Bush, McCain vie over tax cuts

Arizona senator puts more emphasis on debt reduction

Stakes high for GOP

January 26, 2000|By Jonathan Weisman | Jonathan Weisman,SUN NATIONAL STAFF

WASHINGTON -- As the Republican presidential campaign surges into New Hampshire, an increasingly bitter debate between George W. Bush and John McCain over tax-cutting and debt reduction is likely to dominate the run-up to the Feb. 1 primary.

The outcome of the debate between advocates of sweeping tax cuts and supporters of federal debt reduction could have profound consequences for Republicans. The party has long been divided between fiscal conservatives in the mold of Dwight D. Eisenhower, who are fearful of rocking the economic boat, and more daring conservatives, who believe deep tax cuts would shrink the government and promote economic growth.

Since Ronald Reagan was elected president in 1980, the tax-cutters have held sway, but McCain could be heralding a resurgence of so-called Main Street Republicans.

Events in Washington are fueling the argument. The nonpartisan Congressional Budget Office presented new long-term budget forecasts yesterday that anticipate federal surpluses over the next decade to swell to as much as $1.9 trillion if Congress freezes federal spending. That figure is nearly double the estimate presented last summer.

If spending is allowed to rise with inflation, as it has done the past two years, the non-Social Security surplus will reach $800 billion less than the $1 trillion surplus that Bush and McCain have relied on to formulate their economic plans.

President Clinton inserted himself into the fight yesterday, vowing to present to Congress a 2001 budget that would eliminate the government's $3.6 trillion publicly held debt by 2013, two years earlier than the target he announced in June.

"Now is not the time to let up on a strategy that is plainly working," Clinton said, taking a swipe at Bush's five-year, $483 billion tax-cut plan. "Our children and their children will not inherit the crippling burden of interest payments that we faced seven years ago."

McCain has allied himself with Clinton's cause, though the Arizona senator is loath to acknowledge that. McCain's charges that the Bush plan is "fiscally irresponsible" and would "disproportionately favor the rich" could have been ripped from a White House news release.

McCain's tactic appears to be working. Polls in New Hampshire indicate that most Republicans there would rather have a small tax cut, coupled with debt reduction and money to shore up Social Security, than a large tax cut that would devour the surplus not generated by Social Security payroll taxes.

Kevin Hassett, an economist at the American Enterprise Institute and McCain's chief economic adviser, noted that Congress passed a tax plan last year that was similar to Bush's but failed to attract voter support, even after Clinton vetoed it. Bob Dole, the GOP presidential nominee in 1996, ran on a platform calling for a 15 percent, across-the-board tax cut, and he went nowhere.

McCain's push appears to have thrown Bush on the defensive. Yesterday, the governor's campaign began running an advertisement that stresses Social Security, debt reduction, and education and military spending before mentioning tax cuts.

Compounding Bush's problems is Steve Forbes. After the publisher's strong showing in Iowa Monday, Bush will have to watch his right flank as he woos independent voters siding with McCain. Forbes' flat-tax proposal dwarfs Bush's and McCain's tax cut plans, and the publisher has repeatedly called Bush and McCain "the timid twins on taxes." It is a charge that Forbes will almost certainly repeat in a nationally televised debate tonight.

Bush has proposed using $483 billion from the burgeoning federal surplus over five years to slash marginal tax rates for every taxpayer. All of the money from Social Security payroll taxes would be left unspent, leaving $2 trillion over the next decade to shore up the ailing system.

McCain would devote $237 billion to tax cuts, less than half of Bush's total, and much of that would be offset by closing corporate loopholes in the tax code.

More than 62 percent of the non-Social Security surplus -- $230.6 billion over five years -- would be devoted to Social Security; 10 percent, or $37 billion, would go to Medicare; and 5 percent, or $18.6 billion, would go to debt reduction.

Plans have similarities

Within the Bush and McCain tax-cut proposals are similarities. Both candidates have proposed doubling the $500-a-child tax credit. Both would eliminate the earnings test on senior citizens that discourages them from working while receiving Social Security. Both would reduce the marriage penalty that taxes some married couples at a higher rate than if they were filing separately as singles.

Bush would eliminate all estate taxes, and McCain would exempt $5 million of a taxpayer's estate from taxation.

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