- The Washington Times - Sunday, September 9, 2001

House and Senate Republican leaders, worried that an economic recovery is nowhere in sight, have joined forces to push for a major cut in the capital gains tax this fall, despite the president's opposition to such a move now.
Speaker J. Dennis Hastert told House Republicans last week that he now intends to make a capital gains tax cut "a major priority" in this session of Congress. That proposal not only will set up a huge political confrontation with the Democrat-controlled Senate, where Majority Leader Tom Daschle and other Democrats oppose such a move, but it also would put Mr. Hastert at odds with President Bush, who wants to wait and see if his income tax cuts will get the economy growing again by year's end.
Republicans and their grass-roots supporters are pressuring the speaker to take more aggressive action to jump-start the economy before the 2002 election year, when control of the House and Senate will be up for grabs. House Republicans cheered on Mr. Hastert Thursday when he told them in a closed-door meeting of his plan to ask Ways and Means Committee Chairman Bill Thomas, California Republican, to draft a bill to cut the capital gains tax rate to 15 percent from 20 percent.
"House Republicans are worried about the economy. They think the president's tax cut is the right thing to do, but they now think we have to do more," said John Feehery, the speaker's chief spokesman.
When Mr. Hastert, Illinois Republican, told House Republicans that "the president wants to wait until next year" to decide on whether to cut the capital gains tax rate, there were "audible groans from the members," said a House Republican official who attended the meeting.
At a White House meeting with Mr. Bush on Wednesday, both Mr. Hastert and Senate Republican leader Trent Lott of Mississippi — who has been calling for a capital gains tax cut for months — urged the president to get behind their proposal now to give the anemic economy an additional boost, said congressional Republican officials.
House Republican leadership officials said the two leaders told Mr. Bush of their plans to move ahead with a capital gains cut "at the earliest opportunity."
The president has been reluctant to call for additional tax cuts, saying he first wants to see if his tax rebates and the additional income tax rate reduction in January will be sufficient to pull the economy out of its yearlong slump. But Mr. Bush has said he has "an open mind" on the issue, and his chief economic adviser, Lawrence Lindsey, was looking at a capital gains tax cut "much more closely," a White House official said.
Supporters of a lower 15 percent capital gains tax rate say that it not only will stimulate new risk-taking investment in the economy, but that increased sales of stocks and other assets will result in more tax revenue, boosting the surplus by as much as $7 billion over the next two years.
"The speaker feels very strongly that a capital gains tax cut will help grow the economy and plans to bring it up in this session. They have had their discussions with Chairman Thomas and we're trying to get this done," Mr. Feehery said.
Despite the narrow political split between the two parties in the House, Republican vote counters believe they have enough votes to pass a capital gains tax cut, especially after the strong ovation that members gave Mr. Hastert when he announced his plans in the Republican conference.
Mr. Daschle of South Dakota and most of his Democratic colleagues oppose such a move in the Senate, but a small but growing band of conservative and liberal Democrats has supported a capital gains tax cut in the past.
Seven Democrats broke ranks on May 21 and voted for an amendment to cut the capital gains tax to 15 percent, including Sens. Evan Bayh of Indiana, Max Cleland and Zell Miller of Georgia, Joseph I. Lieberman of Connecticut, Charles E. Schumer of New York, Robert G. Torricelli of New Jersey and Ron Wyden of Oregon, although the measure lost on a 47-51 vote. More recently, Democratic Sen. John Kerry of Massachusetts also has come out in support of a capital gains tax cut.
Meanwhile, the president's opposition to an immediate capital gains tax cut has upset many of his conservative supporters, who think that he is underestimating the depth of the economy's weakness.
Wall Street economist Lawrence Kudlow said the president was "asleep at the switch," while Stephen Moore, president of The Club for Growth, warned in a memorandum to Republican leaders that "the lack of an aggressive economic recovery plan by the White House may lead to catastrophic GOP losses in both the House and Senate" next year.


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