Daschle blames Bush tax cuts for economy's deterioration

By James Kuhnhenn and Steven Thomma KNIGHT RIDDER NEWS SERVICE

January 5, 2002

WASHINGTON -- Senate Majority Leader Tom Daschle yesterday blamed President Bush's tax cuts for the "most dramatic fiscal deterioration in our nation's history" and called for new measures to create and sustain economic growth.

Daschle, the nation's top Democratic official, opened a debate over Bush's stewardship of the economy that will echo throughout this congressional election year. A Democratic gain of six seats would shift the House of Representatives to that party's control, while a Republican gain of one seat would shift control of the Senate to the GOP.

Bush is expected to make the case for his economic management and stimulus plan beginning this morning at a town hall meeting in Ontario.

In his speech, Daschle repeatedly argued his central theme: Bush and Republican lawmakers had erased budget surpluses with a $1.35 trillion tax cut that also has pushed the federal government back into deficit.

"Not only did the tax cut fail to prevent a recession, as its supporters said it would, it probably made the recession worse," the South Dakota senator said in a 47-minute address to the Center for National Policy, a policy-research group with strong links to the Democratic Party.

Nonpartisan analysts say the recession is the biggest cause of this year's deficit, as tax revenues drop and social spending increases. This year's tax cut is not that big, and both parties supported the tax-relief checks mailed out last year.

Republican officials and business leaders reacted skeptically to Daschle's remarks. They particularly bristled at his claim that the tax cuts were responsible for the current budget deficits.

"Perhaps the most important thing the Congress did last year to promote economic security was to pass the president's tax relief proposal," House Speaker Dennis Hastert, R-Ill., told The Associated Press.

In the next decade, the Republican-designed tax cut will grow as more breaks phase in. It is expected to cost $1.5 trillion over that time and eliminate about 45 percent of the once-projected 10-year surplus. Long-term costs of the 2001-02 recession are projected to take about 40 percent of the surplus, and increased spending the rest.

"Over 10 years, the tax cut is the big culprit," said Robert Bixby, executive director of the Concord Coalition, a bipartisan group devoted to fiscal discipline.

Despite his criticism of the tax cuts, Daschle did not call for reversing them.

A year ago, the bipartisan Congressional Budget Office predicted that the government would have a surplus of $313 billion in fiscal 2002. Days into the start of the new fiscal year last October, it was clear that a slowing economy would take at least $165 billion of that, as lost jobs and shrinking profits cut tax revenues.

An additional $66 billion would go to increased spending to recover from the Sept. 11 terrorist attacks or to wage war, and other programs.

The tax cuts are expected to reduce Treasury revenues by $31 billion this year.

Those figures -- from an early estimate by congressional budget committees -- would leave a surplus this year of about $52 billion. When Bush submits his budget proposals to Congress, he will forecast deficits for 2002, 2003 and 2004. White House Budget Director Mitch Daniels blames the recession.

While Daschle contends this is the nation's most "dramatic fiscal deterioration," it remains to be seen how the current problems will size up historically. The nation incurred deficits throughout the Great Depression of the 1930s, and even larger deficits during World War II.

Daschle said that as the tax cuts take effect, the deficits will grow and make it harder for the government to pay for crucial items in the Democratic agenda -- homeland security, scientific research, new energy initiatives and training for workers adversely affected by trade.

"The Republican agenda in Washington today is being written by a wing of the Republican Party that isn't interested in fiscal discipline," he said. "They have one unchanging, unyielding solution that they offer for every problem: tax cuts that go disproportionately to the most affluent."

Daschle proposed two new ideas to spur renewed economic stimulus talks -- a one-year business payroll tax credit and a new business depreciation schedule to encourage companies to replace equipment and technology this year.

As his party's top spokesman, Daschle has emerged as the leading potential challenger to Bush in 2004, and hints of presidential politics were abundant yesterday.

Leon Panetta, former President Clinton's chief of staff, and former Clinton Treasury Secretary Robert Rubin introduced Daschle, and former Clinton Agriculture Secretary Dan Glickman sat in the front row. Aides confirmed Daschle had consulted with Clinton as he prepared his remarks.

-- Anonymous, January 05, 2002