Candidates Debate Tax Cut Plans
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JIM LEHRER: Now: Taxes in the presidential campaign, and to Ray Suarez.
RAY SUAREZ: The congressional proposal over whether to extend middle class tax cuts ties into a larger debate between the two presidential candidates over tax cuts.
President Bush believes that all of the tax cuts passed in his first term, including those for the wealthiest Americans, should be made permanent. Most are set to expire in coming years. The president also says that if he is reelected, he will appoint a commission to find ways to make the tax code simpler and fairer. The president recently told supporters in Pennsylvania why further tax relief was so important.
PRESIDENT GEORGE W. BUSH: We unleash the energy and innovative spirit of America with the largest tax relief in a generation. (Applause) The entrepreneurial conspiracy is strong; the small business sector of our economy is strong. And the tax relief helps strengthen it. (Applause)
We encourage savings and investment by cutting taxes on dividends and capital gains. (Applause) Tax relief put money in the hands of American workers, so they could save for their retirement or for their home or for the education of their children. My philosophy is government sets priorities, funds its priorities, and lets the people keep as much money as possible. I think you can spend your money better than the federal government can.
RAY SUAREZ: Sen. Kerry’s plan has some major differences from the president’s. He too endorses tax cuts for low and middle income Americans. But he also wants to cut corporate income taxes while closing so-called tax loopholes that encourage job outsourcing. And to pay for these and other fiscal plans, Kerry would roll back income tax cuts for the wealthiest 2 percent of American taxpayers. He told a crowd in St. Louis recently why those cuts needed to be rescinded.
SEN. JOHN KERRY: John Edwards and I have a plan to put people back to work, a plan to create manufacturing jobs in America, a plan for tax incentives not to the wealthiest people in the country, but to the companies that are trying to create the jobs, help people be able to hire people, help people with job training. These are all choices.
George Bush’s choice: Tax cuts for the wealthiest people in America, to the exclusion of taking care of our veterans, taking care of children, cutting after school programs. That’s a choice. If you want a different value system, folks, that tells you we don’t have a broken budget in Washington, we have a broken value system and we need a president who fights for the American people, for the working people, and stands up for justice in this country.
RAY SUAREZ: To learn more about the candidates’ positions on taxes, I’m joined by Roger Altman, a senior economic advisor for the Kerry campaign– he was deputy treasury secretary in the Clinton administration — and Tim Adams, director of policy for the Bush/Cheney campaign. He’s served as chief of staff at the Treasury Department in the Bush administration.
Tim Adams, let me start with you. Could you walk us through the next four years and give us the major points in President Bush’s plans for tax policy.
TIM ADAMS: Well, certainly a big portion of it is plans in tax policy is what we saw happen today on Capitol Hill and what we’ll see tomorrow and that is passing middle class tax relief — tax relief that is for the most vulnerable in our society, but those who are facing enormous challenges. The president put these tax cuts into place in 2001, we accelerated them last year, despite John Kerry voting against it, and we think we ought to be helping the most vulnerable and the most economically challenged in our society.
RAY SUAREZ: And Roger Altman, if John Kerry takes oath next year what would his tax policy look like for the next four years?
ROGER ALTMAN: Ray, I don’t think the issue is the middle class tax cuts which are going to be extended tonight. There’s a consensus in this country favoring those extensions, Senator Kerry has long favored them, that’s really not the question. The request is the condition of our economy, and the effect of the deficits we have on that condition.
Right how the economy is not working for most Americans. Over the last three months, and that’s a period that has nothing to do with 9/11 or the corporate scandals or the tech. bubble or the conditions this administration inherited, the percentage of Americans who are working in this country has fallen and incomes for most Americans have fallen. The percentage of Americans working has fallen because the job creation rate hasn’t kept pace with the population growth rate, and incomes have fallen because inflation is outstripping wage gains.
Now, that is not a sign of a healthy economy. One of the underlying problems here, ironically, is a replay of 1993. In 1993 President Clinton came into office, he inherited a very large deficit from then President Bush Sr.; we fought a bloody battle over President Clinton’s deficit reduction plan and his economic plan, there was not a single Republican vote for the ultimate bill which passed the House by one vote and passed the Senate on a tie breaking vote from the vice president, and everyone opposed to that at that time said the tiny tax increases in there which affected 1.2 percent of Americans will ruin the economy. And all the prophecies of doom and depressions worse than the 1930s were made. Of course they were all wrong and they’re being made again now. And they’ll be wrong again.
