<i>FTN</i> Transcript - Jan. 28

Bob Schieffer, CBS
News Chief Washington Correspondent: Today on Face The Nation, Is a tax cut a sure thing now? How big is it going to be?

Last week, the Federal Reserve Chairman Alan Greenspan reversed course and told Congress he thought a tax cut would be a good idea. How much did he boost the chances for President Bush's $1.3 trillion tax plan? Could it get even bigger? We'll ask the president's chief economic adviser, Lawrence Lindsey.

Then we'll talk to Texas Senator Phil Gramm, who's in favor of a big tax cut, and Congressman Charles Rangel of New York, who wants a smaller one.

Finally, we'll get a Super Bowl preview from NFL Commissioner Paul Tagliabue. Gloria Borger is here, and I'll have the final word on unplanned defense.

But first, the Bush tax cut on Face The Nation.

Announcer: Face The Nation, with Chief Washington Correspondent Bob Schieffer. And now from CBS News in Washington, Bob Schieffer.

Schieffer: And we start this morning with the White House economic adviser, Lawrence Lindsey. Mr. Lindsey, thank you very much for coming.

Lawrence Lindsey, Bush economic adviser: It's great to be here.

Schieffer: Well, when Alan Greenspan gave that green light, it really seemed to change the game. Are you looking now for a larger tax cut than even what President Bush talked about during the campaign?

Lindsey: What President Bush proposed was changes in the tax code to make it work better, make it fairer, make it simpler. And he wants to see those changes enacted. What has changed, I think, is whether or not we can put more money in people's pockets sooner by accelerating portions of the tax cut. I think that's the big issue.

Schieffer: How do you do that?

Lindsey: Well, the way people would see it is in their paychecks in withholding. Uncle Sam would take a smaller cut, and the bottom line would be bigger.

Schieffer: When would you think, if you could make a guesstimate, that people might see that, saying that Congress would have to pass this first? But are we talking about a matter of months?

Lindsey: It's all up to the Congress. It could be changed very, very quickly, as soon as legislation is signed. I would hope that sometime the second quarter, July 1 at the latest, people could see it, because I think that's really when the economy is going to need it. But, again, it's entirely up to the Congress.

Schieffer: But you think it's possible they could see it in the second quarter of the year?

Lindsey: It is possible.

Gloria Borger, U.S. News and World Report: Would you support, by any chance, something that the Senate majority leader supports, Trent Lott, which is a tax cut on capital gains?

Lindsey: I have written many papers in my life saying the capital gains rate should be lower. What President Busasked us to do in the campaign was to set a list of priorities, what were the most egregious problems in the tax code. And I think we identified them. Certainly, capital gains is one of them, but in a world of scarce resources, I think it is less egregious than some of the problems we identified - marriage penalty, death tax. We have a case now where a single mom with two kids is in the 50 percent tax bracket making $25,000 a year. That's terrible. That's got to be changed.

Borger: But if we're talking deeper - a larger tax cut possibly, would you see deeper rate cuts on the horizon?

Lindsey: I think the key is, the president wants the program he ran on enacted. The issue is whether or not that program can be accelerated. He proposed phasing it in gradually in order to maintain the growing surplus. If the economy needs it sooner, it might make sense to have money in people's pockets sooner.

Schieffer: Let's talk a bit about this problem out in California. The president ordered some extra help, told those energy companies to keep the generators going to help California. But the word we keep hearing from the White House said this is it, as far as George Bush is concerned.

Lindsey: Sure. The governor of California asked for two weeks to get legislation through. And, you know, we had to weigh the costs and the benefits. It's not that we can just simply order electricity to California; there's a cost to that electricity. For example, behind Grand Coulee Dam, we will not be able to generate any electricity in two weeks because we've pumped so much water through.

We're running out of water in Arizona. I was meeting with Governor Hull. People are not going to be growing crops in Arizona this summer, they have shut down paper mills in Oregon, they shut down aluminum smelters in the Pacific Northwest - all to accommodate this sending power to California.

There's a tradeoff here. We said, "Two weeks, all right, that's probably a little too long, but if the governor needs it, we'll give him two weeks." Longer than that and there's real suffering in the rest of the West.

Schieffer: So what you're saying is, California must get this done in two weeks. They should expect no more help from the White House?

Lindsey: They should expect no more help from the White House. It's not that we don't want to give them the help. If we could send thunderbolts into the electric grid to run electricity, we would do it. We can't.

