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Bush Attempts to Salvage Parts of Tax Plan - 2003-05-06

President Bush issued another challenge Monday to members of Congress, urging them to approve deeper cuts in taxes for Americans. Mr. Bush's campaign to salvage key parts of his plan to stimulate the U.S. economy comes as lawmakers put finishing touches on different versions of legislation in advance of expected votes in the House of Representatives and Senate.

With major military combat in Iraq ending, President Bush waded directly into the battle with Congress over the fate of the economic stimulus plan he proposed in his State of the Union Address in January.

In that speech, the president laid out one of his key domestic priorities, a package to tax cuts totaling $726 billion including a controversial proposal to eliminate double taxation of corporate dividends, a move long favored by Republicans. However, the size of Mr. Bush's proposal coming as it did well before the war in Iraq, and amid persistent pessimism about the economy worried many lawmakers, including key Republicans in the Senate.

It was the Republican-controlled Senate that dealt the first blow to the president's plan when it cut his proposed tax cut in half.

When that happened, Republicans in the House who had favored bigger cuts, were furious. Congressman Tom DeLay, the House Republican leader, directed his anger at the chairman of the Senate finance committee, Charles Grassley. "The position explained today by Senator [Charles] Grassley is not the position of the House of Representatives, nor the Republican leadership, nor our Budget or Ways and Means Committee members," says Mr. DeLay. "His position was not expressed by him or any members of the Senate leadership during negotiations with the House. It was a secret. I didn't know. The speaker didn't know. The whip didn't know. The committee chairmen didn't know. And the President of the United States didn't know."

In response to the Senate move, President Bush lowered his own expectations. He is now pressing Congress to approve at least $550 billion in tax cuts the amount supported by Republican leaders in the House.

Of course, Mr. Bush would like more than that. And in a speech in Arkansas Monday, the president noting the latest increase in U.S. unemployment to six percent made clear he is not relenting on the essential positions he took four months ago. "This news ought to serve as a clear signal to the U.S. Congress that we need a bold economic recovery plan so people in America who want to work can find a job [applause]," he said.

Tax reduction is a key issue for Democrats, and in particular, candidates for president in 2004, who have called Mr. Bush's original tax cut plan a ""reward to the rich."

Tuesday, congressional Democrats will unveil an alternative economic plan and tax proposals they say will have a better chance of creating jobs and minimizing long-term damage to the economy from higher deficits.

With competing tax cut figures still far apart, key House and Senate committees are finalizing different versions of legislation for consideration by both chambers of Congress. A House vote cut could come as early as Friday.

President Bush's effort to save what he calls a "robust" tax cut for Americans ran into opposition from the powerful chairman of the Federal Reserve (the U.S. central bank), Alan Greenspan, who warned that significant reductions need to be balanced by spending reductions or tax increases in other areas.

Public opinion polls, too, reflect public anxiety on the issue. According to the latest Harris poll, while half of Americans feel some sort of tax reduction is in order, only 22 percent favor the kind of large cut President Bush wants.

In the end, whatever legislation lawmakers approve, the House and Senate will have to agree on a final overall tax reduction figure before a final bill goes to President Bush for signature.