Election-year economy debate begins

WASHINGTON -- Democrats and Republicans pointed fingers at each other Sunday in a debate over the economy, in what amounted to a game plan for each side's election-year strategy. Democrats blamed last year's tax cut for vanishing budget surpluses, while Republicans said anyone who criticizes a tax cut must want to raise taxes instead.

Sen. John McCain, R-Ariz., spelled out most candidly the dilemma of lawmakers facing new budget deficits and re-election at the same time: Taking back or delaying some of President Bush's 10-year, $1.35 trillion tax cut is not "politically salable," McCain said on NBC's "Meet the Press."

Administration officials defended the tax cut, a centerpiece of Bush's first year in office.

"The way to stimulate this economy is to give this economy tax relief," Commerce Secretary Don Evans said Sunday on ABC's "This Week."

Democrats led by Senate Majority Leader Tom Daschle, along with independent analysts, note the tax cut helps explain why the federal government is now facing a budget deficit after several years of mounting surpluses.

But Daschle and most Democrats have stopped short of calling for its repeal. Asked Sunday if Daschle would consider repealing any of the tax cut given his sharp criticism, spokeswoman Ranit Schmelzer would not say what his position is.

"He wants to see the administration's budget -- he wants to see whether they dip into the Social Security surplus, and if so by how much," she said. "And then they can discuss options about how to proceed."

That hasn't stopped Bush and fellow Republicans from accusing Democrats of wanting to raise taxes. On Saturday, Bush said, "Not over my dead body will they raise your taxes!"

And asked about Daschle's criticism, Evans added Sunday: "If he wants to raise taxes, then I invite him to raise taxes. I don't think that's what the American people want."

But Treasury Secretary Paul O'Neill, who has been known to stray from the administration line, told NBC: "I have not seen anyone say they want to raise taxes."

An 'insurance policy'

The government was projecting large budget surpluses when President Bush ran for office promising a large tax cut, which cut income tax rates across the board.

Republicans urged Democrats to get behind Bush's broad tax cuts as an "insurance policy" to economic recovery.

"Sooner or later this economy is going to recover on its own, but if you're unemployed, you'd much rather have sooner rather than later," White House economic adviser Lawrence Lindsey told "Fox News Sunday."

Democrats said the cuts have whittled away at a surplus they've carefully built over the past eight years, urging limited tax relief to get the nation out of recession without worsening future deficits.

The debate grows as a new analysis from the nonpartisan Congressional Budget Office favors payroll and sales tax "holidays" among various stimulus proposals. Several ideas promoted by Bush, including a repeal of the corporate alternative minimum tax, had less "bang for the buck," the CBO report said.

Stanley E. Collender, managing director of the Federal Budget Consulting Group, said the budget numbers back up Democrats' contentions about the tax cut eliminating at least 25 percent of the projected surplus.

"The tax cuts had a fairly substantial impact," he said.

Democrats and Republicans ended 2001 at odds over legislation to stimulate the economy, largely in a dispute over tax relief versus aid to the unemployed. Two plans passed in the GOP-controlled House, but neither came to a vote in the Senate, which is controlled by Democrats.