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 | DOLE PLANS MAJOR TAX CUT
AUGUST 5, 1996TRANSCRIPT |
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Bob Dole proposed a major economic package that includes an across-the-board 15% tax cut, a $500 per child tax credit, and a reduction by half of the capital gains tax. He announced his plan in a speech in Chicago, noting his formula would cost $548 billion over 6 years, and lead to a balanced Federal budget in the year 2002. White House chief of staff Leon Panetta and Dole advisor Donald Rumsfeld discuss the plan's merits with the NewsHour.
ELIZABETH FARNSWORTH: For the administration view on the Dole economic plan, we turn to White House Chief of Staff Leon Panetta. Mr. Panetta, thank you for being with us.
LEON PANETTA, White House Chief of Staff: Nice to be with you, Elizabeth.
ELIZABETH FARNSWORTH: Generally, how--we'll get into the specifics in a minute--how would you characterize the Dole economic plan?
MR. PANETTA: Well, I think it represents a major reversal by Sen. Dole against everything he's been saying for the 35 years that he's been in the Congress. He has continually criticized supply side economics, saying that huge tax cuts are not going to produce revenues that balance the budget. And today, he now suddenly embraces everything he's talked against by essentially providing a huge tax cut without any specifics as to how he would, in fact, balance the budget.
This country tried this in the early 80's, and we paid a huge price for that with a quadrupling of the national debt, huge interest payments laid on ourselves and our children for the future. And we've all recognized, including Sen. Dole, that our first responsibility ought to be to reduce the deficit. Yes, you want to do tax cuts, but they ought to be targeted tax cuts; they ought to be responsible, not do the kind of huge tax cuts that are going to result in blowing a hole in the deficit and basically setting us back in terms of our progress in the economy.
ELIZABETH FARNSWORTH: You're quite convinced that this would not lead to a spurt of economic growth like the Senator thinks it would. He says that it would be different this time because there would be a combination of tax cuts and balanced budget, and that didn't happen before.
MR. PANETTA: This is not just my view. This is the view of leading conservative economists. Warren Rudman, who is a close adviser to Bob Dole, a member and leader of the Concord Coalition, had an ad that's basically said it's too early for Christmas. These kinds of economic projections that project growth like this simply do not work; whether it's Pete Domenici or whether it's Bill Archer, or whether it's Alan Greenspan, or Paul Volcker, major economists continue to say, look we cannot engage in smoke and mirrors when it comes to dealing with the federal budget.
We have--we know that--what the 80's produced in terms of a quadrupling of the debt, and in the guise
of providing tax cuts, which are attractive, make no mistake about it. I understand why Bob Dole is doing this. People like to hear that they're going to get a tax cut. But in the guise of providing tax cuts now, what you wind up doing is, is providing a regressive tax increase on our children because of the increase in the debt that takes place.
We've been through it. We've learned our lesson. This is not new. We saw what the legacy of the 80's is. We ought not to repeat that mistake.
ELIZABETH FARNSWORTH: What is your view, though, of the key premise of the Dole plan, and especially of the tax provisions in that plan, that the American people are just too--the tax system is too heavy, and it's just too complicated for people to understand?
MR. PANETTA: Well, there's no question that we ought to move towards simplifying the tax system. President Clinton has said we ought to do that. President Clinton has said we ought to have targeted tax relief, aimed at education, aimed at training, aimed at children, aimed at savings. We have about $130 billion worth of tax relief in the President's plan which provides for a balanced budget and specifics as to how you get to a balanced budget.
On the contrary, the Dole plan provides $548 billion in tax cuts of which about $122 billion are paid for by the Republican budget plan that's on the Hill, $426 billion is not specified as to how it's paid for. A good chunk of that is based on these growth estimates which simply are not going to happen.
ELIZABETH FARNSWORTH: About--
MR. PANETTA: So that's the difference between the two.
