GOP leaders still want more tax cuts this fall

Thursday, September 6, 2001

WASHINGTON -- Top congressional Republicans said Wednesday they want new legislation to stimulate the economy including cuts in the capital gains tax rate, despite President Bush's wish to delay such an effort.

The GOP split emerged as Republicans stepped up efforts to combat Democratic claims that this year's tax cut was so costly that, unless savings are found, it could force the use of Social Security surpluses to pay for defense, education and other increases that both sides support.

In a private meeting, House GOP leaders decided to ask the White House to take administrative actions in the last days of this fiscal year to ensure that Social Security surpluses are not spent, Speaker Dennis Hastert, R-Ill., said in a brief interview. Fiscal 2001 ends Sept. 30, and lawmakers have little taste for enacting 11th-hour spending cuts this year.

Social Security option

As for making sure Social Security surpluses are not siphoned next year, one option House GOP leaders discussed is an across-the-board cut in spending, said another participant in the meeting speaking on condition of anonymity. Congress currently is working on next year's spending bills.

Hastert also said Republicans want to work this fall on a capital gains tax reduction and other measures that could "keep growing the economy." Just Tuesday, Bush said he preferred to wait until next year to see if the $1.35 trillion, 10-year tax cut enacted this year was bolstering the flagging economy.

"It's saying, 'What else can we do to keep this economy going and to grow the economy,"' Hastert told reporters after meeting Wednesday with Bush. "And that's what we're interested in doing."

Senate Minority Leader Trent Lott, R-Miss., also said he wanted to pursue a capital gains tax cut this fall. He said it could be attached to a minimum wage boost that Democrats want or other legislation.

In addition, House Majority Leader Dick Armey, R-Texas, and Senate Budget Committee Chairman Pete Domenici, R-N.M., came out for a fresh effort to revive the economy. In separate comments to reporters, each said the measure should include a capital gains tax cut, strengthened authority for Bush to negotiate overseas trade pacts, or other items.

Divergent timetables

The divergent timetables for action between Bush and congressional Republicans is fueled by the differing political needs of the two.

GOP lawmakers face November 2002 elections for control of Congress in which they want to be seen as having tried mightily to revive the economy. Bush, nurturing his image as a compassionate Republican for his 2004 re-election bid, has so far distanced himself from a capital gains tax reduction, criticized by Democrats as an expensive boon to the rich.

A confrontation between congressional Republicans and Bush is not in the offing. GOP lawmakers think they could win points by pushing an economic package this fall if either the Democratic-controlled Senate kills it or it is shaped to win bipartisan support and becomes easy for Bush to sign.

New budget suggested

Meanwhile, in the growing battle over the weak economy and shrinking surplus projections, House Minority Leader Dick Gephardt, D-Mo., said Bush should write a new budget to reflect leaner times.

He declined to call for a rolling back of the recent tax cut but reiterated his support for the defeated package Democrats offered last spring, which had about half the tax reduction

Bush wanted.

And White House budget director Mitchell Daniels and congressional Democrats had their first face-to-face confrontation since official federal surplus projections were drastically scaled back last month.

Daniels told the House Budget Committee that projections still call for near-record budget surpluses for the next few years. And he said that if lawmakers refrain from exceeding Bush's spending plans, it would "allow the funding of our nation's priorities -- defense, education, debt reduction -- all consistent with the full protection of the Social Security surplus for debt reduction."

But the panel's senior Democrat, Rep. John Spratt of South Carolina, said the new surplus projections have made it difficult to overhaul Medicare and Social Security, boost defense, farm and school spending, and pursue other items without eating into Social Security's surpluses.

"We've got to get past denial and recognize we've got a problem," Spratt told Daniels.

Both parties have pledged to not spend any parts of Social Security's surpluses for anything but debt reduction. The White House projected last month that would not happen, though it conceded the margin was just a few billion dollars out of a $2 trillion budget.

But the nonpartisan Congressional Budget Office said that $9 billion of the projected $162 billion Social Security surplus would be eroded in fiscal 2001, which ends Sept. 30, and the budget would come within $2 billion of doing it again next year too.

Using small amounts of Social Security's surplus would have no significant effect on the program's solvency. But each party would be happy to blame the other for violating its promise.

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