Selling the Tax Cut

CYNTHIA JOHNSON FOR TIME
Campaign 2001: Back to the hustings to pitch his budget and pressure the pols

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The idea, White House political director Ken Mehlman told a group of G.O.P. state legislators in a conference call last Thursday, is to re-create what happened during Bush's Inauguration speech. When the President mentioned his $1.6 trillion tax cut, politicians on the Capitol steps clapped politely. But out on the damp and muddy Mall, the crowd whooped and hollered louder than at any other moment of the speech. Hearing that, the politicians amped up their own applause. To turn up the grass-roots volume, Bush is getting help from groups like Americans for Tax Reform, whose founder, Grover Norquist, organized Mehlman's conference call. In coming weeks, Norquist promises, many G.O.P.-controlled state legislatures will vote to send resolutions to Washington directing their Senators to vote for the President's plan.

Some of the targeted Senators are fighting back. When Daschle heard that the President would be dropping in to his state, the minority leader challenged him to a tax-cut- and-budget debate on local TV. (Bush declined.) Democrats are eager to engage because their polls show that Bush had a strong night in his first presidential address. Bush's individual proposals are immensely popular, but he has been unable to assuage public fears that his numbers don't add up. Bush's tax cut, Daschle warned, "will consume nearly all of the available surplus--at the expense of prescription-drug coverage, education, defense and other critical priorities."

The skepticism is justified. Plenty of voters remember the dark side of Reagan's legacy--record deficits the country is still paying off. When politicians tell Americans they can have it all, they have learned to say, "There they go again." To counter that reaction, the President insisted all week that his budget sets aside $1 trillion of the projected surplus for "contingencies." But on closer inspection that contingency fund looks like a bottomless till, a way to pretend to pay for a host of Bush initiatives that will end up costing far more.

During the campaign, Bush rarely talked about debt reduction. But last week paying down $2 trillion of the national debt suddenly became one of his "major initiatives." The reason: internal polls told Bush strategists that the public wants debt reduction at least as much as, if not more than, a tax cut. "We knew we had to change the argument from tax cut or debt relief to tax cuts and debt relief," says a Bush aide. But although the President's rhetoric changed, his plan did not. He came up with no money for paying down debt beyond the Social Security payroll-tax revenues, which both parties have unanimously agreed should never be used for anything else.

Hoping to jump-start the economy, Bush is calling for part of his tax cut to be retroactive to Jan. 1--without factoring the added cost into his budget. Unless there is some tinkering, that will surely increase the cost above his cap of $1.6 trillion, which means Bush will have to decide where to compromise--by fiddling with the pace at which cuts take effect, reducing rates by less than he has proposed, or reducing rather than killing the estate tax.

But for now, compromise is looking less probable. Despite all the talk of changing the tone in Washington, Republicans and Democrats are back to their old spitting and bickering. Last week Republicans rammed a version of Bush's across-the-board income tax cut through the House Ways and Means Committee on a party-line vote. A full House vote is scheduled for this week. Even Democrats who appeared likely to support Bush were complaining that they had been railroaded into considering tax cuts before the budget had been hammered out or the program cuts even announced. Bush was pleased by the pace and hoped that the sense of momentum would put more pressure on fence-sitting Democrats and moderate Republicans. It may not. "He has to be willing to work with us," says Arkansas Senator Blanche Lincoln, another Democrat who got the Bush treatment last week when he visited Little Rock. "It can't be his way or no way."