Democrats refocus on economic strategy

After election failures, they'll push stimulus plan, then decide tax-cut issue

Democrats struggle to agree on new economic strategy

January 06, 2003|By Julie Hirschfeld Davis | Julie Hirschfeld Davis,SUN NATIONAL STAFF

WASHINGTON -- Democrats, sentenced to two years of playing defense against a popular Republican president and his legislative majority, are struggling to agree on an economic plan that might help them win back control of Congress and the White House in 2004.

They're not there yet.

And as President Bush prepares to unveil a package tomorrow to stimulate the economy and completes his budget proposal for release next month, Democrats have little time.

They are working to craft a strategy to convince voters that Bush's economic policies are ineffective and unfair, and that they have better ideas. That feat eluded Democrats in last year's elections.

Their first step will be pushing for a stimulus package to challenge Bush's own. Montana Sen. Max Baucus, the top Democrat on the Finance Committee, presented one last month. House Democrats are expected to present a similar plan today.

Democrats must also reach consensus on a delicate issue that will essentially drive their economic strategy in the 108th Congress: whether to call for a freeze or outright repeal of portions of Bush's $1.35 trillion, 10-year tax cut -- and if so, which ones.

"There is no consensus yet among Democrats on that issue," Rep. Benjamin L. Cardin, a Baltimore Democrat who is on the tax-writing House Ways and Means Committee, said last month. "I cannot tell you that there is a Democratic position."

In her first news conference as House Democratic leader, Rep. Nancy Pelosi said Democrats have put aside that prickly issue in efforts to come out early with a stimulus measure.

She raised -- but did not answer -- the question of whether the nation could afford to go through with scheduled tax cuts, especially for the richest Americans, while shouldering the costs of fighting terrorism at home and abroad.

"Many of us and many in the public do not think that we are doing enough to make our country and our people safer," Pelosi said. "The cost of homeland defense and potential conflicts abroad begs the question: Can we afford the tax cut at the high end?"

Democratic leaders have coalesced around a strategy for boosting the economy in the short term. It includes targeting any tax cut to middle-class and low-income people, enacting steps that will yield quick benefits and sticking to provisions that will not create costly obligations.

The plan House Democratic leaders are expected to unveil today would hold to those standards. The heart of the $140 billion proposal, according to a Democratic aide who spoke on condition of anonymity, is an extension and enhancement of jobless benefits.

The plan also calls for one-time income tax relief for individuals and breaks for small businesses, the aide said. It proposes sending grants to states to help pay for homeland security and transportation costs.

The proposal that Bush and congressional Republicans will present is expected to total at least $300 billion and could reach $600 billion. It's likely to propose investor tax breaks -- notably lower taxes on corporate dividends -- and tax cuts for businesses and individuals. It is also expected to include funds for cash-strapped states.

Democrats have long argued that tax breaks for corporations and wealthy individuals are unfair and fiscally irresponsible, given the high costs of fighting terrorism and possibly Iraq and in an era of budget deficits. They also contend that such provisions would provide no short-term stimulus.

"We will fight the president's misguided plan to give more to those who have the most," Senate Democratic leader Tom Daschle said in a radio address Saturday. "It is wrong to divert -- to special-interest tax breaks -- the funds we need to make our country safer, stronger and more prosperous."

At a two-day economic summit last month, about 130 House Democrats and economists appeared to endorse the idea of a quick-acting, short-term stimulus.

Later last month, Baucus rolled out a $160 billion proposal that he said would meet those standards. It includes allocating $75 billion to cash-strapped states, extending jobless benefits, providing a $300 income tax cut or rebate for low-wage earners, offering $16 billion in incentives for businesses to invest in equipment, and increasing spending on road construction.

Democrats have stepped up their calls for an extension of unemployment benefits, which an estimated 780,000 individuals lost Dec. 28. Republican leaders are expected to agree to extend jobless benefits shortly after the new Congress convenes tomorrow, but Democrats want a more generous extension.

Democrats have argued that Bush's recent shake-up of his economic team was an admission of failure. But Democrats also recognize that they bungled their efforts in the past election to capitalize on the issue of the economy and that they need a compelling new strategy.

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