- The Washington Times - Friday, October 19, 2001

Senate Democrats, hoping to derail Republicans' bid for more tax cuts in an economic stimulus plan, said yesterday that terrorism-related costs could eat up $2 trillion of the Medicare and Social Security surpluses.

Budget Committee Chairman Kent Conrad, North Dakota Democrat, said a new analysis he provided to Democrat leaders showed the additional costs, combined with a continued poor economy, would sap all but $500 billion of the trust fund surpluses over the next 10 years.

"Our conclusion is that there is a risk of a very substantial use of Medicare and Social Security trust fund monies for other purposes substantially greater than has been previously discussed," Mr. Conrad said.

Mr. Conrad said his analysis makes clear that any economic stimulus package should be limited to one year.

"Otherwise, we're going to be putting more upward pressure on interest rates," Mr. Conrad said.

The Democrats' emerging strategy comes as the Republican-led House is expected to vote next week on a plan that provides $100 billion in stimulus in the first year and is weighted toward permanent tax cuts.

President Bush has urged Congress to approve a stimulus package of $60 billion to $75 billion in tax relief. The White House does not support the size of the House plan nor some of its provisions, such as a capital gains tax cut.

Told of the Democrats' new projections, Sen. Don Nickles of Oklahoma, assistant Republican leader, said it sounded like a justification for more spending instead of tax cuts.

Mr. Nickles noted that Republicans were seeking to accelerate depreciation for businesses in the package. "If you only do it for one year, you're not going to do any good," Mr. Nickles said.

"Some of our Democratic friends want tax cuts to be temporary, but you seldom hear that from them on the spending side," he said.

Mr. Conrad said he prepared the projections for Senate Democrat leaders "so they can have something to evaluate over the weekend."

"The best description of it is the possible additional claims on the budget," Mr. Conrad said. "It includes additional economic slowdown largely attributed to reductions in productivity, which we've never factored in before. It includes additional rebuilding costs as well as counterterrorism costs."

The House bill would give tax rebates to those who did not qualify for income-tax rebates sent out this summer and fall because they did not earn enough. It would accelerate the income-tax rate reductions passed earlier this year, let businesses write off new equipment purchases faster and repeal the minimum income tax.

It also would eliminate the five-year holding period for capital gains, which effectively lowers the tax rate to 18 percent, and offers aid to states to pay for rising unemployment costs and health insurance for the unemployed.

Senate Finance Committee Chairman Max Baucus, Montana Democrat, is expected to alter the House bill significantly. He wants a bill somewhere between the $60 billion and $75 billion range that Mr. Bush has proposed.

Mr. Conrad denied that his projections were a worst-case scenario.

"This helps put in perspective how all of this potentially fits together, and the overall surplus is reduced to $500 billion," Mr. Conrad said.

He said of the House plan, "I just can't take it very seriously. It's far beyond a stimulus package. Seventy percent of the tax cuts included in that package are permanent tax cuts."

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