Bush, Democrats ready rival proposals to stimulate economy

WASHINGTON -- House Democrats and their new leader, Nancy Pelosi, said Friday they will propose new benefits and job opportunities for the unemployed next week, putting them at odds with President Bush and assuring a quick and heated battle in the new Congress.

Pelosi said the Democrats' plan, to be announced Monday, would focus on job creation and wouldn't cost as much as Bush's proposals to expand tax breaks. The president is to outline his ideas on Tuesday, when the new Republican-controlled Congress convenes.

At a news conference, Pelosi also addressed the "very dangerous situation" in North Korea, expressing support for Bush's diplomatic approach.

"I am pleased, so far, that the same pre-emptive policy that has been professed for other parts of the world has been, shall we say, softened when it comes to North Korea," the California lawmaker said, referring to Iraq.

Pelosi urged the administration to press China, North Korea's closest ally, to do more to persuade Pyongyang to abandon its nuclear weapons program.

Pelosi, about to become the first woman ever to lead either party in Congress, recalled a visit she made to North Korea several years ago. "I never saw anything like the poverty of spirit that I saw visiting North Korea. The people, of course, you know are starving. They are eating roots and grass. ... At the same time, they have the technology and the intellectual capacity to develop weapons of mass destruction."

Back at home, the White House and Democrats agree the government must act to help the struggling economy and the people whose livelihoods have been affected by the downturn, but their approaches are significantly different.

Focus on tax relief

The president's plan, to be unveiled in a speech in Chicago on Tuesday, is likely to concentrate on tax relief -- speeding up tax cuts included in the $1.35 trillion tax act of 2001 but not scheduled to take effect until later years, reducing by possibly half the current tax on corporate dividends paid to investors and increasing tax breaks for businesses investing in new plants and equipment.

Pelosi said the administration talks about economic stimulus but uses the term "as a Trojan horse to wheel in some favorite tax breaks for the high end that they're so fond of."

Pelosi wouldn't give details of her plan, but Democratic aides said it would center on three components: extending unemployment benefits and assuring that all laid-off workers are eligible for 26 weeks of federal aid; providing payroll tax relief and tax cuts for small businesses, and giving aid to states to promote infrastructure and homeland security projects.

"What we're talking about is something that will be immediate, that would be fiscally sound which would not have long-term harm to our budget," Pelosi said.

She said House Democrats were in contact with Democrats in the Senate, where Sen. Max Baucus of Montana has outlined a $160 billion plan that includes aid to the states, unemployment benefit extensions and elimination of taxes on the first $3,000 of taxable wage income.

A stimulus package is certain to be one of the first orders of business in the new Congress. Republicans narrowly control both houses, and could have trouble advancing the president's plan in the Senate, where it takes a 60-vote majority to move controversial legislation.

Bush on Thursday took issue with the Democratic argument that his tax breaks would mainly benefit the rich.

"Some would like to turn this into class warfare," he said from his ranch in Crawford, Texas. "That's not how I think. I think about the overall economy and how best to help those folks who are looking for work."

A key component of the president's plan is expected to be a reduction in taxes paid on corporate dividend payments. In a bow to arguments that dividends flow primarily to higher-income Americans, the administration is considering limiting the amount of the reduction in this area to roughly a 50 percent cut instead of elimination.

The administration also may accelerate the individual rate cuts scheduled to take effect in 2004 and 2006. A senior White House official said Thursday that, while no final decision had been made on this aspect of the plan, Bush would apply this speedup to all tax brackets, including those higher income individuals in the top tax rate, currently at 38.6 percent.