Electricity is generated largely by draining existing reservoirs in the West. There will be less water in the rivers. That's going to have ecological effects. It's going to shut down factories throughout the rest of the West.

It's not that we don't want to give them the electricity. It's that we're giving them electricity now that will have huge economic and ecological repercussions down the road.

Borger: So worst-case scenario, what if Caliornia cannot meet the two-week deadline?

Lindsey: Well, in the case of electricity, the amount - right now, the order is putting about two-thirds of one percent, not a lot, extra into the grid. What we are hoping for is, first of all, that the financial picture can improve so that the fear of selling to California is reduced. But second, that they can't find some way of getting a little extra conservation - in other words, you're talking about two-thirds of one percent - so that they can still meet their needs.

Schieffer: Let me just ask you, just to make sure I understand here, because what happens if the economy goes in the dump in California because of all this? And as Alan Greenspan said, that could affect the economy all across the country.

Lindsey: There's no question that this is a serious problem. But the reason the problem exists is, no new power plants have been built, no new transmission lines have been built, no new natural gas pipelines have been built. The president raised this issue in the campaign. He pointed out that for eight years we have had demand growing five, six, eight times faster than supply. That can't go on. That is the fundamental problem.

It's not a problem you can solve with decrees from Washington. It's something that has to be done with tough decisions: more power plants, more transmission lines, more natural gas pipelines.

Schieffer: Larry Lindsey, thank you very much for coming by.

Lindsey: My pleasure.

Schieffer: And to get another view on all of this, we go to New York where Congressman Charles Rangel, who of course is the ranking Democrat on the House Ways and Means Committee, is standing by.

You'll be a key man on what kind of a tax cut this turns out to be, Congressman Rangel. Do you agree with Larry Lindsey that it maybe possible to move it up, to accelerate the whole thing?

Rep. Charles Rangel (D-N.Y.): Well, as you know, all tax plans under the Constitution have to start in the House and has to start with the Ways and Means Committee. But even Senator Lott believes that it won't even reach the Senate until July 4. So, I really don't know what stimulus it would be to the economy.

But one thing is certain, that while economists do well at projecting what's going to happen in the future, we in the House have to be fiscally responsible to make certain whatever tax cut we have fits into an agreed budget agreement.

Schieffer: At this point, would you favor a tax cut the size that Larry Lindsey and George Bush are talking about?

Rangel: Well, Larry Lindsey has said on more than one occasion that he believes that we might even go into the Social Security trust fund in order to pay for this tax cut. And I say that's not going to happen.

It's easy for those people to talk about tax cuts because we all want to do it. But the truth of the matter, that we in the House have a moral and fiscal reponsibility to protect the Social Security system not just now, but when it doubles to 80 million people in the year 2030. That includes Medicare.

President Bush says he wants to help the older people with their prescription drugs, to improve public schools in rural and inner-city areas, to improve the quality of life our young people in the military. And God knows it's a national disgrace that 43 million Americans have no health insurance.

Now, all of these things are our responsibility should fit into the budget and should fit into a sizable tax cut.

Schieffer: All right. Well, let's go now to the studio where Senator Phil Gramm, who introduced President Bush's tax bill in the Senate last week, is with us today. You heard Charlie Rangel. You heard Larry Lindsey. How does it look to you, Senator Gramm?

Sen. Phil Gramm: Well, first of all, I can't imagine that we're not going to have this tax cut passed and implemented by July 1.

Schieffer: Really?

Gramm: Secondly, the non-Social Security part of the surplus is more than twice as large as the Bush tax cut. We don't know what $1 trillion is. Most people don't realize how big the economy is. But let me set it in a perspective that people back home can understand: Of every dollar we're going to collect in the next 10 years, we're talking about giving 6 cents back to the taxpayer. As Alan Greenspan said, that would be about the average size of the tax cuts we've had in the post-war period.

The surplus is big. The tax-level is the highest level in American history, as a percentage of income. And, with the economy slowing down, the idea that we wouldn't give some of the surplus back to the American people I think is just out of touch with reality.

Schieffer: Let me ask you just one practical political question: You surprised even some on the White House staff last week when you brought in Zell Miller, the first Democrat, and Senator Miller said he was going to support the Bush tax plan. Have you picked up any other Democratic support yet?

Gramm: Well, we're talking to both Democrats and Republicans. And what we're going to be trying to do this week is something that Charlie talked about the need to do, and that is, we're going to be trying this week to put together the budget, the tax cut, our priorities to show they all fit, and to set out a program to begin systematically reducing the debt. This is something that George Voinovich and I have been talking about.