ELIZABETH FARNSWORTH: Well, about a quarter's based on the growth estimates, but he did lay out, and the plan in written form does lay out some other ideas, cuts in--10 percent cut in non-defense administrative costs, non-defense program reductions, Energy Department, Commerce Department, and so on.
MR. PANETTA: Well, let me tell you what the difference is. Currently, the Republican budget that was on the Hill and that Bob Dole supported has a $245 billion tax cut. That's part of it. But to pay for that $245 billion tax cut and balance the budget, the Republicans had to propose $270 billion in Medicare cuts, $163
Now, Bob Dole is doubling the size of that tax credit to--or that tax cut to about $548 billion, and he is not saying that he has to cut Medicare or Medicaid or other areas. He's stopped being specific. And that--who are we kidding here? If you're going to do that size tax cut, you have to cut the kind of programs that affect Americans on a day to day basis.
ELIZABETH FARNSWORTH: Even though he did rule out those cuts specifically?
MR. PANETTA: That's correct.
ELIZABETH FARNSWORTH: You just think it's inevitable?
MR. PANETTA: Of course, it's inevitable. I mean, that's the problem. He's saying that most of this is going to be paid for through smoke and mirror growth. If that doesn't take place, where do you have to turn? You've got to then find the cuts--where--in Medicare, in Medicaid, in education.
So at least the Republicans on Capitol Hill were honest about their presentation. They said if you want a $245 billion tax cut, you want to balance the budget, you're going to have to have huge cuts in Medicare and Medicaid, and in education. Bob Dole is now saying forget that, we'll have this huge tax cut, but I'm not going to tell you that it's going to--that you're going to have to cut any of these programs; we'll do it through growth increases. That just is not being, I think, honest with the American people.
ELIZABETH FARNSWORTH: Mr. Panetta, a key premise of this plan, as stated quite explicitly, is that the economy under your administration--under the Clinton administration or in the Clinton administration--under the Clinton administration's leadership is growing too slowly, and that this has caused a lot of the problems that lead to the feeling among many middle class people that they're just running in place, that they can't get ahead. How do you respond to that? He calls it a grow slow--'grow slow policy.'
MR. PANETTA: When President Clinton came into office, we inherited the legacy of the first supply side
We cut the deficit in half--the first time that's happened in four years under a President since before the Civil War. We were able to provide 10 million new jobs in our economy compared to almost no job growth during the Bush administration. We had 4.2 percent growth in the last quarter. On the private sector growth we have 3.2 percent, which is more than President Bush, more than President Reagan, and in addition to that, we have now reduced interest rates and provided the kind of growth in our economy that is steady but it's being done with discipline in terms of the economy. We've got a slow program.
Is there more that we need to do? Of course there is. But let's do it with firmness and with discipline, not by promising people the moon. The American people are smarter than that. They know that you can't get something for nothing, and obviously, when you're running for President, you'd like to promise that, but it doesn't mean that it's true.
ELIZABETH FARNSWORTH: The Senator said we are the party of change, referring to the Republicans, Clinton's is the party of the status quo. Is it likely that people might feel that the Democrats are a bit behind the eight ball on, on tax reform, since your tax--your reforms are fairly limited?
MR. PANETTA: I think the President has said that, that what he is about providing the American dream for our children in the future, and doing that through education incentives, doing that through trying to reduce the deficit, as we have, so that they won't bear the cost of an increased debt in the future, doing that through expanded trade, doing that through the kind of investments in technology that will make us competitive in the world of tomorrow.
The President's plan is working, and it's working for the betterment of this country. Bob Dole has now fallen back to supply side economics as his answer to the future. You saw what that did in the 80's, and we're not going to pay that price again for the future. I think that's what the American people are going to have to choose, whether they want to go back to something that didn't work in the 80's and repeat that mistake, or do they want to go forward with this President.
ELIZABETH FARNSWORTH: Well, Mr. Panetta, thank you for being with us.
