- The Washington Times - Friday, February 15, 2002

The White House today will offer proof that its tax cuts have softened the recession and will help to create 800,000 jobs by the end of this year.
In a speech to the Council on Foreign Relations, Vice President Richard B. Cheney will present findings by the president's Council of Economic Advisers in answer to Democratic critics in Congress who want to freeze tax cuts and who have blamed tax relief for the recession.
The findings, a copy of which was obtained by The Washington Times, show that third-quarter growth last year would have contracted at an annual rate of 2.5 percent, instead of the reported 1.3 percent, without the tax relief.
In the fourth quarter, Mr. Cheney will say, the real gross domestic product would have fallen 1 percent instead of seeing an estimated growth of 0.2 percent.
The report concludes that the recession "has been more mild and will likely turn out to be shorter than it otherwise would have been without the tax relief."
"The report provides crystal-clear evidence that the tax cut has jump-started our economy," said White House spokesman Jim Wilkinson. "It also provides unqualified evidence that the assertions by Senator Daschle and other Democrats that the tax cut has hurt our economy are inaccurate."
The positive economic news comes as the election-year impasse in Congress over recession relief deepens. Yesterday, the Republican-led House and the Democrat-led Senate again approved the same two incompatible bills.
The $89 billion House plan, also approved in December, speeds up income-tax cuts and provides more generous tax breaks for businesses to create jobs.
The Senate proposal, put forth by Majority Leader Tom Daschle, only extends unemployment benefits for 13 weeks, a feature also contained in the House bill.
"It seems that Republicans are the only ones on the dance floor at the Valentine's Day ball," said House Majority Whip Tom DeLay, Texas Republican. "It's time for the 'do-nothing Daschle-crats' to get their backs off the wall."
Mr. Daschle, South Dakota Democrat, said House Republican leaders "should be embarrassed for what they're doing."
"This isn't going anywhere," he said.
The feuding lawmakers then adjourned for an 11-day vacation, during which time jobless benefits for more than 120,000 unemployed workers are due to expire.
The House approved the bill, supported by President Bush, by a vote of 225-199. Ten Democrats joined all but one Republican, Rep. Constance A. Morella of Maryland, in support.
Mr. Cheney's address will begin a weeklong offensive on the economy while President Bush travels to Asia next week. He is expected to address trade, pension reform and the administration's energy plan, which is currently stalled in the Senate.
Some Democrats, notably Sens. Edward M. Kennedy of Massachusetts and Hillary Rodham Clinton of New York, have advocated freezing or repealing the administration's tax cuts approved by Congress in June 2001. Mr. Kennedy proposed freezing tax relief for families earning $130,000 or more.
The economic advisers' report says that the $1.35 trillion tax cut has eased the recession and that reversing course on tax policy would imperil an economic recovery.
"The Tax Relief Act has raised the prospects of a solid recovery in 2002 by boosting economic growth by 0.5 percentage point, lifting the expected growth rate from 2.2 percent to 2.7 percent," the report states. "Moreover, by the end of 2002, the president's tax relief will have helped the private sector to create 800,000 more jobs than there otherwise would have been."
Raising taxes during a period of slow economic growth "would not only lower long-run growth prospects but also jeopardize a recovery."
"The nascent recovery is still vulnerable and can be derailed by adverse shocks such as those arising from a tax increase," the advisers said. "A tax increase would be detrimental for several important reasons. First, an increase in taxes would sap the economy of demand, as individuals and small businesses would see a decline in their after-tax income."
The report in general supports comments by Federal Reserve Chairman Alan Greenspan, who has said the tax cuts helped the economy.
The Council of Economic Advisers estimates the effect of the tax cuts to be 0.7 percent of GDP in 2003 and about 500,000 jobs. Cancellation of the tax relief "would break a promise made less than a year ago and could adversely affect consumer and business confidence about the future," the report states.


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