Bush's Sudden Tax Cut Turnaround

October 27, 1991|By KAREN HOSLER

WASHINGTON. — Washington -- It seemed like a giant tornado went roaring through the White House last week and spun everyone around in the opposite direction.

One day White House Chief of Staff John H. Sununu was on television belittling a middle-income tax cut plan offered by Senator Lloyd Bentsen, D-Tex. The next day, White House spokesman Marlin Fitzwater announced President Bush is considering something very similar.

Until then, Mr. Bush has considered the defense budget so inviolable that he recently predicted it might even have to grow despite massive nuclear arms cuts. Suddenly, that defense budget appeared on the table as a possible source of White House-approved financing for such tax cuts.

And the protective fortress many in the administration had built around last year's painfully-wrought budget agreement with Congress just seemed to disappear.

"Everything's under review; we're looking at all options," said Mr. Fitzwater.

For months, the White House had clung stubbornly to the view that the recession was over and nothing needed to be done for the economy except hang tough against free-spending Democrats. Now, it seems in the throes of complete conversion.

It's not yet clear whether the White House turn-about -- which was actually some weeks in the making -- will ultimately result in relief for taxpayers, a stimulus to the economy or additional benefits to the jobless -- the ostensible goals sought by Democrats and Republicans alike.

Only two months remain for a tax program to be enacted in time to take effect next year, and Congress had hoped to spend one of those months on vacation. Mr. Bush leaves tomorrow night on the first of nearly four weeks of diplomatic missions that will bring him home just as Washington opens its traditional round of Christmas parties.

Speedy action on such a complicated issue as tax cuts would probably require more good faith than it is reasonable to expect from an incumbent president seeking re-election and from the opposition-led Congress, some of whose members will be trying to oust him.

But the persuasive argument at the White House has been that President Bush must be able to convince voters -- whose lifestyles have been radically diminished by layoffs, salary cuts, business losses and other economic setbacks -- that at least he tried to do something.

Until last month it had seemed to most in the White House that Mr. Bush's foreign policy successes would be enough to carry him through the 1992 election handily as long as the economy bounced back at a moderate rate.

But it hasn't. Growth is slow and halting, consumer confidence is down and layoffs continue to the spread the pain. Some economists belief there could be a second dip of the recession.

Americans are even more worried about the economy now than they were in the midst of the recession earlier this year, according to a recent New York Times/CBS News Poll. Nearly two-thirds of those surveyed said they disapproved of Mr. Bush's handling of the economy, and by a margin of 41 percent to 35 percent, voters said a Democrat was likely to do a better job at it.

The political impact of the economy was already begining to sink in at the White House when it was observed with some horror that Mr. Bush's dramatic announcement last month of unilateral arms cuts -- ending four decades on the precipice of nuclear war -- sparked no more than a day or two of headlines.

"Everybody just went right back to talking about jobless benefits and the economy, like it never happened," one administration official said. "That was very sobering."

In fact, Mr. Bush's arms cuts fueled even more talk of a so-called peace dividend from the defense budget that might help ease the economic pain at home.

Some Bush advisors acknowledge the Democrats have been unusually successful in making the president's refusal to waive a pay-as-you-go provision in the budget deal in order to extend jobless benefits seem heartless -- especially since he has granted similar waivers for foreign emergencies.

"We should never have let that bill get to the point of a veto," said one a former Bush aide. "We didn't have to give them as much as the Democrats wanted, but we should have given them something."

A more activist approach on the economy was urged initially on the president by Vice President Dan Quayle, Housing Secretary Jack Kemp and Commerce Secretary Robert Mosbacher, who are considered by some to have keener political instincts and more outside contacts than some top Bush aides in the White House.

Resistance on the inside came largely from Mr. Sununu, Budget Chief Richard G. Darman and Treasury Secretary Nicholas Brady, according to aides familiar with the dicussions.

Until recently, those three had had been arguing strenuously for the hang-tough approach on the budget agreement and against the folly of trying to do business with a Democratic Congress that seemed eager to attack any Bush proposal as a relief bill for the rich.

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