Congress hopes for quick accord on the economy

January 21, 1992|By New York Times News Service

WASHINGTON -- Congressional leaders are predicting that they will kick out of the starting blocks when they return to work today, trying to overcome election-year partisanship to act quickly on a number of measures intended to stimulate the economy -- from a tax cut for the middle class to an extension of unemployment benefits for the jobless.

The political discord of presidential election years usually shackles congressional action, but leaders say this year could be different -- at least on tax policy -- because the recession demands efforts to stimulate the economy.

While most economists warn that a tax cut might worsen the budget deficit and harm the bond market, Democratic leaders say it is politically imperative for them to work with President Bush to take action.

"Both the president and Congress will try to act expeditiously to get things done because the economy is in trouble," Rep. Richard A. Gephardt of Missouri, the House majority leader, said an interview. "We'll try to move a tax bill quickly."

The first test will come early this week when Democrats in the House introduce legislation to extend unemployment insurance another 13 weeks. Mr. Bush vetoed two earlier versions last year before signing a 20-week extension in November. Democratic leaders say they have the votes to override a veto, but they believe the president has to be more cooperative this year.

The White House and Democratic leaders in Congress appear ready to tinker with the spending restrictions set in the 1990 budget agreement, allowing them to use money from a reduced Pentagon budget for non-military spending. They also appear to be moving toward penalty-free withdrawals of individual retirement accounts for first-time home buyers and tax incentives for businesses willing to make capital investments.

The White House is expected to propose a smaller tax cut than the Democrats support, but differences appear to be lessening.

Republican leaders say they are willing to work with Democrats to cut taxes, but they will fight efforts to increase social spending by directing that cuts in military spending be targeted at reducing the deficit or paying for tax cuts.

"The big debate will be over what should be done with defense savings," said Sen. Phil Gramm, R-Texas. "The Democrats desperately want to spend it. We will fight any effort to destroy spending restraints."

Republicans will also promote a cut in taxes on capital gains, a proposal that George J. Mitchell of Maine, the Senate majority leader, said he would oppose unless the tax rate for the wealthiest taxpayers was increased. That is a concession the White House is not expected to accept.

Economic matters are likely to dominate congressional action until the Easter break, particularly in the House, where tax legislation originates. But as the session progresses, the Democratic Congress and the Republican White House are likely to battle over a number of other issues, including banking regulations, energy conservation, changes in health insurance, and family and medical leave.

The first arrows are expected to fly this week, when the Senate debates a $850 million education bill sponsored by Sen. Edward M. Kennedy, D-Mass., that would give parents a choice in deciding which public schools they want their children to attend. Senate Democrats will sharply criticize an alternative proposal by the Bush administration to use federal money to subsidize parents who choose to send their children to private schools.

Many leaders expect that the hottest congressional debate of the year will come over health care, with most Democrats demanding comprehensive changes in the nation's health insurance system to cover unemployed and part-time workers, as well as all women and children.

Although proposals like universal national health insurance are gaining momentum, particularly in the House, a veto by Mr. Bush has been promised for all but the most modest changes, like tax incentives to expand private insurance coverage.

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