August 12, 1999
TERENCE SMITH: Tax cuts are the flavor of the month. House and Senate Republicans are using the congressional August recess to promote their tax legislation, while President Clinton is arguing against it. Kwame Holman has more.
KWAME HOLMAN: House Speaker Dennis Hastert kicked off his part in the tax cut campaign in his home district yesterday outside Chicago.
REP. DENNIS HASTERT: It's nice to be out of Washington and home to really the American heartland. (Applause)
KWAME HOLMAN: Hastert was the headliner before 250 workers at an auto parts plant in Elgin, Illinois, inaugurating a three-week push by congressional Republicans to raise public support for their $792 billion tax cut package. Hastert explained the essence of the tax bill Congress passed just before its summer recess using plain language, and dollar bills.
REP. DENNIS HASTERT: This is the surplus that the federal government is going to have in the next ten years. So every four dollars of surplus, we're going to take three dollars-- one, two, three-- and we're going to go down and we're going to pay down the debt for those three dollars. Then we're going to take this one dollar, and we're going to give it back to the American people, because they think what we think when they're overcharged on their taxes; that they'll do a better job with that money in spending it, or investing it, or saving it, than the federal government will do. And that's what this tax bill, ladies and gentlemen, is all about.
KWAME HOLMAN: Main features of the Republican tax cut plan include: A 1 percentage point reduction in each of the five income tax rates, a reduction in personal capital gains tax rates, a reduction in the so-called "marriage penalty" tax, and a phase-out of estate taxes. But President Clinton remains steadfast in his position that he will veto the tax bill as it now stands.
PRESIDENT CLINTON: And I would urge the American people to look at the fine print of this bill, because it also has big cuts in education, in research and development, in the environment. Because of the surplus, it means we can invest in the education of all of our children and meet our other fundamental responsibilities, and still afford a modest -- not a big, but a modest tax cut -- designed to help people deal with the biggest challenges they face.
TERENCE SMITH: Now, how the tax proposals look to our regional commentators:
Patrick McGuigan of the "Daily Oklahoman;" Cynthia Tucker
of the "Atlanta Constitution;" Lee Cullum of the "Dallas
Morning News;" Bob Kittle of the "San Diego Union-Tribune."
Joining them tonight are Rachelle Cohen of the "Boston Herald,"
and Jane Eisner of the "Philadelphia Inquirer." Welcome to
PATRICK McGUIGAN: Well, I think as the Speaker indicated in the news segment, that prepared us for this discussion, that spending a portion of it on practical things that there's broad agreement on like Social Security, Medicare, fixing those things, having some for additional spending for education and other issues is a laudable purpose. But at least a portion of it, as he indicated in his simple but rather compelling way, ought to go back to the people who have made the surplus possible; that is, a tax cut of at least some percentage for taxpayers. There's absolutely nothing wrong with that. And, inevitably, we're going to get into some class warfare, which the President seems to be feeding. But part of the inevitability of that is that about half of the federal tax burden is paid by about 4 percent of all the taxpayers with the rest going to the remainder.
TERENCE SMITH: The wealthiest 4 percent.
PATRICK McGUIGAN: Yes. There is going to be some benefit for upper-income individuals. And there's nothing wrong with that.
TERENCE SMITH: Cynthia Tucker, what's your view?
CYNTHIA TUCKER: Well, I think everything is wrong with this tax cut proposal, Terence. First of all, there is not yet a surplus. This surplus is just predicted. If, in fact, we eventually have a surplus, then we have a debt amounting to more than a trillion dollars that we first have the responsibility of paying off. Secondly, the American public is not exactly clamoring for this tax cut. They understand that there would be much more benefit to them if Social Security is shored up, if Medicare is shored up. And so the American people have not said that they want this one dollar back. In fact, they would be much happier to see the debt paid off and then some fundamentals like Social Security taken care of if in fact, we turn out to have a surplus.
TERENCE SMITH: Lee Cullum, you've heard the case for it and against it. Where do you come down?
LEE CULLUM: Terry, first I'd like to take issue a little bit with Cynthia. I saw a Pew Center poll that said that if Social Security income is not touched, if Social Security revenues remain inviolate, 60 percent of `Americans do favor a tax cut. 25 percent of them favor new federal programs. I feel that some tax cut is in order. It's got to be done obviously in concert with Medicare. The two have got to be considered in tandem. It's especially important to look towards tax cuts. It will stimulate savings and investments. And if that is done, it's bound to benefit the American economy.
