San Diego Union-Tribune

Jan 07, 2003

A-1

Democrats contrast their plan to Bush's
   President expected to offer big tax cuts

By Finlay Lewis
Copley News Service 

WASHINGTON -- House Democrats accused President Bush yesterday of planning to lavish huge tax breaks on the wealthy, while unveiling their own proposal to rejuvenate the economy by putting more money this year in the pockets of the unemployed and other hard-pressed consumers.

In an effort to draw a sharp contrast with the Bush administration and the Republican majorities on Capitol Hill, House Minority Leader Nancy Pelosi, D-San Francisco, and her top lieutenants laid out a hastily drafted $136 billion economic stimulus package. 

The plan would extend unemployment benefits for jobless workers, encourage new business investment, give families a tax rebate of up to $600 and funnel federal aid to governors and mayors to help them with homeland defense, Medicaid and new road-building costs. 

Bush will roll out his own $600 billion "growth and jobs" package in a speech today in Chicago, but the White House moved quickly to upstage the Democrats by announcing that the president's plan would provide an average tax cut this year of $1,083 for 92 million taxpayers. 

The administration also said last night that the president would propose a $3.6 billion plan to provide unemployed individuals with up to $3,000 to pay for the costs of job searches. The program would be administered by the states.

In an effort to relieve strained household budgets and encourage greater consumer spending, the House Democrats proposed that all workers receive a rebate this year equal to 10 percent of their earned income up to $300 per person or $600 per couple. The plan would cost the treasury $55 billion. The maneuvering over taxes and economic policy foreshadows what is certain to be a politically charged struggle that is likely to play itself out over the coming year and that could help define next year's presidential election. In a preview of the looming rhetorical 

battle, Rep. James Clyburn, D-S.C., said the administration's economic agenda amounts to "class warfare." That is a charge Bush himself recently leveled at his Democratic critics.

In his Chicago speech, the president is expected to announce that he will ask Congress for an economic revitalization package that would cost about $600 billion during the next decade. It would abolish individual income taxes on stock dividends, accounting for about half of that price tag, or $300 billion.

By contrast, the House Democratic plan would pack $136 billion into the current year through its combination of tax cuts and domestic spending increases but would recoup most of those costs in subsequent years as the economy recovers. 

By structuring their package in that fashion, the Democrats sought to portray themselves as the guardians of fiscal responsibility while blaming the president for policies that would worsen the deficit. Rep. John Spratt of South Carolina, the ranking Democrat on the House Budget Committee, said, "It'll go to the people who need it . . . in the near term . . . without wrecking the budget in the long term." 

But Republicans, who now control both houses of Congress, immediately criticized the Democratic initiative as shortsighted and too narrow. "The Democrat plan offers little stimulus beyond an increased appetite for more federal spending," said Rep. Tom DeLay, the incoming House majority leader from Texas. "To put people back to work, a stimulus must contain the dynamic elements that can empower economic growth and job creation."

The president's package reportedly will propose accelerating the effective date of individual tax-rate cuts enacted in 2001 but not due to take effect until after the current year. Under the president's plan, at least some of those cuts would become available this year.

Hoping to put Bush on the spot even before he officially announces his plan during his appearance before the Economic Club of Chicago, the House Democrats contended that his tax-cutting proposals affecting dividends and individual rates would mainly benefit the wealthy.

At a Capitol Hill press conference, Rep. Steny Hoyer of Maryland, the Democratic whip, said that eliminating the dividend tax would mean an average savings of only $42 for 82 percent of all taxpayers, while millionaires would garner a $27,000 windfall.

"We stimulate the job market. The president's plan stimulates the stock market," declared Rep. Robert Menendez, D-N.J. Those were claims that Bush sought to rebut in a brief White House session with reporters yesterday. While declining to discuss its details, the president argued, "The critics haven't seen the plan.

This is a plan that provides tax relief to the working citizen. It's a plan that's a very fair plan. It's a plan that recognizes when somebody has more of their money, they're likely to spend it, which creates more jobs."