October 31, 2001
Bush Urges Action on Stimulus Package
Before the Economic Slowdown Deepens
By JACOB M. SCHLESINGER and SHAILAGH MURRAY
Staff Reporters of THE WALL STREET JOURNAL
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WASHINGTON -- As the economic-stimulus package bogs down on Capitol Hill, the White House is ratcheting up pressure on lawmakers to move soon, warning that failure to act could deepen the current downturn.
"We are playing with fire if we don't pass a reasonable stimulus package," said Glenn Hubbard, chairman of President Bush's Council of Economic Advisers, in a briefing by the administration's top economic officials.
Private-sector forecasts of an economic recovery next year "all have significant fiscal stimulus -- particularly on the manufacturing and investment end -- built in," added Lawrence Lindsey, head of the White House National Economic Council. "If that's removed, I think there is significant risk to the economy."
Their comments came as prospects for quick action -- or any action at all this year -- seemed to dim, even as the stock market has started falling again and economic data have worsened.
The House passed its $99 billion stimulus plan last week by only a razor-thin margin. Senate Majority Leader Tom Daschle (D., S.D.) said he hoped the Senate would pass its version of a bill as soon as next week. But disagreements in the narrowly divided chamber suggest that timing is optimistic, and that any bill passing the Democratic-run Senate will have major differences to be reconciled with the GOP-run House.
Senate Republicans unveiled Tuesday an $89 billion plan that mirrors the priorities Mr. Bush supported a few weeks ago. They include accelerating to 2002 the tax cuts for higher-income families that Congress passed earlier in the year, depreciation breaks for business investment, repeal of the corporate alternative minimum tax, and $300 cash payments to workers who had no income-tax liability.
Though that is closer to Democrats' liking than the more business-oriented House bill, Democrats prefer a cheaper plan with scaled-back business provisions and more worker benefits, plus greater spending on antiterrorism measures.
Indeed, the two sides appear to be heading toward a collision.
Mr. Daschle said he considered a new health-insurance subsidy, along with expanded unemployment benefits, to be "essential" to any package. "We will not even consider a bill unless it has those components," Mr. Daschle said.
But White House aides -- for all their talk of urgency and bipartisanship -- are threatening to seek a veto of any stimulus bill that allocates significant funds to sweetening health benefits for laid-off workers.
Some health-care proposals from Senate Democrats are "a huge reach and change in policy, putting the federal government into a position where it's now going to create a new entitlement," said Treasury Secretary Paul O'Neill, who is leading the stimulus negotiations with Congress. "I personally would recommend to the president that he not accept a bill with a component as they originally conceived it," he added.
Democrats are cool to the corporate AMT relief that the White House says is essential. "The corporate AMT raises effective tax rates on business in a downturn; it's just nuts as tax policy," Mr. Hubbard said.
The political volume will turn up a notch Wednesday, with liberal groups taking out advertisements in some national publications, blasting Republican-backed business tax breaks. One ad, showing an outreached hand, reads: "A heartfelt message from General Motors at this time of national crisis: Sacrifice is for Suckers." The ad is sponsored by the Institute for America's Future, funded by individuals and foundations, and the foundation-funded Citizens for Tax Justice. Both have liberal bents and are based in Washington.
Meanwhile, some legislators are turning against any stimulus at all, worried about the long-term impact on the budget.
"We saw the surplus evaporate before our eyes," said Sen. Lincoln Chafee (R., R.I.), part of the Senate's crucial centrist bloc. Mr. Chafee said that, given the budget situation, he isn't convinced a stimulus package is necessary. "Basically, we're doing well," he said. "And we just had a gigantic tax cut in May."
The comments by Mr. Bush's economic advisers Tuesday did nothing to allay those concerns. Pressed over when the federal government would return to surplus, Mr. Lindsey refused to say, answering: "FDR in 1942 said the right fiscal policy is one that wins this war. I thinks that's where you've got to stop now."
Beyond the substance of the debate, some legislators in both parties say the administration hasn't played a sufficient leadership role in shaping the bill, leaving the process to drift. Democrats say that, despite the White House's repeated calls for a stimulus and Mr. O'Neill's near-daily visits to the Capitol, the Bush administration continues to keep a low profile in negotiations. One senior senator predicted that unless the White House makes firm demands from both parties, the Senate might not pass a bill. One big hurdle: Due to budget rules, the stimulus must garner 60 votes to pass without procedural delays.
The White House economic officials bristled at those complaints. But they didn't say they had plans to raise their visibility on the issue. The question of the need for additional White House action "has in it a sense there's no end in sight" for the debate over the stimulus bill, Mr. O'Neill said. "I don't share that view." Mr. Bush's tax proposal is "middle of the road," said budget director Mitchell Daniels Jr. "There's a good chance both sides will find their way back to that middle line," he added. |
