highly paid,' said Sylvester J. Schrieber of Wyatt Co., benefits consultants in Washington.