- The Washington Times - Friday, June 8, 2001

Just four months after taking office, President Bush has gained approval of his No. 1 economic-policy priority. The tax cut isnt quite as big as he wanted and the top tax rate hasnt fallen by as much as it should have but the administration nonetheless achieved a stunning victory with the passage of the tax-cut bill signed by Mr. Bush yesterday.

But this tax cut should be only the first step. Ideally, the White House will build on this momentum by proposing further tax reforms.

One way to achieve more victories is to review this year´s battle and see what went right and what went wrong. Who won, who lost, and why?

Winner: The House Leadership. Despite the narrowest congressional majority in modern history, House Republicans were united in their fight for tax relief. This is a tribute to Reps. Dennis Hastert, Illinois Republican, Richard Armey,Texas Republican, Tom DeLay, Texas Republican, and the rest of the House leadership. There are many weak-kneed Republicans in the House, any of whom could have played the role of spoiler. The fact that this didn´t happen is remarkable.

Loser: Former Senate Minority Leader Tom Daschle, South Dakota Democrat. Notwithstanding his subsequent elevation to majority leader, Mr. Daschle was a non-factor in the tax debate. He lost 12 members of his caucus on the major tax-cut votes. Yes, he can demagogue, but his ability to rally his own troops is in doubt.

Winner: Former Senate Finance Committee Chairman Charles Grassley, Iowa Republican. Starting with an evenly divided Finance Committee that included two of the most liberal Republicans in the Senate, Mr. Grassley was able to craft a bill that attracted substantial bipartisan support, while still achieving the lion´s share of what the president wanted. (In the time-to-eat-crow department, I had argued that working with the lead Democrat on the committee was a foolish step. That strategy turned out to be the key to victory, though, demonstrating why I´m just a think tank analyst and Mr. Grassley was chairman of the Finance Committee.)

Loser: House Minority Leader Richard Gephardt, Missouri Democrat. Like his Senate counterpart, Mr. Gephardt had little impact on the outcome, though for a different reason. Mr. Daschle´s problem was that he lost so many of his own party. Mr. Gephardt kept most his caucus united until the final vote, but lost all leverage because he couldn´t convince five or 10 Republicans to bolt ship. In the face of effective leadership on the Republican side, this explains why the House voted so overwhelmingly for Reagan-style tax relief.

Winner: President Bush´s Economic Team. From the moment the tax plan was introduced back in 1999, the Bush team Larry Lindsey of the National Economic Council, Treasury Secretary Paul O´Neill, and Glenn Hubbard of the Council of Economic Advisers demonstrated a quiet determination that helped safeguard key elements of the tax package. And while many conservatives hoped the administration would expand the size of the tax cut when larger surplus figures materialized, the commitment to future tax cuts and tax reform is a very positive sign.

Loser: Class Warfare Economics. Five years ago when my Heritage Foundation colleague William Beach began focusing attention on the multiple problems with the death tax (not the least of which is the fact that it affects more small business owners than its proponents admit), almost nobody thought this class-warfare relic could be repealed. After all, the death tax was just a levy on the so-called rich, right? Would ordinary Americans support a plan to eliminate a tax they didn´t pay? The answer is yes. It turns out that class warfare economics is all bark and no bite. When presented with two competing visions one based on growth and opportunity and the other based on envy and redistribution Americans chose wisely.

Winner: America´s taxpayers. Last but not least, American taxpayers won a big victory. They are the ones who will be allowed to keep more of the money they earn, and they are the ones who will benefit from improved economic performance.

President Bush shouldn´t be shy about proposing substantial tax relief and reform next year. This year´s tax battle demonstrates that a Reagan-style tax cut is good politics as well as good economics. And with three-fourths of the projected budget surplus still up for grabs, Social Security reform and further tax cuts are desirable if for no other reason other than preventing that money from being squandered on new government programs.

Remember: They can´t spend what they don´t have.

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