Recession fears bring good and bad for Bush

TAX CUTS: Democrats say they'll support cuts to help boost the sagging economy.

By SARA FRITZ

© St. Petersburg Times, published January 7, 2001

WASHINGTON -- When new President George W. Bush formally presents his proposal for a massive tax cut to a joint session of Congress, probably sometime next month, many Democrats who once ridiculed the idea will be applauding.

That's because Democratic leaders in Congress have done an abrupt about-face on the tax issue in recent days, and they are sending strong signals to the president-elect that they are open to negotiating a compromise on what had been shaping up as one of the most contentious political issues of the new year.

Of course, the scope and details of any such tax cut are a long way from being finalized. Republicans are certain to cling to the idea of slashing taxes across the board; Democrats, as usual, will argue that the biggest breaks should go to low-income taxpayers.

But there is little doubt the popularity of a tax cut is growing in Washington as a direct result of the Democrats' desire to appear more conciliatory toward the new president, the ever-expanding federal surplus and growing fears on both sides of the aisle that the sagging economy needs a boost.

"You'd have to say the chances of getting a tax plan passed are reasonably good," said Sen. Bob Graham, D-Fla., who is likely to be among the supporters of a compromise. "I'm not saying it's a done deal, but he has a reasonable possibility of passing it."

Saturday, from his ranch in Texas, Bush said, "One thing is certain: In order to enhance economic recovery, we need tax relief. And I think both Republicans and Democrats understand that."

Although Democratic opposition to Bush's tax cut proposal has been softening for quite a while, the shift was unmistakable last week when House Minority Leader Dick Gephardt, D-Mo., announced at the start of the 107th session of Congress that he was open to a larger cut than he previously supported.

When Gephardt was asked if he would support legislation granting as much as $1.3-trillion in tax cuts, as Bush proposed during the election, or if he would stick to his proposal for a $300-billion cut, he replied: "I don't know the exact size. It may be that it has to be bigger because the recession is looming and we've got economic woes out there."

Bush press secretary Ari Fleischer, who described Gephardt's comments as "heartening," said the chances for compromise on a tax cut were also improved by the selection Thursday of Rep. Bill Thomas, R-Calif., as chairman of the tax-writing House Ways and Means Committee. Despite his well-known hair-trigger temper, Thomas is known for his legislative skills and his ability to forge compromises with Democrats.

"Bill Thomas is a good man," said Fleischer, who previously worked on the Republican staff of the Ways and Means Committee. "He's going to show himself to be a good and able leader."

In addition, Bush's choice of Larry Lindsey as his chief economic adviser also signaled his commitment to a broad tax cut. Lindsey, a former Federal Reserve governor who has been anticipating an economic downturn longer than most economists, is a supply-sider and an outspoken advocate of tax cuts.

Perhaps no one was more surprised by Bush's continued commitment to a massive tax cut than the Republican leadership of the Congress, which until recently has been operating on the assumption that Democrats would not go along with it.

Just two weeks ago, Speaker Dennis Hastert, R-Ill., indicated he was ready to continue pushing for piecemeal tax cuts -- such as the elimination of estate taxes and the so-called marriage penalty. But Bush quickly set him straight, saying he had no intention of giving up on his $1.3-trillion proposal.

Bush also won the support of the business community for this approach to tax reduction during meetings with corporate executives in Austin, Texas. Floyd Kvamme, a technology sector venture capitalist, emerged from one of these meetings saying that the president-elect had heard "zippo argument" against his tax cut proposal from the executives.

In order to cement Democratic support for a tax cut, however, Bush must show a willingness to compromise on three points:

Debt-reduction. Many Democrats, although open to compromise, still think more than half of the federal surplus should be devoted to paying down the national debt. Graham, for example, says Congress should not spend more than 25 percent to 30 percent of the surplus on tax cuts. "The proportion between tax cuts and debt reduction will be the key to getting a compromise," Rep. Jim Davis, D-Tampa, said.

Intended beneficiaries. Because Democrats led by presidential nominee Al Gore campaigned against Bush's tax cut proposal on grounds that it was a giveaway to the rich, they will seek a compromise that shifts at least some of the benefits from the wealthy to the working class. As Gephardt said, "we think hard-working, middle-income families, people trying to make it into the middle class, are the ones that really need this tax cut, not the people at the top."

Timing. Because Bush proposed his massive tax cut long before there were signs of an economic slowdown, the proposal would take effect gradually over the next five years and many taxpayers would not realize the benefits in the short term. Democrats such as Graham argue that whatever tax cut is enacted by Congress this year, it should "show up immediately in paychecks" in order to provide a genuine boast to the economy.

If Bush is prepared to make concessions on these three points, Democrats say, the prospects for bipartisan tax cut legislation are good. Or as Gephardt put it, "I think we can work out a compromise where everybody gets some of what they want."

-- Staff writer Bill Adair contributed to this report.

Bush's Cabinet picks

SPENCER ABRAHAM, SECRETARY OF ENERGY: Abraham, 48, has drawn criticism from environmentalists because he supports oil drilling in the Arctic National Wildlife Refuge and opposes higher fuel efficiency standards. Abraham, a Michigan senator who lost re-election in November, co-sponsored legislation in 1996 and 1999 to close the Department of Energy. He has a limited background in nuclear weapons issues, but during his years in the Senate he earned a reputation as a hard worker, never missing a roll call vote in six years.

