- The Washington Times - Friday, January 3, 2003

President Bush should encounter fewer political obstacles to his tax-cut stimulus plan this year than he did in 2002 when the Democrats ruled the Senate and fought his economic proposals.

The $300 billion package of accelerated tax cuts that the president will announce sometime next week will be the first big test of the mandate that Mr. Bush and the Republicans won in the midterm elections.

This time, say administration advisers, the climate on Capitol Hill for a plan to spur economic growth is far more favorable to the administration's position.

"There's no question that winning the elections provided a huge burst of momentum for Republicans and their tax-cut plan," said Stephen Moore, president of the Club for Growth, which raises campaign money for congressional candidates who support lower tax rates.

"It will be a big fight, but this time it is a fight about how much to cut taxes not whether to cut taxes," Mr. Moore said yesterday.

Several political and economic factors are working in the president's favor.

While the economy is growing at a moderate 2.5 percent to 3 percent annual rate, unemployment has climbed to 6 percent, manufacturing is still in the doldrums, corporate earnings are weak and the overall economic picture is "soft," says Federal Reserve Chairman Alan Greenspan.

"There is more of a desire on both sides of the aisle to do something to help the economy grow faster," said an administration official.

At the same time, 10 of the 12 Democrats who voted for Mr. Bush's tax-cut plan in 2001 are still in the Senate which the GOP now controls 51-49 giving the administration much more maneuvering room to hammer out a compromise in the coming months.

Some Democrats, such as Sen. Max Baucus of Montana, have indicated that they are eager to deal.

The latest evidence of this bipartisan shift in favor of a tax-cut stimulus bill was seen last month when Mr. Baucus, the top-ranking Democrat on the tax-writing Finance Committee, met with White House officials to discuss a compromise plan.

Mr. Baucus, who has introduced a $160 billion stimulus package of his own, reportedly told the White House that he was "open" to Mr. Bush's proposals to accelerate the 10-year tax cuts and to enact a plan to cut the tax on stock dividends.

The White House has been meeting secretly with and reaching out to other Democrats over the past month on the president's plan, say administration lobbyists.

Another factor helping the White House may be the eroding political impact of the Democrats' class-warfare offensive.

The Democrats have charged relentlessly that Mr. Bush's tax cuts favor the wealthy, but postelection polls found that this class-warfare strategy failed among key groups of middle-income voters.

Mr. Bush signaled yesterday at his ranch in Crawford, Texas, that he was ready to engage the Democrats in that debate. "I understand the politics of economic stimulus some people want to turn it into class warfare," he said.

In what tax-cut supporters hope was a trial balloon, White House officials said last month that the accelerated tax-cut plan would step up all of the income-tax rate cuts slated for 2004 and 2006, except the top rate, which is now at 38.6 percent on incomes of more than $311,950.

Mr. Moore and other supply-side tax-cut advocates sharply criticized the move, saying that those in the top brackets are the ones who save and invest the most. "It's the top rate that does the most damage to the economy," he said.

"They are having second thoughts about that strategy. I think they were surprised about how strongly opposed conservatives were to the idea. I think they are reconsidering it," Mr. Moore said.

In a Club for Growth memorandum sent yesterday to the White House and Republican leaders, Mr. Moore said, "the lesson we should have learned from the first 2 Bush tax cut plans is that negotiating with the liberal Democratic leadership to buy votes can so water down the tax bill that it's economic value is rendered nearly inconsequential."

"Republicans need to use this occasion to lay down a marker about how they believe strategic and growth-oriented tax changes can help rally the stock market, generate jobs, improve business conditions, and reduce federal, state, and local budget deficits," Mr. Moore said.

"Now is not the time for tax cut timidity. Across the country, our Club for Growth candidates in the House and Senate ran for office embracing the president's tax cuts and urging its acceleration and its permanence.

Democrats ran against the tax cuts. Pro-growth Republicans won in almost every instance," he said.

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