Manu
11-20-2002, 12:45 AM
WASHINGTON (Reuters) -- The White House and Republicans in Congress are laying the groundwork for a wide range of tax cuts, including a short-term economic stimulus starting near $100 billion, congressional aides and lobbyists said Tuesday.
But swift passage of new tax cuts was far from certain under arcane Senate rules, which could hold up deliberations for months, and divisions within the White House and Congress over the risk of exacerbating budget deficits.
Emboldened by the November 5 election giving Republicans control of Congress, Bush directed his top economic advisers to come up with short-term stimulus options, hoping to give the lackluster economy a boost and avert a slide back into recession ahead of the 2004 presidential election.
Bush is also pushing longer-term initiatives, top among them making big tax cuts enacted in 2001 permanent.
Some White House officials led by National Economic Council Director Lawrence Lindsey are advocating broad-based tax cuts to shore up businesses and households.
Treasury Secretary Paul O'Neill is more cautious, pushing for more limited, targeted tax relief less likely to send budget deficits soaring.
White House spokeswoman Claire Buchan said Bush had not made up his mind. "The president is continuing to review options. Any plan must create jobs, spur economic growth, and be good for the short-term and the long-term," she said.
Tax package make-up
Officials said a final decision on the size and make-up of Bush's tax package would likely depend on how well the economy holds up in the fourth quarter and the pace of consumer spending during the critical holiday shopping season.
"The first question is whether the measures are needed. If you cross that threshold, the question is how bold are you going to be. You have some (administration officials) who are more willing to take the risk of red ink than others," a senior Republican congressional aide said.
Based on preliminary discussions, the components of a short-term stimulus would likely start at nearly $100 billion, which may be spread over two years. It could end up being far more depending on the state of the economy, Republican congressional aides said.
They said a stimulus of less than $50 billion to $100 billion would have little economic impact. "Anything less than that would be window dressing," a senior Republican aide said.
Bush's advisers are considering several options, including accelerating tax breaks for families that are not scheduled to kick in until later and allowing businesses to write off their capital investments faster.
Even though Republicans hold a thin majority, Bush will need at least some Democratic support to get the 60 votes he needs under Senate rules to overcome a filibuster.
Bush could get around the 60-vote rule by getting his tax cuts included in the budget Congress approves, but that process could delay Senate action on taxes until the middle of 2003.
Citing these obstacles, business groups are concerned that any short-term stimulus will come too late. "Earlier is certainly better than later," said Bruce Josten, executive vice president of the Chamber of Commerce. "But I think it's going to be hard to have an early legislative result."
Permanent tax cuts
In addition to providing a short-term stimulus, Bush will ask Congress to make last year's $1.35 trillion tax cuts permanent. They are set to expire at the end of the decade.
Bush may also resurrect several ideas that were put on hold before the election because moderate Republicans in Congress -- and some of Bush's own economic advisers -- were concerned about how they would be received by voters.
Those include raising the age at which senior citizens must begin withdrawals from retirement accounts; raising limits on how much pretax income can be put into 401(k) retirement accounts and doubling the amount of capital losses investors can deduct from ordinary income.
O'Neill is expected to make a push to simplify the tax code. Lawmakers also plan to overhaul tax breaks that benefit U.S. exporters to bring them in line with global trade rules.
Some Republicans are pushing for more sweeping and costly changes, including reductions in capital gains taxes. But administration officials -- and some business leaders -- have sought to scale back expectations.
"There's a lot on the table, but all of those discussions have to compete against a growing deficit in an atmosphere of declining tax receipts," Josten said
After four years of surpluses, the federal government sunk back into deficits in fiscal 2002. Additional tax cuts, coupled with Bush's threatened war with Iraq, could send the government deeper into the red for the foreseeable future, Democrats say.
www.cnn.com
But swift passage of new tax cuts was far from certain under arcane Senate rules, which could hold up deliberations for months, and divisions within the White House and Congress over the risk of exacerbating budget deficits.
Emboldened by the November 5 election giving Republicans control of Congress, Bush directed his top economic advisers to come up with short-term stimulus options, hoping to give the lackluster economy a boost and avert a slide back into recession ahead of the 2004 presidential election.
Bush is also pushing longer-term initiatives, top among them making big tax cuts enacted in 2001 permanent.
Some White House officials led by National Economic Council Director Lawrence Lindsey are advocating broad-based tax cuts to shore up businesses and households.
Treasury Secretary Paul O'Neill is more cautious, pushing for more limited, targeted tax relief less likely to send budget deficits soaring.
White House spokeswoman Claire Buchan said Bush had not made up his mind. "The president is continuing to review options. Any plan must create jobs, spur economic growth, and be good for the short-term and the long-term," she said.
Tax package make-up
Officials said a final decision on the size and make-up of Bush's tax package would likely depend on how well the economy holds up in the fourth quarter and the pace of consumer spending during the critical holiday shopping season.
"The first question is whether the measures are needed. If you cross that threshold, the question is how bold are you going to be. You have some (administration officials) who are more willing to take the risk of red ink than others," a senior Republican congressional aide said.
Based on preliminary discussions, the components of a short-term stimulus would likely start at nearly $100 billion, which may be spread over two years. It could end up being far more depending on the state of the economy, Republican congressional aides said.
They said a stimulus of less than $50 billion to $100 billion would have little economic impact. "Anything less than that would be window dressing," a senior Republican aide said.
Bush's advisers are considering several options, including accelerating tax breaks for families that are not scheduled to kick in until later and allowing businesses to write off their capital investments faster.
Even though Republicans hold a thin majority, Bush will need at least some Democratic support to get the 60 votes he needs under Senate rules to overcome a filibuster.
Bush could get around the 60-vote rule by getting his tax cuts included in the budget Congress approves, but that process could delay Senate action on taxes until the middle of 2003.
Citing these obstacles, business groups are concerned that any short-term stimulus will come too late. "Earlier is certainly better than later," said Bruce Josten, executive vice president of the Chamber of Commerce. "But I think it's going to be hard to have an early legislative result."
Permanent tax cuts
In addition to providing a short-term stimulus, Bush will ask Congress to make last year's $1.35 trillion tax cuts permanent. They are set to expire at the end of the decade.
Bush may also resurrect several ideas that were put on hold before the election because moderate Republicans in Congress -- and some of Bush's own economic advisers -- were concerned about how they would be received by voters.
Those include raising the age at which senior citizens must begin withdrawals from retirement accounts; raising limits on how much pretax income can be put into 401(k) retirement accounts and doubling the amount of capital losses investors can deduct from ordinary income.
O'Neill is expected to make a push to simplify the tax code. Lawmakers also plan to overhaul tax breaks that benefit U.S. exporters to bring them in line with global trade rules.
Some Republicans are pushing for more sweeping and costly changes, including reductions in capital gains taxes. But administration officials -- and some business leaders -- have sought to scale back expectations.
"There's a lot on the table, but all of those discussions have to compete against a growing deficit in an atmosphere of declining tax receipts," Josten said
After four years of surpluses, the federal government sunk back into deficits in fiscal 2002. Additional tax cuts, coupled with Bush's threatened war with Iraq, could send the government deeper into the red for the foreseeable future, Democrats say.
www.cnn.com