Tax Cut Likely To Pass

Despite the opposition of President Clinton, the Senate is on the verge of passing a nearly $800 billion tax cut. CBS News Correspondent Diana Olick reports.

Lawmakers in the Senate Friday are expected to finally vote on the Republican-backed $800 billion tax plan.

Even though the president has vowed to veto it, insiders say it will likely pass - and Democrats are still crying foul.

"This is class warfare," said Sen. Paul Wellstone. "Sixty percent of the benefits go to the top 10 percent."

Mr. Clinton lashed out at the proposed tax cut Thursday, calling the measure shortsighted and irresponsible. He said the U.S. budget surplus should be used instead for Social Security, Medicare and education.

In a brief statement at the White House before departing for a trip to the Balkans, Mr. Clinton told reporters he will veto the "large and risky tax cut," which he predicted could carry America back "to the dark old days of huge deficits."

Even Federal Reserve Chairman Alan Greenspan, the dean of Republican economists, warned big tax cuts could lead to big inflation.

Economist Todd Buchholtz explains, "he fears that if there is a massive tax cut that sends money back into the pocketbooks, it will merely show up in credit card balances and people will end up spending and spending and spending."

So with Greenspan so clearly opposed and the president ready to veto, why are Republicans so set on such a huge cut?

"Republicans are desperate to define a difference between them and the Democrats - and cutting taxes is ultimately their issue," said Marshall Wittman of the conservative think-tank Heritage Foundation.

Their measure would cut taxes for individuals and families and provide tax breaks for education and long-term health care. The average middle class family of four would get about $450 a year back as a result of the Republican plan.

But 67 percent of the plan's benefits would go to the wealthiest 10 percent of America's families; the president says that's too much and too generous to the rich. Republicans say the money should be returned to the taxpayers.

Wittmann says, "ultimately God put Republicans on earth to cut taxes. Republicans believe that they have to go back to their standard bread and butter, and that is cutting taxes."

"Let me be clear again," Mr. Clinton said at the White House, "I do strongly support tax cuts, but not if they are so large they undermine our strength."

Democrat John Breaux also wants a tax cut. But he is convinced the GOP plan will backfire.

"Under the scenario, the only thing that will win will be political operatives in this country who will provide each party with a political issue," Breaux said.

The smart money says that's what will happen in the future of any tax cut. It will depend on lawmakers cutting a deal behind closed doors in the fall.