Breakthrough boosts outlook for stimulus bill

Daschle cuts figure for added spending on domestic security

Social Security tax pause?

November 29, 2001|By Karen Hosler and David L. Greene | Karen Hosler and David L. Greene,SUN NATIONAL STAFF

WASHINGTON - Prospects brightened yesterday for a package of tax cuts and worker benefits to help revive the economy - a bill that might include giving Americans a one-month break from Social Security taxes.

A monthlong impasse on the legislation ended yesterday when Senate Majority Leader Tom Daschle agreed to drop his demand for up to $15 billion in new spending for homeland security. The Democratic leader cut his demand in half, to $7.5 billion, and said he would try to include it instead in a must-pass bill that provides money for the Pentagon.

Daschle stressed that he was not giving up on additional spending for homeland security, an item that still seems headed for a veto showdown with President Bush. The Senate leader said he was offering his new approach as a way to "move the process forward."

The White House welcomed the breakthrough. But the president sidestepped questions about whether he backed the idea of a one-month break on Social Security taxes. He instead urged lawmakers to work quickly to resolve their differences so he can sign an economic stimulus bill into law before Christmas.

"There are differences, but the differences aren't that big," Bush said after meeting with congressional leaders. "They just now have got to work out the details, and I hope they're able to do so."

"This country is waiting for action," he said later. "Further delay could put more Americans and more families at risk. So let's move. Let's get the job done."

Daschle's concession came a day after Senate Republican leader Trent Lott tried to increase pressure on Democrats by embracing the idea of a monthlong holiday from the payroll tax that finances Social Security.

As envisioned by Senate Republicans, the payroll-tax proposal - which is designed to have no effect on Social Security benefits - would be one element of a $100 billion stimulus package.

Their package also would include an acceleration of the income tax rate cuts enacted earlier this year, as well as corporate tax cuts and higher benefits for laid-off workers. The rest of the package is intended mostly to stimulate long-term spending and investment.

The brief break from the payroll tax is designed to encourage speedy consumption - preferably during the Christmas shopping season. It would apply to nearly all workers earning up to $80,400, as well as to their employers, who pay half the 12.5 percent tax.

"We think this is the quickest, easiest way to stimulate the economy," said Sen. Pete V. Domenici, the New Mexico Republican who was the chief author of the payroll-tax proposal.

Though the Republicans succeeded in sparking movement on the stimulus talks, Democrats agreed only reluctantly to include the payroll-tax idea. Daschle said he might be willing to accept it if Bush and the Republicans dropped their insistence on accelerating the income tax rate cuts: "It has to be one or the other."

But Republicans want the payroll tax cut to replace another feature of the plan proposed by Bush as a concession to Democrats: a one-time cash payment of $300 for singles and $600 for couples, envisioned as a rebate from payroll taxes for people who did not qualify for income tax rebates earlier this year because they earn too little to pay income tax.

"That's a nonstarter," Daschle said. "Perhaps, if we took the rebate and the rate-reduction acceleration off the table and looked at the payroll-tax exemption as an alternative to both, that might be something we could look at."

But as formal negotiations got under way in Congress last night, Bush said he remained committed to speeding up the income tax cuts enacted this year, partly in hopes of staving off an economic downturn.

"The sooner rates come down, the faster our economy will rise," the president said.

For the most part, though, Bush seems to be following the strategy he used on the airline security legislation that became law last week: He stayed largely above the fray, then celebrated as a victory a bill on which Democrats had secured many concessions from Republicans.

On the payroll-tax holiday, for example, the president's spokesman, Ari Fleischer, said that Bush "believes it's an interesting idea" but has serious questions about whether it could stimulate the economy quickly enough.

Fleischer said Bush is also concerned about taking away money that was intended for Social Security, which, the spokesman pointed out, is running out of money.

Even so, Fleischer said, Bush "would like to see progress made in the Senate."

Daschle's decision to drop his insistence on including in the stimulus package billions of new spending to tighten security on highways, bridges, rail stations and other public facilities came after Bush urged an end to the delay.

Democrats had hoped the politics would work in their favor - that Bush and Republican lawmakers would be faulted for seeming to give higher priority to tax cuts than to protecting the American homeland in the wake of the Sept. 11 terrorist attacks.

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