Tax Fight

MARGARET WARNER:

For a preview of where the Bush tax cut is going in the Senate, I'm joined by four of its members; two Republicans: Olympia Snowe of Maine, a member of the Senate Finance Committee, and Larry Craig of Idaho, Chairman of the Republican Policy Committee. And two Democrats: Dianne Feinstein of California, a member of the Senate Appropriations Committee, and Richard Durbin of Illinois, who also sits on Appropriations. Welcome, all.

Senator Durbin, as we speak now, the House is on the verge of voting for the President's tax cut. What are its prospects now, as it heads for the Senate?

SEN. RICHARD DURBIN:

I think it'll be a different story in the Senate. It appears that the House considered this measure without much bipartisan debate and very few opportunities for amendment or substitutes. I think the Senate's a different scene. It's a 50-50 split. I think you're going to find both parties actively involved in considering this issue.

MARGARET WARNER:

Senator Craig, do you agree that it will be a very different procedure in the Senate, very different approach?

SEN. LARRY CRAIG:

Well, it will be a different procedure, and I think Senator Durbin's right, with the 50-50 split, depending on what our Budget Committee can do. We do have a process here that the House does not have, it's called reconciliation, which means it will come out with our budget package, and it will not be just the marginal rates; it'll probably be a total tax-cut package that will be worked out by the Budget Committee. Or if they gridlock, the rules of the Senate now will allow us to bring it directly to the floor, where it will play itself out on the floor in limited fashion.

MARGARET WARNER:

So let me make sure I understand. One of the things that the House Democrats were very upset about today is the fact that they're being asked to vote on this without seeing the budget blueprint. You're saying that will not happen in the Senate?

SEN. LARRY CRAIG:

Well, it won't happen in the Senate. We do it differently because we do not have a Rules Committee to limit debate or control debate. As a result, we have what's called budget reconciliation, a process where budget… and in the budget, there will be a fixed figure that will say, up to so much will be allowed for tax cuts. Now, that does not mean that specific tax cuts will, at that time, be proposed. But at least a round figure could be proposed that then would be applied to coming tax cuts.

MARGARET WARNER:

All right. So Senator Durbin, back to you, since you first brought this up, what impact do you think that will have, the very fact that it's being approached in a different way and being approached kind of in the round with all the other aspects of the financing for the next ten years? Will that improve the prospects for the President?

SEN. RICHARD DURBIN:

Oh, I think it definitely improves the process on Capitol Hill.

MARGARET WARNER:

No, I meant the prospects for the President's tax cut bill.

SEN. RICHARD DURBIN:

Oh, the prospects for the President? Well, that's another story, because we have to wait and see the budget that's going to be proposed by the administration. We received the cliff notes. Now we want to see the full text. What does it mean? What will we have to cut to achieve this $2.6 trillion tax cut if you take the total involved that the President's asked for? And I think a lot of us want to ask questions, too, about whether or not the projected surplus of five or ten years from now is really something we can count on.

MARGARET WARNER:

All right, Senator Feinstein, what's your read and what's your view on where… how the tax cut will do in the Senate and which direction it should go?

SEN. DIANNE FEINSTEIN:

Well, I think there are a number of us that don't want to vote for a tax cut unless it has a trigger. Senator Snowe who's sitting here with me is one of our leaders on that issue. There are at least 12 of us in that regard, about half Democrats, half Republicans. We believe this very strongly. There are those of us on the Democratic side that want a tax cut but see no chance for a $2.6 trillion tax cut. There is no question. I come from the sixth largest economic engine on earth, and California is sliding into recession. The productivity rate is substantially down. Therefore, the surplus figures are already jeopardized.

The budget… or, excuse me, the tax package is back loaded where the surplus figures are the most ephemeral. So we have very serious concerns about this, and I think many of us would like to see, and the centrists here specifically, would like to see a form of compromise. So hopefully there will be time to work that out. Senator Craig, Senator Durbin, Senator Snowe I think concur that there will probably be some form of compromise if anything is going to pass the Senate in this regard.

MARGARET WARNER:

Senator Snowe?

