- The Washington Times - Monday, January 15, 2001

In the midst of the Bush Cabinet battles, the really big story here is the fast-growing support in Congress for pro-growth tax cuts early this year to halt the looming economic downturn.

A month ago, the chances of broad-based income tax rate cuts happening anytime soon seemed unlikely, especially with the GOP's tenuous hold on Congress. But all that has changed dramatically because of the economy's continuing nose dive and sharply increased tax surplus projections, which have risen from an estimated $4.5 trillion to $6 trillion or more over the next 10 years.

House Majority Leader Dick Armey of Texas and Senate Republican Leader Trent Lott of Mississippi have begun talking up the idea of making George W. Bush's tax cuts the first order of business when Congress starts work at the end of the month. Moreover, they are talking about making the income tax cuts retroactive to Jan. 1.

"If we can raise taxes retroactively, we can cut them retroactively," Mr. Armey said last week in a memo to House Republicans.

What a difference a 50 percent plunge in the economic growth rate can make.

A few weeks ago, House Republican leaders were sending signals that Mr. Bush's tax cut proposals should not be taken up until much later this year. And if they were, they had to be watered down significantly. Instead, many suggested breaking up the tax cuts into smaller bills, passing a few smaller tax cuts that received broad support last year, such as death tax repeal and eliminating the marriage penalty for two-earner couples.

But with growing evidence of a seriously weakening economy that has alarmed Republican leaders and many Democrats, and polls showing increased public support for tax cuts to stimulate economic growth, such reticence seems to have vanished.

Mr. Armey was the first to sound the clarion call last week, breaking with House Speaker Dennis Hastert's go-slow approach.

"The Fed has done its job. Now it's time for us to do ours. It is vitally important that Congress move quickly to enact a pro-growth tax cut that could help avert a recession," Mr. Armey said in his "Call to Action" memo.

"Some are arguing that we should put off the income tax rate cut until later this year. I disagree. I believe the income tax rate cut must move first, whether alone or part of a larger tax cut package. It's imperative that we cut tax rates quickly to bolster our economy," said Mr. Armey, a former economics professor.

Jack Kemp, leader of the GOP's tax-cutting wing, immediately embraced Mr. Armey's initiative.

"The surest way to promote long-term, noninflationary growth and minimize the risk of recession is to enact a prompt, across-the-board income tax rate cut to spur growth and revive our lagging economy," Mr. Kemp said.

And in a slap at GOP leaders who had been retreating on Mr. Bush's tax cut plan, Mr. Kemp added: "The time is now. The need is immediate. Republicans should not be negotiating away the Bush tax cut before the president-elect even sends his proposals to Capitol Hill."

As reported in my previous column, business leaders across the country are voicing alarm about the economy's decline.

Morgan Stanley Dean Witter's chief economist, Stephen Roach, now thinks the economy will dip into negative territory in the first two quarters. The definition of a recession is two straight quarters of zero or minus growth.

Last year, tax cut opponents repeatedly said that was no public support for tax cuts. Not anymore.

A new national poll of 1,000 voters by pollster John Zogby released last week found 53 percent support Mr. Bush's tax cuts. Support is strongest among Republicans (78 percent), but 45 percent of independents back his plan, as do 35 percent of Democrats.

There also is growing tax cut support among conservative Democrats in Congress. In a letter last week to Mr. Bush, the 33-member Blue Dog House Democrats said they were ready to join the new president in what they called "a productive working relationship."

The Blue Dogs' "50-25-25" surplus allocation formula would devote "half of the budget surplus outside of Social Security and Medicare to debt reduction, with the remaining half divided equally between tax relief and investments in priority programs."

Thus, these pivotal Democrats are not that far from Mr. Bush's tax cut target. Under his proposal, half of the $6 trillion budget surplus would go into shoring up and reforming Social Security, and half of the remaining sum would go to tax cuts, with the rest into new spending.

Somewhere between Mr. Bush's $1.3 trillion in tax cuts and the Blue Dogs' nearly $800 billion in tax cuts, there is plenty of room for compromise.

Liberal tax cut opponents say this tax cut is too big, and they play up the $1.3 trillion cost. What they do not say is that it is only a tiny fraction of the $25 trilllion to $30 trillion in tax revenue that will pour into the U.S. Treasury over the next 10 years.

Moreover, as a share of the nation's economy, Mr. Bush's plan "would equal only 0.9 percent of GDP over 10 years, less than half the size of President Kennedy's tax cuts," says Mr. Kemp.

Late last week, Mr. Bush huddled here with his budget advisers to map out a tax cut strategy. The word coming out of that meeting was "sooner rather than later," a Bush adviser told me. Stay tuned.


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