Schieffer: Do you think he's going to support this?

Gramm: Well, I think if we can set out a system where, quarterly, we would begin to reduce the outstanding debt, rather than wait until the end of the year and inviting Congress to spend the money before we could pay down the debt, I think it's possible, and I think maybe he will.

Borger: Congressman Rangel, there's some talk - and Senator Gramm has actually been talkinabout it - about this tax cut growing rather than shrinking. Some Democrats seem to want to shrink it. Are you worried that this is going to get into kind of a bidding war on tax cuts?

Rangel: No, not on our side, because our commitment, I really believe, is a lot stronger than the Republicans, as it relates not only of saving but reforming and improving Social Security and having it there for the so-called bumper crop, when the enrollees are going to double.

And so, if they're going to back off of that commitment, then I guess they can talk about making it retroactive and having a tax cut bigger. But if they're going to talk about the things that President Bush talked about, in a bipartisan way, there's no way for it to get bigger. As a matter of fact, it really starts reducing. We have to take care of our military and improve the quality of life of these young people. We have to take care of those people who are uninsured.

Under the so-called Gramm proposal - I don't know whether there's a sponsor on the Ways and Means Committee for that bill - but the local and state taxes will no longer be deductible in states like New York, California, Wisconsin. There are so many things that we have to look upon.

The problem that we have is that, once we cut taxes and we start going toward a deficit, which Chairman Greenspan was concerned about, it is very, very difficult to raise taxes. President Bush's father found that out. President Clinton and the Democrats found that out. When we stimulate the economy, we had the tax increase, and what happened? We lost the majority.

So that this time we should be bipartisan, we should read from the same page. I will be meeting with President Bush on Tuesday. I hope we can come out of there not with agreement, but with an agreement to try to work together.

Borger: Congressman, very quickly, what number, then, would you have in mind?

Rangel: It all depends on really what we intend to do and how deep the commitment is to do it. If you take in consideration prescription drugs, Social Security, and Medicare, that's half of the $5.7 trillion that we're projecting. If you improve and see the losses that we have in credits for research and development, for the deduction of local and state taxes - if we repair that, that's another $400 billion.

And so, if you take care of the uninsured - and we have 43 million people without any insurance at all - it costs $2,000 a year. That would be another $80 million a year to take care - $80 billion a year to take care of that. So it all depends on what's in the budget, and then we determine the size of the tax cut.

Schieffer: Senator Gramm, let me ask you. The whole idea, should there be some kind of trigger's in this that if you reach a point where the surplus is not there, that things kind of - you kind of halt it there?

Gramm: I don't know how you set tax policy that way, but we don't do that on spending I mean, one of the reasons Alan Greenspan did this 180 was not only has the economy changed, not only is the surplus a depressing factor on the economy, but, as he made very clear in an extraordinary statement for a chairman of the Federal Reserve Bank, in the last two years, domestic spending has exploded. If you project the spending growth of the last three years out 10 years, it's $1.8 trillion. We have already started spending more than the Bush tax cuts.

So it's interesting to me the very people who are saying we can't afford to give people back this money, we can't eliminate the death tax or the marriage penalty or cut rates because it costs too much. They have started a spending program in Congress that spends far more than that amount.

Now that's already built into the baseline. Much of that spending they've already gotten. But the one person who has gotten nothing out of this situation we're in, in terms of government policy, is people who work and pay taxes. And in my opinion and Bush's opinion, and I think America's opinion, it's their turn.

Schieffer: I'll give you the last word, Congressman Rangel.

Rangel: Well, I think Phil Gramm started to touch on it when he was saying some of these expenditures are built into the budget in Medicare and in Social Security. And so nobody's - whatever Chairman Greenspan does, he does that well. But no one's going to go to him for Social Security, for health care, or for education. So we have a responsibility, instead of just speculating as to what the surplus is going to be.

Schieffer: All right, gentlemen, we have to stop it there. The two things that most Americans seem interested in: football and taxes. Well, we've talked about taxes. We're going to talk about football when we come back in a minute.

(COMMERCIAL BREAK)

Schieffer: And with us now from the site of tonight's Super Bowl in Tampa, the commissioner of the National Football League, Paul Tagliabue. Well, I guess the first question we should ask, how's the weather down there, Commissioner?

Paul Tagliabue, NFL Commissioner: The weather's great, and it's going to be great tonight.