MR. PANETTA: Thank you.
JIM LEHRER: Now, a reaction to that reaction from Dole adviser Donald Rumsfeld, a Chicago businessman who held positions in three Republican administrations, including chief of staff and secretary of defense under Gerald Ford. Mr. Rumsfeld, welcome.
DONALD RUMSFELD, Dole Campaign Adviser: Thank you very much.
JIM LEHRER: Leon Panetta says it's supply side economics revisited; it didn't work in the 1980's, it isn't going to work in the 1990's.
MR. RUMSFELD: Well, I listened to that with some interest and amusement. If you think about it, Mr. Clinton came into office promising a middle class tax cut; he broke the promise and raised taxes--the largest tax increase in history. I listened to the concern and anguish about the possibility of the budget being out of balance. On the other hand, President Clinton has vetoed a balanced budget and, in addition, he has opposed the Balanced Budget Amendment. If he really wants to worry about a balanced budget, all he has to do is send one up to the Congress, and I'm sure there will be plenty of votes to pass it within 30 days.
JIM LEHRER: But what about Sen. Dole's plan to base--as he acknowledges himself--to get this money out of projected growth based on the supply side theory of reducing taxes?
MR. RUMSFELD: Well, let me say this. I don't want to characterize it as supply side or not.
JIM LEHRER: Okay.
MR. RUMSFELD: Because if you call it supply side, there's a tendency for people to think of connecting a tax reduction directly to growth. Now, the way I look at it is this is a comprehensive plan, and it suggests correctly that there will be changes in people's behavior because of all of the elements of the plan, one of which is the tax reductions. There's no question that people will behave differently if, in fact, more of those dollars are left in their pockets to decide what to do with than with the government, but second, tax reform, the American people are spending $300 billion a year coping with the tax system, which is corrupt, doesn't work right, takes half the people have to get experts to tell them how to fill out their forms, and when they sign them, they don't know what they mean. Uh, if you change that, and simplify it, massive tax reform, clearly, the dollars saved there contribute to growth. The same thing with respect to regulatory reform, to the extent the government reviews its regulations, takes those off that are anachronisms and aren't healthy for our society, and lets the economy, be freer to grow, that's going to be growth without inflation. And the same thing with tort reform, which President Clinton vetoed.
JIM LEHRER: But what about the comparison that Leon Panetta made and the Democrats have made all day or all weekend, since this plan was first floated, that it didn't work, that similar thing that you just outlined was exactly what the Reagan folks said in the 1980's, and the end result was a huge federal deficit?
MR. RUMSFELD: Well, I would say two things: First is that in the 1980's, the Congress was a Democrat Congress; they were determined to have spending programs. They did not impose discipline on themselves, and as a result, there's no question but that the deficits went up. The new President, and Sen. Dole as President of the United States, will be the first one in history with a line-item veto. Here's a man who's an honorable man, who has made a career as a deficit hawk. He believes in, in balanced budgets, and he knows what they are, and he sent a couple down to the White House, both of which President Clinton has, has disregarded or vetoed. He will use the President--the line-item veto. He will have a balanced budget. And I know this man, and if one listens to him talk about it, there isn't a doubt in my mind, he understands the importance of a balanced budget. But he also understands the importance of tax relief.
JIM LEHRER: So, in other words, the Dole position on this, and comparing with the 80's, that in the 80's you only got half of it--in other words, you got the reduced taxes, but you didn't get the comparable cuts in federal spending, is that right?
MR. RUMSFELD: Yes. And he is convinced, as I am, that the American people recognize that it's the end of the Cold War, it is perfectly possible to have a smaller federal government, and the administration contends that there is no way to cut money out of the budget without going after Medicare, Medicaid, and Social Security. That is flat not true.
JIM LEHRER: What about--
MR. RUMSFELD: President Dole will not touch any of those--Social Security, Medicare, or Medicaid--with this program at all.