SEN. OLYMPIA SNOWE:

Yes, I think certainly there's a substantial likelihood, obviously, that we will have a tax cut this year, I think based on what President Bush has indicated, given the high tax burden in America, as well as the declining economic growth. I think the question is how best to approach this tax cut to ensure that we have broad bipartisan support. And that's why Dianne and I and others joined yesterday in proposing a trigger that we would ensure that we would have a mechanism in place to assure that we stay on track for surpluses that hopefully we expect to materialize over the next ten years. Given the fact that we could have projections go… 50 percent either on the plus or minus side, all the more important that we make sure that we stay on track for debt reduction over the next ten years and not jeopardize this window of opportunity that we have for financial stability and sustaining an era of surpluses.

MARGARET WARNER:

Senator Snowe, staying with you, let me just understand the politics of this. Are you saying that, for instance, for you, having this trigger mechanism is a deal- breaker or you have to have that to feel comfortable voting for the President's tax cut?

SEN. OLYMPIA SNOWE:

Well, I would like to have a trigger, certainly. You know, it's not an all-or- nothing proposition. Obviously, I'd have to look at size and scope. But the issue here is whether or not we can develop a mechanism to ensure that we have the kind of surpluses and debt reduction goals over the next ten years and that we can achieve them. And so from my standpoint, I think it does enhance the likelihood that we could get broad bipartisan support for the kind of tax cut that the President is talking about in terms of size. Obviously, we'll all have differences on particulars within the package that we may want to work on, but in the final analysis, we want to make sure that we can allay the concerns on the probability that, you know, we could go wrong in some of these assumptions. Even Chairman Greenspan, he's the one that proposed this mechanism, and in fact he said it would be an insurance policy. And I think it is an insurance policy that we would want to pursue.

MARGARET WARNER:

Senator Feinstein, let me reverse the question to you. Are you saying that you could go for something like the President's tax cut if it did have this trigger safeguard?

SEN. DIANNE FEINSTEIN:

Well, there are elements of the President's tax cut I can certainly support. I have very deep concern about the number. I think the number… if the Democrats had proposed a tax cut that was back loaded, that didn't provide for the alternative minimum tax costs for interest costs, for tax extenders, for retroactivity, we would be assailed for it. This tax cut at $1.6 billion doesn't provide for any of those things, and those are real costs that will accrue during the ten years. Ergo a $2.6 trillion tax cut really doesn't leave enough for prescription drugs, for the defense program that people want to do, for the education initiatives. Therefore, that's the beauty of having to see the budget and really see these numbers cast in hard terms, not in cliffs note terms, as Senator Durbin referred to, but in actual numerical terms. Then I think this thing is going to be much easier to straighten out.

MARGARET WARNER:

Senator Craig, is the Senate Republican leadership ready to compromise in a way that the House Republican leadership was not?

SEN. LARRY CRAIG:

I think the Senate Republican leadership wants to deliver a very sizable tax cut to the American working men and women, to stave up and strengthen our families and build our families and strengthen the economy of this country. Senator Feinstein's right. California economy's in trouble, partly because of energy and partly, in my opinion, because they need a good tax stimulus at this moment to kick them, start again and get them moving. I think we can produce a very sizable tax cut. We will pay down the debt substantially. And what most don't want to admit, Washington, DC, is awash in America taxpayer surplus money. We have a lot of money here to build a good prescription drug and a Medicare reform program. We can deal with Social Security, we can deal with some defense expenditures, and at the same time we can hold down the overall growth of government by making sure we don't leave a lot of money on the table that will otherwise get spent.

MARGARET WARNER:

Okay, but what I'm asking you, though, is, are you and other members of the Senate Republican leadership willing, for example, to consider this trigger mechanism to bring along colleagues like Senator Snowe?

SEN. LARRY CRAIG:

If I can help produce a sizable tax package and work with Senator Snowe and Senator Feinstein and others to make sure that we build that, I'll look at mechanisms. I also don't want to make the tax cut something that is uncertain. I don't think it would have the kind of economic stimulus that our country deserves at this moment. It has to be strong, and it has to be certain and predictable so the economy will respond in a timely fashion. But that does not mean that we cannot fashion some kind of mechanism. We'll take a look at that. That's the way good legislation is produced.

MARGARET WARNER:

All right. Now, Senator Durbin, same question to you: Would the trigger mechanism, or are there other compromises that might bring along, if not members of the Democratic leadership, a sizable number of Democratic Senators?