RAY SUAREZ: And Sen. Kerry’s plans for the tax policy?
ROGER ALTMAN: Sen. Kerry has said we need to get these deficits under control, they’re undermining confidence and they’re threatening the country, especially with the aging of America, so he has said let’s roll back the tax cuts for the top 2 percent of Americans, that’s those earning $200,000 a year or more, and only those, and dedicate the proceeds to health care, education, and deficit reduction.
That’s the clear choice in this election, because the Bush side of course as I’m sure Mr. Adams will say, believes that first of all any tax rollbacks will be ruinous to the economy, they said that in ’93, they were wrong and they’re saying it again now and they’ll be wrong again and also will say that they’ll get the deficit under control through some mysterious plan they haven’t unveiled.
And the choice is whether we want to roll those taxes back as we did in ’93 to the levels that prevailed when President Clinton left office and I with would remind everybody that at the time President Clinton presided over those tax rates, ’99, ’98 and ’97, so forth, we have the best economy of anybody’s lifetime, so returning to those rates is not going to ruin anything, it didn’t then and won’t again — or whether we want to stick with the enormous deficits we’re facing and the weak economy that we’re currently experiencing, that’s the choice.
RAY SUAREZ: Well, Mr. Adams, what about the deficit that Mr. Altman put so much emphasis on?
TIM ADAMS: Well, certainly the president has a four-volume, thousand-page budget that lays out in excruciating detail how we’re going to cut the budget, the deficit in half in four years.
John Kerry has a single page which doesn’t even include tax cuts; it doesn’t include deal with the AMT; it doesn’t include Social Security, and it doesn’t even include the 1.5 trillion dollar government takeover of our health care system.
And let me just quibble with Mr. Altman’s characterization of the current economic conditions. At 5.4 percent unemployment, the unemployment right now is exactly where it was when Bill Clinton was running for re-election in ’96 and he was running on a good economy. Interest rates are low, inflation is low, we’ve seen 1.7 million new jobs created over the past year. And our economy is growing faster and has lower unemployment than most of our industrialized partners. The president believes that we should keep taxes low for all Americans.
RAY SUAREZ: Well, the federal government this year had to borrow $422 billion to pay its bills. In deciding today, and for President Bush to support the decision to forego more than $100 billion of collecting revenues over the next several years, are you staying on track toward cutting that deficit in half as you say?
TIM ADAMS: Absolutely. Let me remind you, back in 2000 when the president was running for office, he said there are two reasons we should run a deficit, we have a war and we have a recession, and we had both, we had much more. And so while we are not happy with the deficit, we think it’s too large, we do think it is manageable from historical norms and when compared to other industrialized economies. But we are determined to get that deficit down, we have a plan in place, John Kerry does not.
ROGER ALTMAN: Can I address that?
RAY SUAREZ: Please, and then a quick question. Go ahead. Respond.
ROGER ALTMAN: I want to say something very clearly about the two candidates’ positions on deficits. Sen. Kerry has said let’s reinstate the two central budget laws, I want to emphasize laws, of the 1990 to 2000 period first signed into law by President Bush Sr. — extended again in 1993, extended again in 1997, probably the only thing that Speaker Gingrich and President Clinton agreed on, those two laws very simply were the pay as you go system, and the system of inflation based caps on non-defense discretionary spending.
Those two laws over that ten-year period were a primary reason why we achieved over those years the first balanced budget in 40 years, ultimately the surpluses we saw unprecedented, then the truly unique pay down of the national debt. Now during the early days of this current Bush administration those laws expired and this administration made no effort to extend them, and currently opposes them fiercely.
So one candidate is saying let’s reinstate those budget laws of the 1990s, I will live under them regardless of the effects, including the effects on my own initiatives. That’s Sen. Kerry’s position. The other candidate is saying I don’t want anything to do with them, I’m against them.
Now that’s one reason why President Bush inherited a budget surplus, Goldman Sachs estimated five-and-a-half trillion over 10 years, and we now face Goldman Sachs estimates — a more than 5 trillion estimated ten-year cumulative deficit, that’s the biggest budget reversal in American history in constant dollars since George Washington raised his hand and took the oath of office; they’ll tell you it’s about war, but if you take out defense and homeland security we still have a giant deficit and they’re spending x defense, x homeland security, is still twice the annual rate that we saw during the Clinton years.
