Bush’s Economic Plan
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JIM LEHRER: And to two members of the House of Representatives, and to Ray Suarez.
RAY SUAREZ: With me now are two senior members of the Tax Writing Ways and Means Committee in the House, Republican Jim McCrery of Louisiana and Democrat Benjamin Cardin of Maryland.
Well, gentlemen, last night, the president spent most of his time in the state of the union address talking about the economy more than he did about Iraq though Iraq got a lot of the headlines. Rep. McCrery, what did you hear from the president on the economy?
REP. JIM McCRERY: Well, I heard that the president is concerned about the economy. He recognizes that the rate of economic growth is too slow, that we’ve come out of the recession with too much unemployment and it has been too slow in getting jobs and getting that unemployment rate under control. So I think the president expressed concern and to address that concern, he came out with a very detailed and a very bold plan to use the legislative branch to stimulate economic activity through fiscal policy, so I was very encouraged by what the president said.
RAY SUAREZ: Rep. Cardin let me get your thoughts on the economic package.
REP. BENJAMIN CARDIN: I was disappointed. He didn’t tell us anything new. His proposal will not stimulate the economy. What it will do is increase other deficits, which is going to have another negative impact. I was disappointed; considering that our economy is deteriorating, I would have hoped we would have had new proposals to really help create new jobs in our community.
RAY SUAREZ: What part in all of this do you think the war is playing? Our citizens in Denver, were having a little trouble teasing out what responsibility uneasiness about a war may be having in getting the economy going again?
REP. BENJAMIN CARDIN: Well, obviously the war will have an impact. We need to adequately fund our war effort and our national defense and homeland security. That is going to require us to have additional spending. I think everyone in Congress will support that but at the same time it seems a little bit unusual that you would be talking about a tax cut when our nation is going to need additional resources in order to meet our national defense needs. Every time we cut our taxes we are we’ll be borrowing more money. That means when American put money away for savings, that they would hoped to be used for economic growth, that money is going to be used to help finance government through buying bonds. That’s not what we should be doing.
RAY SUAREZ: Rep. McCrery what was going through our mind what you are hearing our citizens in Denver discuss what part the war plays in all this?
REP. JIM McCRERY: I think they had it right. The war is certainly playing a role in the state of our economy. It makes investors nervous. It raises the cost of capital. So I mean, I think it is playing a role; the sooner we can get Iraq settled one way or another, I think the sooner we can get on track for a solid economic recovery.
RAY SUAREZ: Also, subject of some discussion in Denver was fairness versus stimulus. There was some agreement that maybe some of the problems with the tax code need to be worked out. But some disagreement over whether it would give a shot to the economy right away.
REP. JIM McCRERY: Sure. There is disagreement here on Capitol Hill as you’ll hear this evening. I would point out, though, that my good friend Mr. Cardin says that the tax cuts won’t stimulate the economy. They’ll produce deficits. Well, classical economic thinking says that actually when you increase deficits, you do stimulate the economy. I mean, that is one way to do it.
So I think we should keep our eye on the ball here, and that is how to get this economy to grow at a more robust rate and we can disagree on how to shape the tax cuts, but I would hope that we can agree that we need some stimulus, some governmental action to help give us the best chance to create jobs and grow this economy so if we can agree on that I think we can move forward.
RAY SUAREZ: Go ahead.
REP. BENJAMIN CARDIN: Jim, I want to say I think we are in agreement on that. I think most members of Congress believe we need to do action here is to help stimulate the economy but you are going to stimulate the economy by giving the tax breaks to the lower income people who will spend it, who will use the money. You’ll stimulate the economy if you put money into construction programs that are going to employ more people. You stimulate the economy by having a fiscally responsible program that puts the program in the first year and not long-term hemorrhaging of funds for the government. The president’s proposals are long-term tax cuts that will cost us significant revenues over a long period of time. And will not be focused towards the first year where we really need to stimulate the economy.
RAY SUAREZ: Weren’t Rep. Cardin, some of the proposals things that could put more money into peoples’ pockets right away, an immediate end to the marriage penalty right away, moving to the full child credit right away rather than phasing it in, making tax cuts that were planned for out years effective this year?
REP. BENJAMIN CARDIN: Some of the proposals could benefit and be a stimulus. However when you accelerate the tax cuts on the rates you are costing the federal treasure’ lot of revenue over the ten-year window because many of these tax cuts did not take effect until seven years from now. So it really does affect the revenues of our country. It really does add to the national debt. It really does jeopardize Social Security and our ability to finance Medicare.
RAY SUAREZ: Rep. McCrery, I don’t know if you heard the young fellow from Denver who said basically nobody I know is living on dividends. How would you talk to him about why that part of the president’s plan is important?
