Republicans divided on Bush tax-cut proposal
Rob Hotakainen, Star Tribune Washington Bureau Correspondent
Published March 11, 2003 TAX11
WASHINGTON, D.C. -- As Congress prepares to raise the $6.4 trillion ceiling on the national debt, its members are sparring over President Bush's plan to spend billions more to cut taxes.
On Wednesday, the House and Senate budget committees will take up the president's plan to spend $726 billion on a tax cut, including his cornerstone proposal to eliminate taxes on stock dividends.
"I would never say anything is dead on arrival, but I think it is in trouble," Rep. Gil Gutknecht, R-Minn., a member of the House Budget Committee, said of the tax plan.
In the Senate, Norm Coleman, R-Minn., favors a tax cut, but is searching for a compromise bill that would pass. In recent weeks, he has met with Bush and Federal Reserve Chairman Alan Greenspan to discuss the issue, and he is continuing to meet with a group of 11 centrist Republican and Democratic senators.
"I'm very pragmatic," Coleman said. "I'm trying to find out what it's going to take to get 51 votes for a tax cut."
The actions of wary Republicans are being watched closely. While Bush still has plenty of support in his party, he has little room for defections, given the slim majorities that Republicans enjoy in the House and Senate.
Gutknecht said that House Republicans are "all over the board" and will debate the issue at length. But he said that the administration developed the plan with "virtually no consultation" with Congress and that the administration has made "few of the tough choices that must be made."
The debate comes as the president prepares the nation for a possible war in Iraq, adding to the uncertainty. "We're all terribly distracted," Gutknecht said.
Maintain credit
When he visited the nation's capital last month, Gov. Tim Pawlenty pointed out one big difference between lawmakers in St. Paul and those in Washington as they grapple with big budget deficits. "Unlike the federal government, we can't just go in the basement and print money," he said. "You know, we've got to balance our books."
Indeed, Congress has a much easier way to pay its bills: It can simply vote to increase the government's borrowing limit, and that's just what it's getting ready to do. "I don't think we have any choice," said Rep. Jim Ramstad, R-Minn., blaming the slow economy and the war against terrorism.
Congress raised the debt ceiling by $450 billion to $6.4 trillion less than a year ago.
In a letter to House Speaker Dennis Hastert last month, Treasury Secretary John Snow encouraged Congress to raise the debt limit again. He did not ask for a specific amount but said action was needed to maintain "the full faith and credit of the U.S. government, especially at this critical time."
The issue is coming to a head at the same time that Congress considers Bush's $2.23 trillion spending plan, which includes the tax cut and a 4.5 percent spending increase in in 2004. The plan would also result in a projected record deficit of $338 billion next year, according to a Congressional Budget Office estimate released Friday.
Freshman Rep. John Kline, R-Minn., said that, while Congress will have to increase the debt limit, the deficits will be temporary. "There was a time when we only dreamed we would have a balanced budget," he said. Bush's plan is correct, he continued, and he supports eliminating the tax on dividends, calling it "good for corporate governance and for senior citizens."
Ramstad, a member of the Ways and Means Committee, said he accepts Bush's argument that the best way to get rid of deficits is to cut taxes and boost the economy. "When you look at history, tax decreases stimulate the economy and increase tax revenues," he said.
Ramstad said that Congress needs to stimulate confidence among investors and create jobs, "and I think the Bush proposal will do both. . . . Everyone knows the economy's in the tank."
Gutknecht said that eliminating the tax on dividends won't solve the nation's economic woes. He said the U.S. cannot afford to pass a tax cut at the same time it tries to win the war against terrorism, change Medicare and provide seniors with a prescription drug program.
Gutknecht said he has told the White House not to "write checks that the Congress won't cash." He said the administration is running into opposition from many Democrats and Republicans who grew accustomed to fiscal discipline in the 1990s.
"Most farm families believe that you pay off the mortgage and you leave the kids the farm," he said. "You don't sell the farm and leave the kids the mortgage."
'Do something'
Sen. Mark Dayton, D-Minn., said Bush's plan is "unbelievably irresponsible," adding that there's no evidence that tax revenues to the government would increase with a tax cut. "We tried that two years ago," he said, noting that the nation is now facing deficits. "It's wishful thinking, but it's not sound budgeting."
Rep. Martin Sabo, D-Minn., a senior member of the House Appropriations Committee and former chairman of the House Budget Committee, said the Bush plan would likely worsen Minnesota's budget deficit and place greater strain on state and local services.
With Congress so divided, Coleman is trying to play the part of mediator. "I want to get something done," he said. "I'm not an all-or-nothing guy."
In January, Coleman said the White House had not done enough to sell Bush's tax cut, particularly on dividends. Last week, he said that Bush "had made strides" in selling the plan, but added: "I can't tell you where it's going at this time."
Coleman said that there is broad support for such things as increasing the per-child tax credit and getting rid of the so-called marriage penalty. "It may, in the end, be not about the specifics or the kinds of cut, but it may be about the size of those cuts," he said. "There's a whole range of options."
Pawlenty, who came to Washington to meet with the nation's governors, said it would "be great" if Congress was required to balance its budget, as the Legislature is forced to do. But he wants members of Congress to pass a tax cut, too, hoping it would help improve the economy. "I'm less concerned about the details than I am about making sure that they do something," said Pawlenty.
startribune.com |
