Jewish World Review March 29, 2001 / 5 Nissan 5761
As Economy Wilts, Is Bush Too
Passive On Early Tax Cuts?
IN THE END, of course, all that counts is whether the economy
recovers quickly and strongly. If it does, President Bush will get
the credit. If not, he'll get the blame.
Still, in the short run he's being judged on how he responds to
the current bear economy and stock market, and the tag being
planted on him is "passive."
Despite a plunging stock market and weak economy, until late
last week Bush seemed curiously unwilling to alter his $1.6
trillion tax-cut plan or even to argue for it on the basis that it
would get the economy moving again.
Finally, the White House quietly indicated that it supported -
and may have helped fashion - Senate Budget Chairman Pete
Domenici's (R-N.M.) proposal to return $60 billion of this year's
$93 billion surplus to taxpayers.
White House aides issued a statement that Bush "believes we
need to get more money into people's hands quicker, and he's
committed to working with Congress to look for ways to make
the tax cut retroactive" to hasten economic recovery.
Nevertheless, the President himself has not been out in front
calling for action to end what surely will be dubbed "the Bush
recession," even if it more justly should be named after Federal
Reserve Chairman Alan Greenspan.
Up to now Bush has allowed Democrats such as Sens. Thomas
Daschle (S.D.) and Kent Conrad (N.D.) to steal the march on
him, recommending "smaller, fairer and faster" tax cuts designed
to put money into the hands of middle-income people who will
Daschle and Conrad called for immediate enactment of a cut in
the lowest tax rate from 15 to 10 percent - a $60 billion
proposal that would give about $600 to every family this year.
Sens. Bob Graham (D-Fla.) and Jon Corzine (D-N.J.)
recommended a plan that would apply the 10 percent rate to an
individual's first $7,500 in income or a couple's first $19,000,
which would give couples $950 each at a cost of $80 billion this
Still another Democratic plan, being crafted by Sen. Max Baucus
(Mont.) with the assistance of former Treasury Secretary
Robert Rubin, would cut tax rates by $200 billion over the next
That's double the amount offered during that period under the
House-passed version of Bush's rate-cut bill, which will cut
taxes by $950 billion over a decade, but offers most of its
breaks in later years.
The House GOP rate-cut bill provides a reduction of only $5.6
billion this year, and Bush's budget calls for no cuts until next
year, when they would total just $30.6 billion.
Other Republicans have been arguing for tax cuts that are
bigger and faster than either the Democrats' or Bush's, but so
far they have no official standing.
One proposal, costing $45 billion this year, would put all of
Bush's proposed rate cuts into effect immediately. But that
would swell the total long-range cost of his tax package to
several times the $1.6 trillion over five years.
Bush may support a speedup of tax cuts, but he seems
determined to stick to $1.6 trillion as its 10-year total cost.
There may be a method to Bush's quiet approach. If both
Democrats and Republicans rally around a speedup, he may get
a policy through consensus without putting his brand on it and
arousing partisan passions.
Conrad's reaction to Domenici's rebate proposal, for instance,
was: "We're glad to see them moving in our direction."
Meantime, Republicans on the House Ways and Means panel
passed an increase in the per-child tax deduction skewed more
toward lower-income families than Bush's - possibly a hint that
the GOP sees a need to make its cuts "fairer."
Major differences remain, though, on estate taxes, whose total
elimination (favored by Republicans) would benefit the wealthy.
One possible compromise is to stop taxing assets, property,
businesses and farms on the death of the owner, but rather
when the asset is sold, and then at a capital-gains rate of 20
percent instead of the current top inheritance rate of 55
Democrats continue to insist that Bush's tax cuts will end up
totaling around $2.5 trillion and will consume the entire
non-Social Security budget surplus, which they say may shrink
if the economy stays soft.
Moderates of both parties have recommended inserting a trigger
into Bush's tax package so new cuts or spending couldn't take
effect unless surplus targets were met.
Baucus' plan takes a different approach: Congress would enact
tax cuts only for three years and revisit fiscal policy on the
basis of projections available then. Republicans are unlikely to
agree to this, though.
How much flexibility will Bush show on the size and distribution
of tax cuts? He isn't saying. That could be seen as passivity or
the kind of leadership that lets Congress play a role in
JWR contributor Morton Kondracke is executive editor of Roll Call, the newspaper of Capitol Hill. Send your comments by clicking here.
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