REP. JIM McCRERY: Well, I think the president’s plan is well constructed. I think all of the parts are necessary to create the kind of synergy in our economy that we need for the more robust rate of growth. The dividends portion is very important for a number of reasons. I would say to that young man that even though he doesn’t know any there are plenty of elderly in this country who do depend on dividends income for their livelihood. So it’s important to them.
On the other hand, we have corporations which under the current tax treatment of dividends are prejudiced toward debt rather than equity and in financing their needs. That shouldn’t be. The tax code shouldn’t encourage that. We should have a level playing field in that regard. The president’s proposal would accomplish that. It would I think improve our corporate management in this country. And as we all know we’ve had some problems the last few years, with corporations inflating their stock value. I think the president’s proposal on dividends would go a long way toward stopping the incentive that is out there to inflate stock value.
So I think the proposal is well balanced. Ray, you pointed out a number of provisions that will put cash immediately into the pockets of all income taxpayers. That will be a stimulus but over the long-term, we need stability, we need people to have confidence in what the tax code is going to be and what their tax rates are going to be and we need to get confidence backs in the stock market. The dividend portion of the president’s package will help do that.
RAY SUAREZ: And, Rep. Cardin, how do you answer that brief just laid out by your colleague from Louisiana?
REP. BENJAMIN CARDIN: Well, the dividend proposal will do virtually nothing to stimulate the economy. It’s basically a tax cut for people who have higher incomes. The overwhelming majority of the relief goes to the highest income taxpayers. And it’s not very well thought out. It’s something that we need to have hearings and think about what we want to do with business taxes.
I applaud Chairman Thomas, the chairman of our committee, who’s raised certain concerns, many concerns about the dividends being excluded from taxable income. It cost an awful lot of revenue to the federal treasury and, again, it just adds to the debt. The president talked about fiscal discipline. Fiscal discipline means on the spending side and on the revenue side we don’t need large deficits at this time; it’s not helping our economy.
REP. JIM McCRERY: Let me point out that deficits right now as a percent of our national income, as a percent of our GDP are very small, much smaller than we ran during the 80s and early 90s. So the debt, the deficits that we are now experiencing are very manageable. What we ought to do again is keep our eye on the ball which is creating jobs, getting this economy growing and if we have to suffer an increase in the short-term deficit to accomplish that, I think it’s well worth it.
RAY SUAREZ: Rep. Cardin, can the country afford to carry a big mortgage more easily than it could 20 years ago?
REP. BENJAMIN CARDIN: No, I don’t think so. When you look at the liabilities that we are accumulating in Social Security and Medicare, Medicare is not adequately funded. Social Security on the long term is not adequately funded. We need to preserve the Social Security generated surpluses for Social Security. And we’re not doing that. Hundreds of billions of dollars of those surpluses are being used for these tax cuts, if Congress passes these tax cuts. That is not the responsibility thing that we should be doing.
RAY SUAREZ: Rep. McCrery, after a state of the union address, is it common for to you hear from people back in your district? Is there machinery? Do you get phone calls, e-mails what are the reviews about last night?
REP. JIM McCRERY: Well, generally we do get feedback and generally the feedback is from people who agree with the president at least at first. So I mean that’s what I’ve gotten so far. I expect within a week or two I’ll get some feedback on the other side. That is only natural. So I think though that the country is anxious for the Congress and the president to work together to get something done to generate economic growth, create jobs, get us back on the right back.
RAY SUAREZ: There have been some public opinion polls recently and you heard it from our Denver group, some real difference of opinion on just how things are going. Are you hearing that?
REP. JIM McCRERY: I think most people in my district would agree that the economy is not in good shape — that it needs some help. So I don’t think there is a lot of disagreement out there as to the state of our economy. Everyone recognizes that we need to improve it. Obviously, on the situation with Iraq, there is a lot of disagreement — a lot of concern. I think the president went a long way last night to assuaging some of those fears and on Feb. 5 when Sec. Powell addresses the U.N. Security Council, I expect him to lay out evidence, which will indicate a national need and a national purpose for military action in Iraq, if Saddam don’t come forth with his weapons of mass destruction.
RAY SUAREZ: And Rep. Cardin, same question, have you been hearing from the folks — relatively a lot closer to home from where you are sitting?
REP. BENJAMIN CARDIN: They can find me a lot quicker coming from Maryland. I can tell you, I agree with Jim McCrery. My constituents want the Democrats and Republicans to work together and resolve these national problems whether it’s the economy or whether it’s foreign policy issues. So they want us to get into a healthy debate here and they want to us help resolve these issues and reach some conclusions but I must tell you until you get to the specifics, you start looking at what we are doing in Medicare and prescription medicines and what we are doing on the environment, what we are doing in education, what impact the president’s tax programs have on these other programs, we’re not getting much specific correspondence from our constituents on the general comments made by the president.
RAY SUAREZ: Gentlemen, I want to thank you both for being with us tonight.