Partisan Tax Battle Lines Drawn
Democrats and Republicans pointed fingers at each other Sunday in a debate over the economy, in what amounted to a game plan for each side's election-year strategy. Democrats blamed last year's tax cut for vanishing budget surpluses, while Republicans said anyone who criticizes a tax cut must want to raise taxes instead.
Sen. John McCain, R-Ariz., spelled out most candidly the dilemma of lawmakers facing new budget deficits and re-election at the same time: Taking back or delaying some of President Bush's 10-year, $1.35 trillion tax cut is not "politically saleable," McCain said on NBC's "Meet the Press."
Administration officials defended the tax cut, a centerpiece of Bush's first year in office.
"The way to stimulate this economy is to give this economy tax relief," Commerce Secretary Don Evans said Sunday on ABC's "This Week."
Democrats led by Senate Majority Leader Tom Daschle, along with independent analysts, note the tax cut helps explain why the federal government is now facing a budget deficit after several years of mounting surpluses.
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"He wants to see the administration's budget - he wants to see whether they dip into the Social Security surplus, and if so by how much," she said. "And then they can discuss options about how to proceed."
That hasn't stopped Mr. Bush and fellow Republicans from accusing Democrats of wanting to raise taxes. On Saturday, Mr. Bush said, "Not over my dead body will they raise your taxes!"
And asked about Daschle's criticism, Evans added Sunday: "If he wants to raise taxes, then I invite him to raise taxes. I don't think that's what he American people want."
But Treasury Secretary Paul O'Neill, who has been known to stray from the administration line, told NBC: "I have not seen anyone say they want to raise taxes."
With the war slowing down in Afghanistan, domestic issues are once again on the front burner, reports CBS News Correspondent Stephanie Lambidakis. Mr. Bush well remembers how a sagging economy destroyed his father's reelection chances after the Persian Gulf War.
The government was projecting large budget surpluses when President Bush ran for office promising a large tax cut, which cut income tax rates across the board.
Republicans urged Democrats to get behind Mr. Bush's broad tax cuts as an "insurance policy" to economic recovery.
"Sooner or later this economy is going to recover on its own, but if you're unemployed, you'd much rather have sooner rather than later," White House economic adviser Lawrence Lindsey told "Fox News Sunday."
Democrats said the cuts have whittled away at a surplus they've carefully built over the past eight years, urging limited tax relief to get the nation out of recession without worsening future deficits.
The debate grows as a new analysis from the nonpartisan Congressional Budget Office favors payroll and sales tax "holidays" among various stimulus proposals. Several ideas promoted by Bush, including a repeal of the corporate alternative minimum tax, had less "bang for the buck," the CBO report said.
Stanley E. Collender, managing director of the Federal Budget Consulting Group, said the budget numbers back up Democrats' contentions about the tax cut eliminating at least 25 percent of the projected surplus.
"The tax cuts had a fairly substantial impact," he said. "You cannot say that the tax cut has had, as some people in the administration say, no impact, or no negative impact."
Democrats and Republicans ended 2001 at odds over legislation to stimulate the economy, largely in a dispute over tax relief versus aid to the unemployed. Two plans passed in the GOP-controlled House, but neither came to a vote in the Senate, which is controlled by Democrats.
David Wyss, chief economist for Standard and Poor's, said the House plan wouldn't stimulate the economy in the short term.
"The only thing it stimulates is campaign contributions, as far as I can tell," he said.
Wyss also wasn't impressed with a Daschle proposal for a job creation tax credit. Rather, Wyss recommends extending unemployment benefits, among other ideas.
He added that Bush's tax cuts were "bigger than we should have passed." They helped steady the economy following the Sept. 11 terrorist attacks, he said, but as an "insurance policy" they're ineffective.
"The problem is, these are very expensive insurance policies that don't pay much insurance," he said. "If an insurance company offered these up to you, they'd be arrested for fraud."
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