- The Washington Times - Friday, March 16, 2001

Treasury Secretary Paul H. O'Neill has told a bipartisan group of senators that the House-passed tax cuts do not provide enough of an early stimulus to revive the economy this year.

Meeting privately Wednesday with about 20 centrist Democratic and Republican senators who call their group the Centrist Coalition, Mr. O'Neill said that he did not believe that the House tax cuts, to be phased in over six years, are "stimulative enough in the early years," according to an aide to the group.

"He acknowledged that the bill did not have a large early stimulus," said another aide to a Republican senator who attended the 90-minute meeting.

"He talked about the tax-cut figures, the marginal rates and how it could provide a more stimulative effect," this aide said. "He's clearly looking at ways to speed it up."

"He said it would be nice to have a bigger stimulus up front," said Michele Davis, Mr. O'Neill's spokeswoman, who confirmed his remarks yesterday.

"It was the Democrats who said they wanted the stimulus up front and he was responding to them," she said.

Sen. Joseph I. Lieberman, Connecticut Democrat, was one of the participants at the meeting who raised the subject, according to those who attended.

Mr. O'Neill's remarks on the stimulative effect of the tax cuts came at a time when the economy is being battered on Wall Street and when Republican leaders are complaining that President Bush's $1.6 trillion tax-cut plan is not big enough and does not kick in quickly enough in the first few years.

The House bill's initial retroactive tax cuts would put $5.6 billion into the $10 trillion economy this year, an amount that critics say would provide little or no stimulus.

Sens. John B. Breaux, Louisiana Democrat, Olympia J. Snowe, Maine Republican, co-chairman of the pivotal group, along with Evan Bayh, Indiana Democrat, and Ben Nelson, Nebraska Democrat, were among those who attended the closed-door meeting.

Mr. O'Neill "made it clear that he wanted to work with the senators and find ways to address their concerns," said an aide. "It was a very valuable meeting."

At one point in the off-the-record meeting, a Senate aide said Mr. O'Neill remarked, "Look, I'll be in big trouble if this gets out."

The administration has been reaching out aggressively to Republicans like Mrs. Snowe, who have expressed doubts about the plan, and to about a dozen or so centrist Democrats who have not tipped their hand about how they will vote on the tax-cut plan. And there were indications yesterday that some Democrats were softening their position on tax cuts in the wake of the stock market's downward spiral this week and other signs of the economy's weakness.

A spokesman for Mr. Bayh said that "he believes you should be able to have a substantial tax cut in the short run but that it should be fiscally responsible in the long run."

However, there were troubling signs for the White House from conservative Republicans who think the economy is in deeper trouble than the administration has acknowledged and that it will take bigger tax cuts to rescue it.

"We need to revise and expand the package so it does more to stimulate the economy," said House Majority Leader Dick Armey in a memorandum this week to his colleagues. He complained that the original Bush plan was put together at the beginning of the 1999-2000 campaign cycle when the economy was doing fine, but that since then the economic "circumstances have fundamentally changed."

Mr. Armey, House Majority Whip Tom DeLay and Republican Conference Chairman J.C. Watts Jr. have been behind an effort to increase the tax-cut package to $2 trillion or more. And 65 conservative members of the House Republican Study Committee have lined up behind a bill by Rep. Patrick J. Toomey, Pennsylvania Republican, to beef up the tax cuts and phase them in more quickly.


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