SEN. RICHARD DURBIN:

I think that's a very important point, and I agree with Senators Feinstein and Snowe. And I just might comment, if the surplus belongs to the American people, as has been suggested, to whom does the national debt belong — a $5.7 trillion debt that we're going to leave to our children if we don't really focus ourselves on taking today's surplus and paying off yesterday's mortgage. And let me also add, I think we need a tax cut across the board here, not heavily weighted toward the wealthiest people in America. I've got people in Illinois, two families that have two teachers in the household, for example, making $80,000 to maybe $100,000 a year. I don't think they're wealthy, and frankly, they don't receive the benefits that they deserve in this tax cut.

MARGARET WARNER:

So, in other words, you're saying the trigger alone would not satisfy your concerns because your concerns are other than that?

SEN. RICHARD DURBIN:

Well, I think we have to look at the entire question, and the trigger's an important part of it. Do we have with the surplus that we had hoped for? Secondly, are we paying off the national debt so our kids won't be burdened with it? Is the tax cut fair across the board? Have we walked away from important priorities like investing in education and prescription drugs under Medicare and reforming Social Security? These are things that have to be considered as a total package, as far as I'm concerned.

MARGARET WARNER:

All right, finally– and I'd like to get around to all four of you on this, Senator Feinstein, starting with you– the President, at least from what we can see, has not been actively involved in lobbying for this right now on the House side. Instead, he's been actually out in some states talking to the public in states where there are Democratic Senators that he won. Do you think that's going to be effective in bringing across… bringing over some Democratic Senators?

SEN. DIANNE FEINSTEIN:

Frankly, I do not. This is the most important thing we will do. This will either enhance our future or jeopardize our future. There is… I think, on our side of the aisle, there is not one Democratic Senator that's going to be swayed by the visits out into the country. What we are going to be swayed by is, is this tax cut really going to improve the economy, or would a lowering of interest rates do better? Is this tax cut so back loaded that not enough can get into the economy quickly enough to make any kind of difference?

MARGARET WARNER:

Okay, Senator…

SEN. DIANNE FEINSTEIN:

Let me just say that the debt question that Senator Durbin raised is a very significant question. We care about that.

MARGARET WARNER:

All right. Senator Snowe, your view on what the President needs to do to bring across… bring enough Senators to his tax cut.

SEN. OLYMPIA SNOWE:

Well, I think he will continue to do what he's already been doing, and that is, you know, discussing these issues on a bipartisan basis. I mean, he has met with more than 200 members of Congress in both the House and Senate in his first month in office. He will continue to have those discussions. Obviously, he's going to reach out. He also should be going around the country and discussing his tax plan with the American people so that they have a full understanding of why he thinks it's so essential for the future of this country. And one thing that has been overlooked, the American taxpayer is facing a historic high when it comes to tax burden in this country. It's the highest since 1944 and so the President logically is saying, you know, if we do have these kind of surpluses, some of it should be returned to the American taxpayer. After all, they're the ones that created it, not government.

MARGARET WARNER:

All right, Senator Craig, a final word from you. Do you… would you recommend to the President that he be ready to compromise to get this, compromise on some of the really important elements to him?

SEN. LARRY CRAIG:

I think he needs to let the Senate Finance Committee work its will. The House is working its will at this moment. That will begin to shape the issue for the President to see more clearly what the Congress wants. Right now, the President is communicating with the American people, as he should, and already he's beginning to move the polls in favor of a tax cut. He is combining it with a very effective debt-reduction program, as we will hear. So in combination, this President is going to be victorious on a tax cut for the American people because, in the end, he will engage not only the American people, but he's going to engage all of us in ultimate votes.

MARGARET WARNER:

All right, let me quickly get Senator Durbin. You really have the last word — the President's role, very briefly.

SEN. RICHARD DURBIN:

Well, the President is in a curious role, to think of all the hard work he's putting in to sell a tax cut. You know, if he had to sell a tax increase or a tough issue, I could understand it. But I think it really reflects the skepticism a lot of people have about projecting a tax cut on a surplus that may be five or ten years from now.

MARGARET WARNER:

Okay, thank you all four Senators very much.