WASHINGTON – Declaring victory from a tax cut he once dismissed as “little bitty,” President Bush heads into his re-election campaign with his own remedy for economic recovery.

But will it work?

Already, Democrats are grousing that the tax cuts favor the wealthy and will only add to the national debt. But Republicans, who have long made tax relief the keystone of their agenda, have largely rallied around the cuts as a jobs-creation measure. Analysts, sizing up both sides, suggest the president had little choice but to roll the dice, push the tax cuts as an economic stimulus and hope the economy recovers.

‘Did what he had to’

“He did what he had to do,” said Sherry Bebitch Jeffe, a senior scholar in the School of Policy, Planning and Development at the University of Southern California. “It is a tax cut after all.”

The $350 billion measure signed by Bush on Wednesday includes $330 billion in tax cuts over the next decade and another $20 billion in aid to states, struggling to balance their budgets without raising taxes.

The Republican-controlled Congress sent the bill to the president last week on largely party-line votes. In the Senate, Vice President Dick Cheney had to break a 50-50 tie.

“It’s a tremendous political victory,” said Gene Sperling, a chief economic adviser in the Clinton White House. “It’s just tremendously bad policy.”

Bush and his fellow Republicans, Sperling charged, have used “gimmicks and sunsets” to keep the tax package’s cost artificially low.

The cuts are scheduled to expire in a few years, but he warned that Republicans will surely try to make them permanent, despite rising deficits. Then, he suggested, “anyone who objects to extending the tax rates at their lower levels will be accused of raising taxes, rattling the stock market and hurting the economy.”

Bush signed the measure in the East Room of the White House, amid considerable fanfare. He was flanked by key members of his economic team and Republican congressional leaders who pushed the legislation, and he faced an applauding audience of aides, other members of Congress and some of the people he met at economic roundtables as he had campaigned around the country for quick approval.

On Tuesday, with no such ceremony, Bush had quietly signed legislation to increase the federal debt ceiling by a record $984 billion.

But the tax cut was celebrated as a success and a salve for the economy, though it came nearly five months after Bush proposed a cut twice its size. And on several occasions in recent weeks, he had dismissed smaller alternatives as “little bitty.”

But a few moderate Republicans balked at Bush’s $726 billion proposal, concerned about the growing deficit. So he settled for $330 billion – still the third largest tax cut in history.

“By ensuring that Americans have more to spend, to save and to invest, this legislation is adding fuel to an economic recovery,” he said. “We have taken aggressive action to strengthen the foundation of our economy so that every American who wants to work will be able to find a job.”

It is a message, coupled with the war against terrorism and other national security issues, that will form the foundation of the re-election campaign that he formally launched two weeks ago.

During his presidency, he said Wednesday, the nation has been tested by “national emergency, corporate scandals, war and recession.” And now with the new tax cuts, he added, “We’re sending a clear message to the doubters that Washington can respond.”

The new law accelerates across-the-board income tax rate cuts already planned for the next decade and cuts capital gains taxes and the taxes that stockholders pay on dividends.

It also eases the marriage tax penalty, increases the child tax credit by $400 a year and allows businesses to write off more equipment investment.

The Internal Revenue Service was already finishing new withholding tables, which will result in more take-home pay starting in July, Bush said, and the checks for child-credit refunds would go out then as well.

Democrats, though, have complained the tax cuts are too little too late to boost the nation’s economy now – and will only add to mounting deficits down the road.


“I’ve begged people to make me one good argument for it, and I can’t find anybody with a straight face to defend it,” former President Bill Clinton said Wednesday during a speech at the John F. Kennedy Library in Boston.

“But we all go on thinking that we’re not supposed to question now and just line up and compromise the future of our country,” he said.

On Capitol Hill, Sen. John Edwards, D-N.C., one of nine Democrats seeking the White House next year, said the legislation that Bush signed was “guaranteed to take us back to the bad old days of enormous federal deficits.”

Nonetheless, he said, he supports tax cuts for the middle class and tax incentives for business.


In many ways, Jeffe said, Democrats are in a “very difficult position,” trying to challenge Bush, who is still riding high in the public opinion polls and using the tax-cut issue effectively to solidify his Republican base of support.

“They’re going to have to wait now and see how the economy responds to the tax cuts,” she said.


Throughout the country, a Gallup Poll last week found Americans nearly evenly divided over whether Bush’s tax cuts were a good idea.

Thirty-six percent of those surveyed said the cuts would help the economy over the next year. But 30 percent said they would make things worse. And 48 percent said the nation’s economy was declining.

The survey of 1,014 adults was conducted May 19-21, with a margin of error of plus or minus 3 percentage points.

For good or bad, political analyst Charles Cook said, Bush is now fully “liable” for his economic program, but in many respects, there isn’t much he or any other president can do to really spur economic recovery.

“They’re going to get the credit, or they’re going to get the blame, no matter what,” Cook said. “To the extent they can do things that they hope and pray will improve the economy – great.”

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(c) 2003, The Dallas Morning News.

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PHOTOS (from KRT Photo Service, 202-383-6099): BUSH-TAXES

AP-NY-05-28-03 2006EDT

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