Why? Because they have abandoned the budget discipline embodied in those two laws that we had during the 1990s and ask Mr. Adams if you would why President Bush opposes reinstating those and why he fought so hard to be sure the bill which did pass the Senate a month ago on pay-go at least would die in the House.
RAY SUAREZ: Well, you just asked him. Tim Adams, go ahead. Respond.
TIM ADAMS: I’m so glad that Mr. Altman brought up the pay-go rules because I just saw a press release from John Kerry who said that he now supports these middle class tax cuts that are going to be voted on in the Senate tonight or tomorrow morning and he says he supports them despite the fact that he opposed them last year.
Now, he opposed them last year because he said there were no offsets, and there are no offsets today, so what we’ve seen is yet another flip flop by this candidate, but it also violates his own pay-go rules. So why is it he says he’s for pay-go, but this legislation we see today violates those rules –
ROGER ALTMAN: Mr. Adams…
TIM ADAMS: Please, please. Please allow me to finish. Let’s go back to the 1990s. The reason we had a surplus in the 1990s is because the previous administration practically gutted the Defense Department and our military capacity which we’re trying to rebuild at this point, they gutted our intelligence capacity which we’re trying to rebuild at this point, and the surplus was principally the result of a bubble in the stock market which produced a historically anomalous set of numbers with respect to the realizations of capital gains. When the market burst in early 2000 and 1.8 trillion dollars of wealth was lost in 2000, the great year that Mr. Altman was talking about, that surplus went with it. It took us right into a recession which we’ve been trying to manage our way out of for the last three and a half years.
RAY SUAREZ: I want to return to 2005 when the next presidential term, there’s a great debate to be had over the 1990s, but Roger Altman, very quickly, how does John Kerry reduce the deficit given the Bush, in the Bush critique, the number of proposals he’s made about how he’d like to spend government funds starting with his term?
ROGER ALTMAN: Well, Ray, I’m going to answer that, but I just want to say for one moment, it’s difficult to respond to the types of things Mr. Adams just said because they’re so nonsensical. The idea that the budget was balanced in the 90s because of the tech. bubble or the idea that the budget laws I referred to had nothing to do with it, with all due respect, that’s absolute nonsense. Now back to your question –
TIM ADAMS: Then you should read Alan Blinder’s book and Janet Yellen’s book; they were your colleagues from the 1990’s, or Joe Sitglitz, another one of your colleagues from the 1990’s, it’s all in their books, they’ve written bit, they’re Democrats, they’re advisors to John Kerry, they’re your former colleagues and that’s what they said. I didn’t make this up, it’s from their books.
RAY SUAREZ: Quickly Mr. Altman on deficit reduction…
ROGER ALTMAN: That’s also nonsensical. In answer to your question, Ray, I answered it a moment ago. Sen. Kerry has said let’s put back into effect those two laws, which produced the first balanced budget in 40 years, the surpluses and the pay down of the national debt, and I as president, President Kerry, will live with the consequences of those laws, regardless of the effects including on my own initiatives.
In addition, every initiative Sen. Kerry has put forward in this campaign, and it’s right on his website, is accompanied by a pay for, every single one. The two central initiatives that account for about 80 percent of his proposed spending are health care and education, those two initiatives add up to less than the proceeds from rolling back the tax cuts for the wealthiest Americans, that’s how they’re paid for. It’s clear, it’s there on the Web site Every initiative has a pay for, and that’s how Sen. Kerry would govern as president and Mr. Bush in his own words would not.
RAY SUAREZ: Let me get a quick response from Mr. Adams.
TIM ADAMS: I’m glad Mr. Altman brought up the Kerry budget and their website. I urge people to look at his budget on his website. The single page in which he derives enormous amount of savings from forcing federal bureaucrats to wear sweaters in the wintertime because he’s going to turn down the temperature — the fact is that for every dollar he raises in raising taxes on small businesses and entrepreneurs, he is going to spend $3 in new spending: 1.5 trillion for a health care proposal. That’s the same size as the economy of France. This country cannot afford the government takeover of our health care system.
ROGER ALTMAN: There are no tax cuts on small businesses — no tax increases on small businesses in Sen. Kerry’s program. In fact, there are tax cuts for small businesses -
RAY SUAREZ: This conversation is to be continued but I want to thank you both for being with us.
TIM ADAMS: Thank you very much.
ROGER ALTMAN: Thanks for having me.