- The Washington Times - Wednesday, February 28, 2001

NEWS ANALYSIS

President Bush proposed new fiscal policies for the nation last night that would significantly restrain the growth in government spending and make the first across-the-board income tax cuts in two decades.
In a sharply conservative reversal from the more liberal spending increases that have dominated the government over the past several years of the Clinton administration, Mr. Bush in his first address to Congress called for a return to a government that was "active but limited."
With the U.S. Treasury piling up budget surpluses that are expected to hit nearly $6 trillion over the coming decade, Mr. Bush made a strong bipartisan appeal for his $1.6 trillion tax-cut plan, reminding Congress that the last two income-tax cuts were proposed by Presidents John F. Kennedy and Ronald Reagan.
"To create economic growth, we must put money back in the hands of people who buy goods and create jobs," Mr. Bush said.
In a delivery that was serious and calm, punctuated with occasional humor and gentle teasing, Mr. Bush was well-received by lawmakers, with overwhelmingly applause usually coming from the Republican side of the aisle.
"It takes a tough man in boots to stand up to the enemies of tax relief," said Rep. J.C. Watts Jr., Oklahoma Republican and chairman of the House Republican Conference. "For the first time in eight years, this is one budget that won't be dead on arrival."
Many conservatives praised Mr. Bush's performance and the agenda he presented to Congress. "It was a public policy winner for conservatives. It has a lean budget, a large tax cut and $1 trillion reserved for private Social Security accounts. Fiscal conservatives have to be very pleased with what Bush proposed," said Stephen Moore, budget analyst at the Cato Institute.
Yet some liberal Democrats criticized Mr. Bush's sweeping tax-cut proposal as favoring the rich at the expense of middle- and working-class Americans. In the Democratic response to Mr. Bush's address to Congress, Senate Minority Leader Tom Daschle of South Dakota said, "The President's plan is deeply unfair to middle-income Americans. The wealthiest 1 percent people who make an average of over $900,000 a year get 43 percent of the president's tax cut."
He added, "Let us be clear: All Americans deserve a tax cut. But surely, the wealthiest among us should not get it at the expense of working families. There's a better way."
Mr. Bush's budget would apply the brakes to discretionary federal spending by slowing its annual growth rate from more than 6 percent a year to 4 percent, or slightly above the rate of inflation.
The president's top budget advisers say that curbing spending growth will be critical to carrying out Mr. Bush's plan to pay off all of the payable federal debt in just 10 years, offset revenue losses from the tax cuts and finance his new spending initiatives for education, defense, health care and Social Security and Medicare reforms.
Mr. Bush had to carefully walk a fine political line in his address to Congress between keeping his promises to his conservative base to curb the growth of government and cut taxes and regulations and reaching out to more centrist Democrats whom he will need to get his budget proposals through Congress.
For conservatives, Mr. Bush said his budget and tax cuts would "let the American people spend their own money to meet their own needs to fund their own priorities and pay down their own debt. I hope you'll join me and stand firmly on the side of the people."
But for those in the political middle who remain undecided about Mr. Bush's fiscal policies, the president said that even with reduced spending growth, he would use some of the budget surpluses to provide sufficient funding for "excellent schools, quality health care, a secure retirement, a cleaner environment and a stronger defense."
The olive branch that he offered to conservative Democrats in the House of Representatives who want to use more of the surpluses for debt repayment would wipe out most of the remaining debt in this decade.
Mr. Bush presented his budget plan to Congress at a time when the economy is showing increasing signs of decline. Consumer confidence has fallen to its lowest level in four and a half years, home sales have plummeted, retail sales are down, and thousands of workers have been laid off, especially in the technology and manufacturing sectors.
The National Association of Manufacturers (NAM) yesterday predicted flat or negative growth for its industry over the next six months and called for quick passage of Mr. Bush's tax cuts to jump start the economy.
"Clearly, we need quick action on both the monetary and fiscal policy fronts to restore business and consumer confidence and avoid a recession," said NAM President Jerry Jasinowski.
Lawrence B. Lindsey, the president's White House economic adviser, said that Mr. Bush's tax cuts would affect the economy "just as soon as we can get it into their paycheck."
"The problem with fiscal policy is that it often takes time to enact and what we're saying to the Congress is that's something you can do something about by passing it just as quickly as you can," Mr. Lindsey told The Washington Times.
In the Democratic response to Mr. Bush's address, Mr. Daschle, who spoke first, and then House Democratic Leader Richard A. Gephardt of Missouri charged that Mr. Bush's budget numbers "simply do not add up. His plan leaves no money for anything except tax cuts. It will consume all of the surplus."
Mr. Lindsey said that "there is more than enough to cut taxes, pay down the debt" and meet Mr. Bush's other spending priorities.
Moreover, "Every dollar of debt that can possibly be retired will be paid off" under the Bush plan, he said.
Mr. Lindsey said Mr. Bush's plan would cut the debt by $2 trillion over the next 10 years, leaving $1.2 trillion in long-term debt that would be too costly to pay off before the Treasury notes mature. "Paying that off would not make a lot of sense," he said.
Democratic leaders, however, continued to complain that Mr. Bush's tax plan does not do enough to help low-to-middle income people. But Pennsylvania Gov. Tom Ridge, the chairman of the Republican Governors Association, said yesterday that "the Democrats have talked a lot about helping working families, but when they could have done something for them, they didn't do anything."
"Class warfare has been the mantra of the Democratic Party for decades. They know no other way. When they controlled the Congress, they never did anything to lower the taxes for working poor people," Mr. Ridge told The Times.
Gov. John G. Rowland of Connecticut, a Republican, noting that the declining economy has put added economic pressure on the states, said that Mr. Bush's tax cuts were needed to spur new investment and business expansion.
"If we don't have these tax cuts it's truly going to hurt us economically," Mr. Rowland said yesterday.
Interviews with several governors yesterday who talked with the president described him as committed to his tax cut and unwilling to give on the $1.6 trillion amount he has proposed.
During a meeting with Mr. Bush and the governors yesterday, "someone brought up the idea raised by the Democrats to put a trigger in the tax plan" that would halt the tax cuts if the budget surpluses fell below a certain level, Mr. Rowland said.
Mr. Rowland quoted Mr. Bush as telling the governors that "the trigger should be on spending, not on the tax cuts."

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