Thursday, January 10, 2008

Conservative Republican tax-cutters were stunned when their leader, Jack Kemp, endorsed Arizona Sen. John McCain the day before the New Hampshire primary.

The Arizona budget hawk, who voted against President Bush’s across-the-board tax rate cuts, declaring they benefit the rich at the expense of lower income Americans, is no supply-sider. He belatedly embraced Mr. Bush’s tax cuts more than a year ago when preparing to make his second run for the presidency and has said he would retain them. But he is not promoting a serious agenda to lower the tax rates further as Mr. Kemp would do.

So why did the former New York congressman, the legendary architect of the Reagan tax cuts, suddenly endorse Mr. McCain’s candidacy? In a word: immigration.

Mr. Kemp told close allies in the tax cut movement he would not endorse anyone in the primaries, despite being intensely courted by Mitt Romney who has made deeper tax cuts the domestic centerpiece of his campaign. What changed Mr. Kemp’s mind was the hard-line tone on immigration in the party’s debates by Mr. Romney and others, close associates told me.

Mr. Kemp supports a fullblown guest worker program that includes a path to citizenship, and Mr. McCain is the only Republican candidate who has led the fight for just such a plan.

So in a terse statement put out by the McCain campaign Monday, Mr. Kemp said, “John McCain is the only candidate who can be trusted to cut taxes, eliminate wasteful spending and enact conservative pro-growth policies to expand the economy.”

But does Mr. Kemp really, deep down, believe Mr. McCain, a deficit hawk who has led the fight against porkbarrel spending, will try to further lower the tax rates if he wins the presidency? Former Rep Vin Weber, one of the supply-side leaders with Mr. Kemp during the Reagan presidency, doesn’t think so.

“Jack doesn’t believe John McCain is a supply-sider unless he’s changed his mind in the last month. This is all about immigration. Jack wants to support an immigration ‘liberal’ but that’s not the image McCain wants to convey,” Mr. Weber told me in an e-mail message.

Mr. Weber knows John McCain’s thinking better than anyone outside his campaign. He was the senator’s chief economic adviser in his ill-fated 2000 presidential bid, though he now supports Mr. Romney and chairs the former Massachusetts governor’s economic advisers.

He also knows Mr. Kemp’s thinking on taxes and immigration better than anyone: “I’ve discussed this race with Jack many times.”

While Mr. McCain has flip-flopped on tax cuts and now conveniently says he will push for their extension as president, he still does not think his vote against them was wrong.

“Do you believe that voting against the Bush tax cuts was a mistake?” Tim Russert asked him Sunday on “Meet The Press.” Mr. McCain’s answer: “Of course not.”

Pressed by Fox News’ Chris Wallace to justify opposing the tax cuts that kept the U.S. economy functioning through a gauntlet of “terrible blows” from the September 11, 2001, terrorist attacks to Hurricane Katrina, Mr. McCain justifies his anti-tax-cut votes this way:

“Well, … when we see what happened to spending and we have a bridge to nowhere of $233 million to an island with 50 people on it and we have former members of Congress who are now residing in federal prison because of the spending and corruption.”

But tax cuts cannot be held hostage to eliminating every pork-barrel earmark that Congress sticks into its spending bills, especially in a time of economic distress. Wasteful spending can be effectively dealt with through strict budget reforms and the presidential veto. Getting the economy going comes first.

As I reported in my last column, the administration is considering further tax cuts and other measures to stimulate economic growth at a time when the economy seems to be slowing down. The administration has not tipped its hand as to what the president has on the table. But sources tell me senior White House officials are considering $300 to $500 consumer tax rebates among other tax stimulus options.

The rebates, which one supply-side tax-cutter called “an astoundingly bad idea,” are being pushed by the political and communications people in the West Wing to help consumers with high gas prices.

The idea is similar to the rebates included in Mr. Bush’s 2001 tax cut plan, but the stimulus track record for rebates is a notoriously weak one that isn’t well-targeted for long-term growth.

Cutting the corporate tax rate as well as taxes on capital gains and savings, and incentives to help small business, the engine of job creation, would do much more to boost the economy than any rebate.

Whatever the shape of Mr. Bush’s proposed stimulus, polls tell us the No. 1 issue today is the economy and jobs. A well-designed White House plan, with strong Republican backing, could be the central domestic issue of the 2008 presidential campaign.

Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.

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