The Tax Cut: Here Comes the Feeding Frenzy

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Fritz Hollings had a good idea Thursday what Alan Greenspan's testimony — especially the bit about "it is far better that the surpluses be lowered by tax reductions than spending" — would do for the appetite for tax cuts on the Hill:

"You're going to start a stampede."

And how. Among Republicans, the Fed chairman's surprisingly unqualified (for him) assertion that big, across-the-board tax cuts are well within the government's fiscal means in this age of blooming surpluses was a cause for celebration. Bush called Greenspan's testimony "measured and just right." Budget Committee chairman Pete Domenici, no fiscal profligate, had this to say after Greenspan got through: "I don't think we have to be concerned about spending too much money because there will be a lot... around."

And from the Reaganomics wing, Stephen Moore, president of the Club for Growth, a tax-cut advocacy group, got really excited: "We supply-siders welcome Alan Greenspan to the movement."

Among Democrats, House Minority Leader Dick Gephardt managed to muster up a little party spin — "The chairman pointed out that we must approach the surplus with caution. Democrats agree" — but the overwhelming sentiment Thursday was resignation. Max Baucus, senior Democrat on the Senate Finance Committee, said in the partisan tug-of-war between big, across-the-board tax cuts (Republicans, if you're just joining us) and smaller, targeted cuts (Democrats), the needle is swinging toward the GOP.

"I think we will cut marginal rates," Baucus said, referring to the broad tax rates paid by individuals. "A large number of senators are in agreement with what I just said, a working majority on both sides of the aisle."

Besides, they know Bill Clinton isn't around any more to veto it, like he did the $900 billion slasher Trent Lott and Dennis Hastert dropped on his desk in 1999. Clinton had a Greenspan mandate at his back when he eked his 1993 deficit reduction plan past congressional Republicans, and by the time Newt Gingrich had come and gone, big tax cuts were budget-busting evils and small, targeted cuts were the touchy-feely fashion.

Now Greenspan says there's more than enough money to go around — maybe too much, there's a Republican in the White House with at least functional majorities in both houses of Congress, and the Democrats, without Clinton in the bully pulpit, are suddenly victims of his fiscal success, and looking like they're on the wrong side of the tide. (Those coattails are as short as ever.)

"For four or five years, Greenspan has been an obstacle for Republicans who want to cut taxes," Moore said. "Now that he is an ally, it is a huge advance for Republicans."

And they're all after a piece of the pie, well beyond Bush's own recipe. Trent Lott wants a capital gains tax reduction (at $100 billion a year). Chuck Grassley, Baucus's boss at Finance, wants to repeal the Alternative Minimum tax (at $300 billion over 10 years). House Republicans have $600 billion in tax cuts that Bush's plan doesn't include. The lobbyists are out in force too — corporations are gunning for another $500 billion for business tax cuts, and conservative groups want a tax break for all married couples that would cost $292 billion over 10 years.

And so Bush has again beat back the Democrats only to find himself surrounded by grabby, attention-starved Republicans. He's got Treasury Secretary Paul O'Neill already looking at ways to speed — or at least appear to speed — the cut's impact on the economy before heading up to the Hill to do battle.

Because the one thing Greenspan didn't much help Bush with Thursday was that old December sense of urgency, before Greenspan grabbed the reins with a surprise half-point interest-rate cut (with more to come Tuesday). The Fed chairman tossed Bush a bone by saying the cuts should be "sooner rather than later" and "might do noticeable good" in a prolonged recession, but he also called fiscal policy "too blunt an instrument" to fix the economy — and even had a Ford-era metaphor to back it up. (To be sure of getting the Bush Cabinet's attention.)

The planets are lining for Bush on this one — a big, across-the-board, eminently Republican tax cut with bipartisan support and noble, recession-proofing aspirations that could be the first big win of his presidency.

But if he and O'Neill don't crack some GOP heads in a hurry, they'll be celebrating it in October.