JOHN ASHCROFT, ATTORNEY GENERAL: Ashcroft, 58, lost his Missouri Senate seat in November to the late Mel Carnahan. Ashcroft, a staunch conservative, is the most controversial of Bush's nominees for his anti-abortion beliefs and for engineering the defeat of a black Missouri Supreme Court judge, Ronnie White, nominated to the federal bench. He served two terms as governor of Missouri and was its attorney general from 1977 to 1985.

LINDA CHAVEZ, SECRETARY OF LABOR: Chavez, 53, is an outspoken opponent of affirmative action and bilingual education, and former head of the U.S. Commission on Civil Rights in the Reagan administration. Chavez said she will enforce regulations to guarantee nondiscrimination by federal contractors. A nationally syndicated political columnist, Chavez lost a 1986 Senate bid in Maryland.

DON EVANS, SECRETARY OF COMMERCE: Evans, 54, is Bush's former campaign manager, longtime friend and a fellow oilman. Evans has been part of Bush's political career from the start: a fundraiser for Bush's losing congressional campaign in 1978 and chairman of Bush's successful gubernatorial campaigns in 1994 and 1998.

MEL MARTINEZ, SECRETARY OF HOUSING AND URBAN DEVELOPMENT: Martinez, 54, is Orange County chairman, a position akin to mayor of the county home to Orlando. He came to the United States from Cuba in 1962 as a teenager. He bucked central Florida developers for his support of a moratorium on new residential projects in crowded school districts last year. He was president of the Orlando Utilities Commission from 1994-1997 and chairman of the Orlando Housing Authority for two years in the 1980s.

NORMAN Y. MINETA, SECRETARY OF TRANSPORTATION: Mineta, President Clinton's commerce secretary, is the only Democrat appointed by Bush. Mineta, 69, took over the Commerce job in June and is the first Asian-American to serve in a Cabinet. He served in the House for 20 years from San Jose, Calif., the last two as chairman of the Public Works and Transportation Committee.

GALE NORTON, SECRETARY OF INTERIOR: Norton, 46, directed the legal staff of the National Park Service and the Fish and Wildlife Service in the late 1980s under Interior Secretary James Watt. She was Colorado's first female attorney general, serving from 1991 to 1999. She supports making federal lands more accessible to oil, mining and ranching interests, and she supports oil exploration in Alaska's Arctic National Wildlife Refuge.

PAUL O'NEILL, SECRETARY OF TREASURY: O'Neill, 65, headed aluminum giant Alcoa Inc. and International Paper Co. after serving 16 years in the federal government. He is viewed by some conservatives as too moderate because in 1992 he endorsed the incoming Clinton administration's gas tax (a position he no longer holds) and has always emphasized deficit reduction over tax cuts.

ROD PAIGE, SECRETARY OF EDUCATION: Paige, 67, has been superintendent of the Houston Independent School District since 1994. Paige is widely credited with making the Houston school system, the largest in Texas and seventh-largest in the nation, one of the country's finest urban school districts. Academic performance and test scores have improved under his tenure at the 90 percent minority school district.

COLIN POWELL, SECRETARY OF STATE: Powell, 63, a retired Army general, served as the 12th chairman of the Joint Chiefs of Staff in the Bush and Clinton administrations. He was President Reagan's national security adviser. He was hesitant about U.S. involvement in Bosnia and Somalia in the early months of the Clinton administration. He supports affirmative action. If confirmed, Powell, the son of Jamaican immigrants, will be the first black secretary of state.

ANTHONY PRINCIPI, SECRETARY OF VETERANS AFFAIRS: Principi, 56, was appointed deputy secretary of veterans affairs by President Bush in 1989 and served as acting secretary in 1992. Principi is a graduate of the U.S. Naval Academy and a decorated Vietnam veteran. He has long supported expanding military and veterans benefits, including college scholarships and home loans without down payments.

DONALD RUMSFELD, SECRETARY OF DEFENSE: Rumsfeld, 68, was President Ford's secretary of defense from late 1975 to early 1977, during which time he was the youngest to hold the job. He is a veteran of four Republican administrations, dating from President Nixon's. Rumsfeld is a strong advocate of a national missile defense program. He opposed a chemical weapons treaty ratified by the Senate.

TOMMY THOMPSON, SECRETARY OF HEALTH AND HUMAN SERVICES: In his fourth term as governor of Wisconsin, Thompson, 59, is the nation's longest-serving Republican governor and was an early leader in the movement to cut welfare rolls. Thompson opposes abortion except in cases of rape, incest or when the woman's life is at stake.

ANN VENEMAN, SECRETARY OF AGRICULTURE: Veneman, 51, was deputy secretary of agriculture from 1986 to 1993, dealing mainly with international trade. She helped to negotiate the Uruguay round of talks for the General Agreement on Tariffs and Trade. The daughter of peach farmers, Veneman is a strong advocate of technology's role in farming. If confirmed, she will be the first woman to hold the post.

CHRISTIE WHITMAN, ENVIRONMENTAL PROTECTION AGENCY ADMINISTRATOR: The governor of New Jersey and a GOP moderate, Whitman, 54, championed open-space preservation and beach protection in the Garden State. She drew fire from environmentalists for cutting finances of state offices that investigate environmental abuses by industry.

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