- The Washington Times - Tuesday, January 7, 2003

House Democrats yesterday proposed a new round of tax rebates $600 for married couples to counter President Bush's economic stimulus plan that the White House said would cut $1,100 in taxes for a prototypical family.
Mr. Bush will detail his plan in a speech in Chicago today. At a cost of $600 billion over 10 years, it is far bigger than the House Democrats' $100 billion plan.
Democrats said what their plan lacks in money it makes up in immediate stimulus and job creation. The president's plan, they said, acts slowly and is skewed toward high-income and wealthy taxpayers.
"The Democratic plan stimulates. The president's plan procrastinates," said Rep. Robert Menendez, New Jersey Democrat and incoming chairman of the House Democratic Caucus.
"The president's plan is too little, too late, and much too irresponsible. The Democratic plan is significant, fast-acting, and it's fiscally responsible. We stimulate the job market. The president's plan stimulates the stock market."
Mr. Bush yesterday said his plan will encourage investment by reducing taxes on dividends. He said such a reduction also will be particularly helpful to senior citizens, more than 50 percent of whom receive dividends.
"That's what we want we want to encourage investment activity. Investment means jobs," Mr. Bush told reporters before a Cabinet meeting yesterday.
"We don't believe it's the role of government to manage the economy. We've got great faith in the private sector. And so we're going to create the environment for the private sector to be stronger. That's the policy of this administration."
Both parties agree that Congress will have to produce an economic stimulus package this year.
The president's plan is expected to include $300 billion to eliminate the taxes that shareholders pay on dividends. It also would accelerate the income-tax cuts scheduled in the 2001 legislation, expedite elimination of the tax penalty that some married couples pay, and offer an extension of unemployment benefits.
Mr. Bush also will propose up to $3,000 in cash to pay some unemployed workers for training, child care or relocation, said a senior administration official. If the workers find employment within the program's 13-week time frame, they can keep the unspent money as a bonus. The benefit targets those considered unlikely to find work in the same field.
"This is a new approach for helping the unemployed make a quick return to work," the official said.
The $3.6 billion, two-year program would be run through the states, and the administration expects it would reach 1.2 million people. The administration official said previous programs that offered bonuses for finding jobs lead, on average, to a week's shorter stay on the unemployment rolls.
The program would be in addition to the extension of unemployment benefits Congress and the president have committed to completing soon.
White House Press Secretary Ari Fleischer said the president's plan will mean an average 2003 tax cut of $1,083 for 92 million taxpaying households.
Some would benefit even more, said Mr. Fleischer. For example, he said, 46 million married couples would average a cut of $1,716, 34 million families with children would receive an average cut of $1,473 and 13 million elderly taxpayers would see an average cut of $1,384.
It was not clear how much of those amounts was an acceleration of tax cuts already scheduled in the 2001 legislation.
The Democrats' plan would spend $58 billion on tax rebates and offer $31 billion in aid to states for Medicaid, highway and homeland security spending. The plan also calls for an extension of unemployment benefits and for spending $32 billion on business tax relief.
They said almost all of that money will be recouped within the decade meaning that while their plan will cost $136 billion in fiscal year 2003, it will cost only $100 billion when calculated over 10 years.
The Democrats' tax rebate plan is similar to that of 2001, though their proposal would allow low-income couples who don't pay taxes to collect the rebate.
That group was ineligible under the 2001 plan.
The plan would rebate 10 percent of an individual's earned income up to $3,000 and a couple's income up to $6,000, allowing almost all taxpayers to receive the full $300 or $600 rebates, regardless of marital status.
The 2001 rebate was cited by many, including Congressional Budget Office Director Dan L. Crippen, as a factor that eased the 2001 recession.
Republicans quickly dismissed the Democrats' plan as too small.
"At a time when our economy needs a fire built under it, the Democrats' plan is like trying to toast a marshmallow with a flashlight," said incoming House Majority Whip Roy Blunt, Missouri Republican.
Republicans, who will control both chambers when Congress convenes today, said they will use the president's plan as their starting point.
"In the House, I suspect it will have a congressional imprint on it, but it will look much the same as the president proposes it," said Stuart Roy, spokesman for incoming House Majority Leader Tom DeLay, Texas Republican.
Sen. Charles E. Grassley, Iowa Republican and Finance Committee chairman, called the president's plan a "balanced package" but said he expected it would need changes to pass.
"I'm assuming that the White House is going to have to be flexible with me to negotiate bipartisan agreement, unless they can show me all 51 Republicans are together, which is not apt to be the case," Mr. Grassley said.
"I would assume, without having talked to them, that they know the realities of the United States Senate not much gets done that's not bipartisan."
Mr. Grassley said the House Democrats' proposal is "short on long-term incentives."
Sen. Max Baucus of Montana, the top Democrat on the Senate Finance Committee, released his own stimulus proposal yesterday.
His $160 billion plan does not include a provision on taxation of dividends, but would eliminate income tax on the first $3,000 of income, at a cost of $45 billion.
It also would extend unemployment benefits and offer $75 billion in funding to states.

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