Bush opens the door to capital gains tax cut
Wednesday, September 5, 2001
WASHINGTON -- President Bush opened the door Tuesday to a future cut in the capital gains tax, a longtime Republican prescription for reviving an ailing economy, but said he first wants to see the effects of last spring's income tax cut.
Bracing for an autumn of wrestling with Democrats over the sluggish economy and diminished budget surplus, Bush told reporters that before reducing the capital gains tax, he wanted to give the income tax cut time to stimulate the economy. White House spokesman Ari Fleischer said the idea could be considered for the fiscal 2003 budget, to be sent to Congress early next year.
"But I'm open-minded," Bush said before meeting with Senate leaders as Congress returned from its summer break.
Bush said trimming the capital gains tax rate -- now 20 percent for most people -- "would pile up some revenues" for the government. That would be a huge help for the administration as it scours the tight budget for money to pay for its proposals to boost defense, education and other spending.
Many economists say the government could make money in the early period of a capital gains tax cut -- as additional people sell their property to take advantage of the lower taxes -- but the reduction would be a money-loser for the government in the long run. Republicans say it is a moneymaker because it prompts property sales that would not have occurred otherwise.
The president also sought to reassure senior citizens that Social Security and the benefits it pays remain solid. His comments seemed aimed at countering Democrats who have played up last month's Congressional Budget Office projections that small portions of that program's surplus are being spent for other federal activities -- something Bush and members of both parties had pledged repeatedly to avoid.
"I understand how politics works up here," Bush said. "There's always that scare tactic trying to tell the American people that the budget process is going to lead them to not get their Social Security check. That's just ridiculous. It's just not right."
Despite repeated questions, Bush declined to say he would veto legislation that would erode the Social Security surplus. Later, a senior aide said Bush would stand by earlier pledges to veto such bills, but hadn't wanted to say so on a day when he was emphasizing his willingness to work with Democrats.
Senate Majority Leader Tom Daschle, D-S.D., said in his session with Bush, the president said he would avoid siphoning any money from Social Security. Hoping to build pressure on the president, Daschle said it was Bush's job to explain how he would do that while financing his other initiatives.
"This is the president's budget, and we're looking to him for his guidance on how we do that," Daschle told reporters.
At a hearing on the budget office's surplus forecasts, Senate Budget Committee Chairman Kent Conrad, D-N.D., played on that Social Security theme and blamed the tax cut for much of the problem. Conrad said the office's numbers showed it was "too good to be true" when Bush made oft-repeated promises to protect Social Security surpluses while cutting taxes and boosting spending for defense, education and other priorities.
"I think the president's budget plan is dying," Conrad said. "We need to move on."
The committee's top Republican, Sen. Pete Domenici of New Mexico, argued that nearly every Democrat supported giving tax rebates this year and said restoring economic growth should be paramount.
The budget office projected last month that the government will run a $153 billion surplus in the fiscal year ending Sept. 30. While still large, that was dramatically smaller than the $275 billion surplus it foresaw in May.