President to unveil new economic plan

Bush is expected to call for accelerating tax cuts, extending jobless benefits

January 03, 2003|By KNIGHT RIDDER/TRIBUNE

WASHINGTON - President Bush plans to unveil an economic-stimulus package Tuesday that is expected to rely chiefly on tax cuts but also to include an extension of unemployment benefits.

The proposal will set the stage for a heated political debate over how best to boost the sluggish U.S. economy.

Bush and most of his fellow Republicans favor across-the-board tax reductions, which benefit the wealthy the most because they pay the most in taxes. Democrats are calling for tax cuts targeted at lower-income groups, and some also want the federal government to give money to cash-strapped state governments.

With economic growth at a crawl, both parties are aware that the economy could shape up as a central issue in the 2004 presidential election. Democrats see Bush's economic record as his weak spot. The president wants to demonstrate that he is doing what he can to help the economy recover.

Yesterday, as he hiked around his ranch in Crawford, Texas, Bush rejected Democratic criticism that his policies favor the rich.

"I'm concerned about all people," he said. "I understand the politics of economic stimulus. If some would like to turn this into class warfare, that's not how I think. I think about the overall economy and how best to help those folks who are looking for work."

Bush, who will release his proposal at a speech in Chicago, is expected to call for accelerating income tax cuts scheduled for next year, so that they would take effect this year instead. The administration reportedly may not speed up the reduction for the top income bracket - those with taxable incomes of more than $311,950 - to try to pre-empt criticism that the proposal would be too generous for the wealthy.

Another likely proposal would reduce the tax on dividend income that individuals receive. The administration also may propose changes in 401(k) retirement accounts, such as allowing greater contributions and increasing the age limit at which individuals must start withdrawing from their accounts.

Business groups are pushing for tax breaks to encourage companies to buy new equipment. One proposal would let companies depreciate such equipment more quickly, allowing them to take a larger tax deduction. Another would expand the ability of mainly small businesses to deduct more of their equipment purchases.

Bush also has said recently that he wants Congress to extend unemployment benefits. A previous extension, under which the unemployed could collect benefits for up to 39 weeks instead of the usual 26 weeks, expired Saturday.

Lawmakers couldn't agree on a new extension of benefits in last month. At the time, Bush was silent on the issue, drawing criticism from advocates for the unemployed. Yesterday, he reiterated his recent support for an extension, though he didn't provide any details.

"I am concerned about those who are looking for work and can't find work, and so next week when I talk about an economic-stimulus package, I will talk about ... how best to create jobs, as well as how to take care of those who don't have a job," Bush said.

The administration's stimulus proposal, which lobbyists say could total $300 billion over 10 years, will be constrained by worries about the growing federal budget deficit.

"They're trying to fit things into a package," said Dorothy Coleman, the National Association of Manufacturers vice president for tax policy. "Revenue concerns are always an issue."

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