If you're George Bush, shrinking government revenues isn't something you want to see just after you got Congress to pass a $1.3 trillion tax cut. During the budget debate, Democrats howled loud and long that the budget surplus projections W. was using to justify his tax cut were flaky. The tax revenues wouldn't pan out, particularly if the economy soured, they argued. With the economy now worsening and the revenue projections dropping, Democrats plan to remind the White House of this "all the time," says a senior aide with the House Democratic leadership. "It's a big problem for Republicans."
Now that they control the Senate, Democrats have more opportunities to make that case before the public. "Republicans know it's coming," says the House Democratic aide. Senate Budget Committee Chairman Kent Conrad plans to haul White House budget director Mitch Daniels Jr. before his panel on Thursday and demand that he explain how W. is going to "get us out of this fix," says a Conrad aide. "We'll drive home the point that we warned that this tax cut was too big. But they rushed it through even though the numbers didn't add up."
Democrats now think they can draw the most blood by ratcheting up their charge that Bush will raid the Medicare and Social Security trust funds to make up the revenue shortfalls. They claim Republicans will have to begin draining the Medicare trust fund this year, taking out $2 billion, and will start drawing from Social Security trust fund in 2003, first with a dip of $10 billion.
But as Conrad gets ready to grill Daniels, Republicans are putting together a public counterattack of their own, which will be two-pronged. First, "we'll say we're working on it," explains a senior Senate GOP aide. Tax relief is on the way and it will help strengthen the flagging economy. The second prong will put the ball in the other side's court: Democrats complain that the tax cut isn't letting them have enough money to spend on social programs. So they have two choices. They can cut spending or raise taxes. "We'll be asking them this question," says the GOP aide. "Do they want to raise taxes to fund these bills or can they stay within the budget limits?" Republicans think that painting the Democrats as big spenders and taxers will shut them up.
Who's going to win this PR war? A lot depends on the condition of the economy next year. Republicans believe they can fend off Democratic attacks for at least six months. Voters will be getting rebate checks this summer, which should make them happy, even if the checks are small. They'll also appreciate the drop in marginal tax rates when they fill out their taxes at the beginning of next year. And those moves are bound to stimulate the economy some. The critical question is whether the economy can turn itself around by June of next year, when voters start turning their attention to House and Senate races. If the economy perks up, the Democrats' I-told-you-so song will sound like whining. If the economy continues to slide, Republicans will likely pay for that music at the polls.