TERENCE SMITH: Bob Kittle, one of the arguments, of course, is not just whether there should be a tax cut but how much. Is the Republican proposal of nearly $800 billion too much?
ROBERT KITTLE: I don't think so, Terry. The reality is, that in 1993, President Clinton pushed through the Democratic Congress the biggest tax increase in history. And he told us at the time that the reason we needed that tax increase was to end the deficit. We have now ended the deficit through strong economic growth and spending restraint. So I don't think the tax cut that the Republicans are proposing is too large. It merely gives back to taxpayers some of the tax increase that was adopted in 1993. But I would also say that there will be no surplus at all unless Republicans in Congress show some spending restraint and stick to the spending limits that they adopted in 1997. And, unfortunately, what we're seeing right now is that the Congress, the Republican Congress is blowing through those budget ceilings, those spending ceilings and passing appropriations bills that basically will spend the surplus before it materializes. So we need a tax cut, but we only need a tax cut if we also have spending restraint.
TERENCE SMITH: Jane Eisner, what's your view?
JANE EISNER: Well, I'd like to pick up on the point about spending. This is a Congress that seems to -- that can't even get its act together to fund a census which we know has to take place every ten years. So we are very concerned that this tax cut ignores the fact that Congress a couple of years ago agreed to reduce spending consistently every year and so far has not been able to do that.
TERENCE SMITH: Rachelle Cohen, I wonder what your view is and particularly about some of the components that have been proposed such as eliminating the marriage penalty and perhaps estate taxes, doing something about capital gains and doing something about retirement.
RACHELLE COHEN: Well, that's something that's getting lost in this debate a little bit because there are wonderful things that these particular targeted tax cuts can and will do for the economy. First of all, we also shouldn't lose sight of the fact that this is not the enormous tax cut the White House would have us believe. It comes down to $79 billion a year. It sounds like an enormous amount of money to most of us. But that's 4 percent of the federal budget. That's 4 percent that could certainly be returned to the pockets of American taxpayers. I think they truly believe in the equity of the argument of doing away with the marriage penalty at long last and the economic argument, the simple economics of reducing the capital gains tax, which only makes the economy grow more.
TERENCE SMITH: Jane Eisner, I wonder what you think of the politics of this. The President has made it clear that he intends to veto the proposal as outlined by the Republicans. How do you think the politics will play here?
JANE EISNER: Well, I don't really know. It's clear that the Republicans have scored a certain kind of victory in that it seems everybody is talking about tax cuts, not just the President, but Al Gore is as well in his own plan. So it seems that there is something that's going to happen in that regard. I think, though, that once the American people realize what this is going to mean, which is that it would have to be done with continued cuts in federal spending, which I'm not sure people are quite aware of yet, that may change the political landscape.
TERENCE SMITH: Bob Kittle, what do you think about that? Do you think public attitudes will change as the debate goes on? And I'm assuming and operating on the assumption that the presidential veto, if it comes, is not the end of the process, but really the beginning.
ROBERT KITTLE: No, I think the veto will not be the end of the process, Terry, and I think the President is going to have to stick to his guns, even though I believe the Republicans are going to have some success in persuading Americans that they do deserve a tax cut. And I think the tax cut is probably going to grow in popularity among voters. When the President veto it is bill, then there will be time for bargaining. And, as you said, the President does support a tax cut; he wants a $300 billion tax cut. The Republicans want a $900 billion tax cut. And there probably will be a compromise where everybody will get a little bit. Nobody will get an entire loaf. And we will have a tax cut. We're really arguing over what the size of it and the dimensions of it will be.
TERENCE SMITH: Right. Lee Cullum, is that the sort of compromise you'd support?
LEE CULLUM: Yes. I think that's a very reasonable compromise. I'd like to add, Terry, that I share Cynthia's concern about looking so far into the future. Ten years is a long time down the road. And I noticed that in the first five years of this plan, only $156 billion of that tax cut will have been in operation. So that's $650 billion left for the last five years. That needs to be rethought. I'm not sure we need to lock in these tax cuts for so long a period of time. Maybe a five-year period is more reasonable. Maybe that $156 billion should be increased perhaps to $250 billion. That would be a reasonable compromise, it seems to me.
TERENCE SMITH: Cynthia Tucker, your skepticism about the surplus and its certainty, does that go to how you think the economy will perform, or what's behind it?