JIM LEHRER: So when Leon Panetta just says it's inevitable in order to get that extra $426 billion over--
MR. RUMSFELD: He's trying to scare the American people.
JIM LEHRER: It's not inevitable?
MR. RUMSFELD: It's not only not inevitable; it's not going to happen.
JIM LEHRER: The--what about the smoke and mirrors line? You've heard it a lot today; you're going to hear it even more, voodoo economics was another--whatever. How are you going to combat that?
MR. RUMSFELD: Well, I guess if you put yourself in the other fellow's position, and you ask what is, what is his circumstance, he has raised taxes, Sen. Dole's for reducing taxes, he is for the status quo on growth, Sen. Dole is for increasing growth. He is, in fact, comfortable with the tax code as it is and hasn't changed it, or recommended changes. Sen. Dole believes we've got to have massive tax reform. Mr. Clinton's for regulatory progress the way it's going. Sen. Dole says we have to reduce regulations. President Clinton's in the pockets of the trial lawyers. That's the biggest single political contributors of the trial lawyers. Sen. Dole knows that we're--our society is all tangled up in litigation, and we have to do something to free up the people. The last piece of it is education and training, and there's no question but that the Dole administration would, in fact, try to find ways to see that those people are employable in our society.
JIM LEHRER: What about the point that Mr. Panetta and others have made today that this plan is not consistent with Sen. Dole's 35-year record in the Congress where he was a deficit hawk more than he was a tax cutter?
MR. RUMSFELD: Well, he's done both, of course. As chairman of the Finance Committee, he led the fight to pass the Reagan tax cuts. So here's a man who understands that they're both important. If you think about it, the United States of America, the American people today face the largest tax burden in the history of the country at 31.3 percent federal, state, and local taxes. That's not necessary. That's not right. We're restraining the kinds of vitality and energy and innovation and creativity that this society is capable of. Do people really believe that a puny 2.3 percent growth is the best this country can do? I don't think so. I think the American people know we can do better.
MR. RUMSFELD: No. What he did was over three months meet with all types of economists and business people and people who were interested in the subject and talked to them about it, and asked about regulation and what we could do there and what the effect would be, how it would change behavior and tort reform and education and training. When you think of it, we have people who are retiring early, not because they want to, but because of downsizing; at a time when people are living longer, there's a whole group of people who aren't employable. With the right type of education and training they can be. There are women and men who would like to work in an unconventional work environment--home--and spend more time with their families--who aren't able to. Here's--the information revolution permits that. There are all kinds of opportunities in this country. This man, Sen. Dole has, in fact, supported tax cuts; he's supported a balanced budget. He is convinced they're both important to growth.
JIM LEHRER: And perfectly consistent then?
MR. RUMSFELD: Absolutely.
JIM LEHRER: Pure political question, Mr. Rumsfeld. Is there any question that this plan would have been floated now or proposed now if the Senator were not 20 points behind in the polls, behind the President?
MR. RUMSFELD: Oh, absolutely. There have been four or five candidates in recent times who have been twenty/twenty-five points behind who've come way back. No, this plan is something that he has worked on personally; he's rolled up his sleeves. He's had late-night meetings with all kinds of people. He feels it in every bone in his body, and it also happens that if I were running, I would like to be very much on the side of those issues that Sen. Dole is and not on the side that President Clinton is.
JIM LEHRER: Sen. Dole's campaign manager said today that the campaign starts today with this plan. Is that how you see it?
MR. RUMSFELD: It is. I think that what's going to happen, we're going to see a total shift in the debate, and we're going to be debating important things. We're going to be debating growth versus slow growth. We're going to be debating reform of that tax system. That tax system needs to be changed. It is not fair to the American people. And those are the kinds of things we ought to be debating.
JIM LEHRER: All right. Mr. Rumsfeld, thank you very much.
MR. RUMSFELD: Thank you.
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