New Priorities and Future Tax Cuts

Kennedy, Daschle and their Republican counterparts have made clear over the last 4 months that the nation is now facing new problems (on top of existing problems) and we cannot afford a debate over semantics. Instead, we must address the problems laid out by Daschle and Kennedy over the last 2 weeks and by the President in his State of the Union address next week.

Kennedy, Daschle and their Republican counterparts have made clear over the last 4 months that the nation is now facing new problems (on top of existing problems) and we cannot afford a debate over semantics. Instead, we must address the problems laid out by Daschle and Kennedy over the last 2 weeks and by the President in his State of the Union address next week.

Kennedy, Daschle and their Republican counterparts have made clear over the last 4 months that the nation is now facing new problems (on top of existing problems) and we cannot afford a debate over semantics. Instead, we must address the problems laid out by Daschle and Kennedy over the last 2 weeks and by the President in his State of the Union address next week.

In the last issue of the Watcher, we noted that in his January 4 speech Senate Majority Leader Tom Daschle (D-SD) avoided a direct confrontation with the politically tenuous proposition to hold off the next phase of the June tax cut until the needs of the country, the economy and the federal budget better allowed for it. Instead, Daschle outlined the problems the country was facing, reminded his audience of the size of the 10-year tax cut the President signed last June, maintained his own commitment to a fiscal responsibility defined by the size of the federal budget deficit or surplus and allowed his listeners to draw their own conclusion as to an appropriate way of navigating through these contrary elements. Though his lack of directness was recognized by many commentators as a shrewd political move by a likely Presidential candidate, the OMB Watcher also noted that he and our nation's other policy makers must come to define fiscal responsibility "much more broadly than the absence of a deficit." Last week, Sen. Edward Kennedy (D-MA) became the most senior of these policy makers to do so publicly.

In a speech at the National Press Club on January 16, Kennedy outlined a plan for a federal budget that represents and meets the needs of the nation's priorities including fully funding programs like Head Start, a prescription drug plan for seniors, a true living -- not minium -- wage, and enforcement and oversight of the nation's laws and regulations protecting against discrimination. Recognizing that even those who would support these values would likely also question whether the country could find sufficient funds, Kennedy predicted that, "we can afford to do what is right if together we return to fiscal responsibility." And connecting the dots between the choices laid out by Daschle last week, Kennedy drew his conclusion: "Whatever the merits or demerits of last year's tax bill, it was enacted in what now seems a very different and distant time. Today, for the sake of our country, we must transcend the old boundaries of debate. We must think anew, and act responsibly. We can and should postpone a portion of the future tax cuts that overwhelmingly benefit the wealthiest taxpayers." His proposal called for delaying the enactment of $350 billion worth of future tax cuts over the next 10 years, while maintaining the $1 trillion in existing tax cuts, future tax cuts for families making less than $130,000 a year, and the child tax credit and "marriage penalty relief." (Rep. Jan Schakowsky (D-IL) proposed a similar delay on the tax cuts in her "First Things First Act" last October.)

Nevertheless, over the last week, many people, including the President's Chief Economic Adviser, Larry Lindsey, have accused Kennedy and other Democrats of working to meet their own "long lists of spending proposals" at the expense of the nation's economic success. Lindsey has also suggested that Kennedy's speech has done the nation a great favor by "making explicit the Democrats' economic plan [to] increase taxes." (Many, including the Center on Budget and Policy Priorities (CBPP) in its latest analysis, have pointed out that under Kennedy's plan, "no tax rates would be raised above their current level" and that, indeed, "95 percent of tax filers would be unaffected by his proposal, and even those with the highest incomes would continue to see their taxes reduced over the decade." The CBPP report also provides a detailed response to Lindsey's and Treasury Secretary Paul O'Neill's claims that the vast majority of the higher income taxes "proposed" by Kennedy would be paid by business owners filing individual returns.)

To some extent, however, it is unfortunate that this has developed into a debate over whether delaying a future tax cut is a tax increase or not. As Kennedy, Daschle and their Republican counterparts have made clear over the last 4 months, the nation is now facing new problems (on top of existing problems) and we cannot afford a debate over semantics. Instead, we must address the problems laid out by Daschle and Kennedy over the last 2 weeks and by the President in his State of the Union address next week. The Democrats have taken a step in the right direction by creating for the public a big picture view of not only the upcoming challenges and problems but also the opportunities and choices we have as a country. We must help them take the next step by letting them know we support reevaluating the $1.35 trillion tax cut in the light of our new and existing national priorities and delaying some of the tax cuts to more easily meet those priorities.

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