CYNTHIA TUCKER: Well, Alan Greenspan has already discouraged this tax cut bill, certainly the nearly $800 billion tax cut proposal that the Republicans have offered up, because one of the reasons you offer tax cuts is to stimulate the economy. That would be one reason, for example, to cut the tax on capital gains. But as we all know, this economy doesn't need any stimulus at the moment. In fact, one of the things that has been best for this economy is that we have finally gotten on sounder financial footing by no longer running a deficit. It strikes me as enormously irresponsible then not to go ahead and pay off the debt. And certainly, one doesn't go out and build a big new house just because your boss said he might give you a raise. And that's the sort of thing we're talking about doing when we're giving a tax cut against a surplus that has not even materialized yet.
TERENCE SMITH: Pat McGuigan, you've heard some arguments against tax cut here from your colleagues. What do you think of them?
PATRICK McGUIGAN: This guy Alan Greenspan is just amazing - watching his career. I mean, he's on the verge of canonization by everybody across the political spectrum. And of course, he's being deployed a lot lately for some mildly critical remarks about aspects of the tax plan. However, he - in the same discussion with members of Congress -- did say that if the choice is a clear-cut choice between spending increases or tax cuts, then in that scenario, he would be for tax cuts. And you have a rough symmetry here. The President has proposed spending increases that over a decade or so total about $800 billion, and Republicans have proposed tax cuts that over a decade total about $800 billion. So you really have a pretty clear-cut choice between a modest set of spending increases or a modest set of tax cuts that are triggered by economic successes, as Lee pointed out. And, personally, I would agree with Lee Cullum's position, which is let's frontload some of these tax reductions and get the benefit for the people who have helped to create this economic boom that we're still in.
TERENCE SMITH: Rachelle Cohen, what do you think of that argument?
ROCHELLE COHEN: Well, I'm glad Patrick got the Greenspan quote correct this time. That was my understanding of where Alan Greenspan was coming from. Certainly, he would love to see all of this locked away to pay debt and shore up Social Security. But preference number two would be tax cuts over spending increases. And I think we all know what's going to happen to that money if the White House has its way, and it doesn't go into tax cuts. It's going to get spent, and that's not a good idea for the economy. And it's just going to disappear. So, I think our choices are clearly, again, tax cut versus spending, I would opt for the tax cut. And I think that three quarters of that surplus is safe and secure at whatever level it comes in.
TERENCE SMITH: Jane Eisner, I wonder, given some of the concerns you expressed earlier, whether you agree or what you think of economists who argue that the best thing for the economy is to pay down the national debt.
JANE EISNER: Well, I think there's a lot of value in that. It does put more money into the economy and less in the hands of the government. And it's also a way of doing it with cash on hand. Remember, we're talking about tax cuts here, and yet, for a surplus that may only be $5 billion next year. We really strongly feel that only a few years after slaying that budget deficit dragon, we ought not to create a new one.
TERENCE SMITH: Bob Kittle, we've been presuming a presidential veto here. What do you think are the politics of that? Is there a risk for Bill Clinton, or do you think it's a politically shrewd move?
ROBERT KITTLE: I think there are risks for the President in vetoing the tax bill, Terry, but I have to give him credit. In every confrontation with the Republicans on Capitol Hill over the budget, the President has come out on top. So I think he's in a strong position. I think he strengthens his position when he says, I want a tax cut, I just don't want one that's this big. So, you know, I think it can work both ways. But I do think that in the end, the American people are going to want a tax cut and that there will probably be one. And the key to all of it again, is it only works if the Congress and the President hold the line on spending. Otherwise, this surplus does not materialize, and there's no money to shore up Social Security or to return a portion of the surplus to the American taxpayers.
TERENCE SMITH: Lee Cullum, you'd save some of it for a rainy day.
LEE CULLUM: Yes, of course, Terry. And some of it should be used to pay down the debt. There's no question about it. I think when you look at the politics of the situation, you have to say that each side is sticking with its own old-time religion, Republicans with tax cuts, Democrats with spending. And the whole thing will ride on that 44 percent of Americans who are moderate and in the middle feel about that whole thing.
TERENCE SMITH: Okay. Cynthia Tucker, a final word from you. What do you think is going to happen?
CYNTHIA TUCKER: Well, Terry, of course that's the $64,000 question. I think that the veto from the President works out well for everybody's politics. Interestingly enough, there are some Republicans who are a little afraid of this $800 billion tax cut bill but they voted for it anyway because they knew that the President would veto it. So everybody gets something out of this; the GOP gets to go out there and criticize Bill Clinton. And the President gets to go out there and criticize the GOP as fiscally irresponsible.
TERENCE SMITH: All of which guarantees it won't be over for a while. Thank you all very much.