Schieffer: The NFL - this is the biggest day in football for professional football. The NFL is doing well, and yet, there are those who say that this league has a real problem with its image, that it's players, some of them, are not projecting the kind of image that America ought to be seeing. How do you respond to that, Commissioner?

Tagliabue: Well, I would say that in an ideal world, we would not have any problems with any player, 100 percent of our players would be perfect all of the time. But we live in the real world. Our players come to us from society, and occasionally a player or players will have a problem, sometimes a serious problem.

So we have put together a support system. We've put together professional assistance of every responsible type o help our players deal with the problems that they may have, that they may encounter, sometimes stemming from their past and sometimes stemming from the pressures that they're trying to deal with as young men playing football.

Schieffer: Let me just ask you this. USA Today ran an editorial in which they said that scores of NFL players have had serious run-ins with the law, and that one study found 21 percent, one in five, had a criminal history. Is that in fact correct?

Tagliabue: No, that is not in fact correct. That book has been widely discredited. It involves some research which was, you know, not responsible. And it's one of the unfortunate things that's been picked up by media and others without any real scrutiny. And it really is unfair and inappropriate. It maligns our players and defames them in a very unfair way.

Borger: Mr. Commissioner...

Tagliabue: For one thing...

Schieffer: Go ahead.

Tagliabue: Well, for one thing it treated charges that were found not to be without foundation, as the equivalent of convictions and so forth. It treated juvenile offenses as major offenses when, under our court system, they are what they are. They're offenses by juveniles, 13, 14 years old. It's not fair to anyone in society to put around your neck for your whole life something you might have done when you were 13 or 14 or 15 years old.

Borger: Mr. Commissioner, the league has been criticized, though, for levying large fines, say $250,000 and the like, against players. And some people say that the players earn so much money, in fact, that the fines are nothing more than a slap on the wrist, and that, you know, by levying these fines, the league is saying it's OK.

Tagliabue: Well, you know, we've suspended quite a large number of players. We suspend players, for instance, if they have a record of recurring offenses involving alcohol abuse or substance abuse. And we impose penalties that far exceed what the court system does, what anyone else in society does. We take it very seriously, and our players know that they're going to pay a very heavy penalty, either in a fine or in suspension, which also involves loss of salary.

So anyone who says that we're not disciplining our players adequately really doesn't understand the type of system we have in place.

Schieffer: You're about to face some competition, at least on television, with the formation of this new football league, the XFL, which is being - it's the brain child of professional wrestling, one of professional wrestling's biggest entrepreneurs. It will have all kinds of rules to make it meaner and tougher: no fair catch, for example, for the punters. What do you make of this, and is this going to have an impact on your league?

Tagliabue: Well, we don't make much of it, because frankly we've spent so much time focused on our own issues and challenges that we have reall not been able to focus on the XFL.

Some of the rules changes they're proposing we think could possibly pose some serious safety issues. We pay a lot of attention to player safety, not only for the safety of the players in our own league, but we want to send a message to young people that sports, particularly physical sports like our sport, should be played safely and within the rules. That's why we have many of the rules we have.

In terms of competition, I don't know. If they have a good product, they'll be out there with all of the other entertainment competing. In terms of the time of season, they'll probably have more of an impact on the NBA and the National Hockey League than they will on us, but it'll just depend on how good their product is.

(COMMERCIAL BREAK)

Schieffer: Finally today, it was his first week, and by almost every account, George Bush is off to a very good start.

Granted, it is hard to look bad when you're playing off the Clinton farewell tour, with all of the pardons and parting gifts and the occasional acts of vandalism.

But give the new man credit. His education plan went down well with all sides. Even Democrats said he was setting the right tone. And Alan Greenspan gave him the best gift of all: the green light for a tax cut. Still, there was a small story in the paper the other day that reminded me that the success of any presidency can never be taken for granted, because so often it turns on events over which a president has no control.

Early in the week, a man who claimed to be a follower of Saddam Hussein, hijacked an airliner in Yemen and demanded the pilot fly to Iraq. The hijacker was unaware that Barbara Bodine, the U.S. ambassador to Yemen, was on board. Luckily, the hijacker was not very adept. Instead of flying to Baghdad, the crew tricked him, flew to Djibouti, and disarmed him. No one was hurt. The ambassador was safe, and it all came out for the best.

But it could have easily gone the other way. And what if it had? An American ambassador held hostage by Saddam Hussein in the first week of the Bush presidency. You don't even want to think about it.

Well, that's our report. We'll see you right here next week on Face The Nation.

END