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Jewish World Review March 29, 2001 / 5 Nissan 5761

Morton Kondracke

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Consumer Reports


As Economy Wilts, Is Bush Too Passive On Early Tax Cuts?


http://www.jewishworldreview.com -- 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 spend it.

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 year.

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 three years.

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 percent.

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 policymaking.



JWR contributor Morton Kondracke is executive editor of Roll Call, the newspaper of Capitol Hill. Send your comments by clicking here.

Up

03/27/01: Ex-Clinton Adviser Thinks Bush Needs More Upbeat 'Vision'
03/16/01: Cultural indicators improved during Clinton years. Why?
03/13/01: Nice talk aside, Bush team wants to win above all
03/08/01: Tax fight turns back to question of what's 'fair'
03/06/01: Bush and Congress should prepare for lean years
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02/26/01: Bush should talk about long-term budget challenges
02/22/01: AARP's agenda at odds with Bush priorities
02/20/01: When will Dems finally say Clinton is unfit leader?
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02/12/01: Is Joe Lieberman tilting left toward 2004?
02/07/01: The controversy starts: Bush orders HHS study of fetal, stem cell issues
02/05/01: Dems move toward bush on taxes, but ...
02/01/01: Bush should be open with press
01/30/01: Bush Should go for broke early on education
01/23/01: Clinton ain't going away, folks
01/19/01: Bush should try for legacy as 'Great Reconciler'
01/16/01: Left-Center Rift Re-emerges For Democratic Leaders
01/12/01: Clinton doing Bush no favors in Mideast
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11/20/00: Can next president and Hill deal?
11/15/00: With nation split, leaders must reach across party divide
11/07/00: The Envelope, Please:Bush Beats Gore, GOP Holds Hill
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05/16/00: McCain's Support Is Tepid, But Lets Bush Focus on Gore
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04/06/00: Bush, Gore Silent As Popular Culture Gets Ever Coarser
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03/28/00: Will Bush, Gore Go for a Better Way To Pick Nominees?
03/23/00: Medicare cutbacks bleed hospitals
03/20/00: Chances Improve That China Trade Will Pass Congress
03/16/00: Lieberman as veep would help Gore
03/14/00: Can Bush, McCain Unite to Beat Gore?
03/09/00: Can GOP Forge Unity After Nasty McCain-Bush Race?
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03/02/00: 'Debate' Proved Gore Is This Year's Best Gut-Fighter
02/29/00: Surprises! The 2000 GOP race is full of it
02/25/00: Voters want centrist in White House
02/23/00: Gore would hit McCain's record
02/15/00: Will negativity hurt McCain in S.C.?
02/10/00: How hard should Bush hit McCain?
02/08/00: Bush must retool his entire campaign
01/27/00: Could Gore beat Bush as Truman beat Dewey?
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12/21/99: Bush improves, everyone panders
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12/14/99: Riots raise free trade as 2000 issue
12/10/99: Gore won GOP 'debate' in N.H.
12/07/99: Election pits Bush cuts vs. Medicare boost
12/03/99: Can race be a constructive issue in 2000?
11/19/99: White House race may be best in decades
11/16/99: Where is Bush on health care fight?
11/11/99: Will TV stop profiteering from politics?
11/09/99: Is GOP isolationist, or just partisan?
11/04/99: Gore, Bradley Run Opposite Races On Style, Substance
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10/27/99: Bush to fight 'culture wars' -- positively
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10/14/99: Bush critiques could help GOP Congress
10/12/99: Congress can save health care from ruin
10/07/99: Will gun-control cause the GOP to shoot itself in the foot?
10/05/99: Gore moves: Desperate but necessary
10/01/99: Fox, Armstrong make case for NIH
09/28/99: Dems' race brightens Bush's chances
09/23/99: East Timor deflates `Clinton Doctrine'
09/21/99: Buchanan v. Bush? Yeah right
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09/15/99: Bush's education problem
09/09/99: Budget makes 2000 an `issues' election
09/07/99:Airport rage increases, with good reason
09/02/99: U.S. future up for grabs in 2000
08/31/99: U.S. Capitol needs visitor's center -- soon
08/24/99: Will 2000 be the year of the foreign crisis?
08/19/99: Neither party has upper hand for '99
08/17/99: Ford gets freedom medal one month early
08/12/99: There's time to catch Bush, say Gore aides
08/10/99: Rudy, Hillary try much-needed makeovers
08/09/99: GOP must launch new probe of Chinagate
08/02/99: Pols blow fiscal smoke on budget surplus
08/02/99: One campaign reform should pass: disclosure
07/27/99: Gore leads Bush in policy proposals

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