- The Washington Times - Monday, January 7, 2002

Treasury Secretary Paul H. O'Neill said yesterday the Bush administration would not agree to delaying the president's $1.35 trillion tax cut as part of any economic recovery efforts.
"That's basically saying rescinding the tax cuts that were passed by the Congress last year. Doesn't make any sense to me," Mr. O'Neill said in an interview on NBC's "Meet the Press."
Also yesterday, Sen. Dianne Feinstein, California Democrat, broke party ranks with Senate Majority Leader Tom Daschle, who charged Friday that the Bush tax cut had worsened the recession and was the primary factor in the loss of much of the projected federal surplus.
"Over a trillion dollars of that tax cut has not yet gone into effect," Mrs. Feinstein said in an interview on CNN's "Late Edition." "The impact of the tax cut has not yet been felt so I don't think it worsens the recession at all.
"My view is we ought to stay the course," she added. "It's good policy to let people keep more of their money."
Mr. Daschle has said President Bush and Republicans precipitated the "most dramatic fiscal deterioration in our nation's history" by pushing through the 10-year tax cut last year.
The South Dakota Democrat has not called explicitly for the tax cut to be repealed or delayed, but he is calling for stimulating the sagging economy with tax credits for businesses that create jobs and increased spending on homeland security and for job training and education.
Yesterday, one of his Democratic colleagues, Sen. Joseph I. Lieberman of Connecticut, said on "Meet the Press" that a delay of future tax breaks should be considered.
"We've got to put everything on the table most of the tax cut has not yet gone into effect," he said. "So the option of delaying it a bit because we're in a recession, because we don't want to go that far in debt that's got to be on the table."
Of all the parts of the administration's tax plan, the first cuts in income tax rates and the per-child deduction already have taken effect, and an immediate $300-per-adult rebate already has been paid.
But most of the cuts in income tax rates and the increases in the per-child credit were planned to take effect over the next several years. Also yet to be implemented are the elimination of the "marriage penalty," the repeal of the estate tax and increased deductibility for education and retirement accounts.
Republicans sharply criticized Mr. Daschle for not letting the Senate vote on a bipartisan economic-stimulus bill passed by the House on Dec. 20, the day before Congress adjourned for the year.
Following the Senate's inaction, the president and congressional Republican leaders initially said it might not be necessary to take up such legislation when Congress returns Jan. 23, because the economy has been showing signs of improvement.
However, on Saturday in California, Mr. Bush urged Americans to support his economic-recovery bill that is stalled in the Senate. He also scoffed at claims that his tax cut was responsible for the economic slowdown and warned Democrats that new tax increases will pass only "over my dead body."
Yesterday, Bush Cabinet members, such as Mr. O'Neill, Commerce Secretary Donald L. Evans and Lawrence Lindsey, the president's chief economic adviser, fanned out across the Sunday news talk shows, touting the House-passed economic-recovery bill and accusing Mr. Daschle and other Democrats of trying to jump-start the economy through a misguided policy of raising taxes.
"Mr. Daschle's proposal that he laid out Friday was a call for a tax increase," Mr. Lindsey said on CBS' "Face the Nation." "He called for significant increases in spending, for homeland security, for investments in research and development.
"The only way you could finance those were tax increases," Mr. Lindsey said.
On NBC, Mr. O'Neill held that delaying the Bush tax cut would be tantamount to "raising taxes," which he said would not be helpful to the economy.
Democrats say it will be impossible for the federal government to offset the tax cuts as they are now constructed, provide Social Security and Medicare benefits to expanding populations, improve health care, offer aid to Afghanistan to help it rebuild, and fight a war against terrorism without reverting to deficits and dipping into the Social Security and Medicare trust funds.
Sen. John McCain echoed those concerns on "Meet the Press" yesterday.
Nevertheless, the Arizona Republican said he does not believe repealing or delaying some of the $1.35 trillion tax cut is "politically salable."
Administration officials yesterday did not deny potential scenarios of federal deficits in the near-term.
"I don't think most of the American people are in favor of raising taxes this year in order to have the nicety of an accountant surplus it's not good economics," Mr. O'Neill said.
"We'll have enormous surpluses in the future, if we speed up the economy," he added.
Mr. Evans, interviewed on CNN's "Late Edition," pledged: "Taxes aren't going to increase under this administration," no matter what happens.
As for Mr. Daschle's concerns that implementation of the Bush tax cut will mean long-term deficit spending and raids on the Social Security surplus, Mr. Evans said, "We need to understand what comes first. I would argue that growth comes first and then the surplus."
"The way to solve the deficit problem is to have robust economic activity," Mr. O'Neill said on "Meet the Press."
In the past, Mr. O'Neill has been reluctant to say the U.S. economy is in recession. He did use that term in his interview yesterday.
"Without that tax cut, which began to take effect in August, I think we would have seen a much sharper recession than the one we've had," he said.

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