Daschle says Bush's upper-income tax cut to blame for vanishing budget surplus

WASHINGTON (AP) _ Senate Majority Leader Tom Daschle blamed President Bush's tax cuts Friday for wiping out budget surpluses and called for a ``growth agenda'' for a country hammered by terrorism

Friday, January 4th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ Senate Majority Leader Tom Daschle blamed President Bush's tax cuts Friday for wiping out budget surpluses and called for a ``growth agenda'' for a country hammered by terrorism and recession.

``Sept. 11 and the war aren't the only reasons the surplus is nearly gone,'' Daschle, S-S.D. said in a speech that effectively launched an election-year debate over Bush's stewardship of the economy. ``The biggest reason is the tax cut,'' he added.

The GOP agenda, Daschle said, ``is being written by a wing of the Republican Party that isn't interested in fiscal discipline. They have one unchanging, unyielding solution they offer for every problem: tax cuts that go disproportionately to the most affluent.''

In his remarks, Daschle did not propose repealing or deferring elements of the $1.35 trillion tax cut that Bush pushed to passage last year. Nor did he mention that 12 of the Senate's 50 Democrats voted for it.

Republicans responded quickly.

``Perhaps the most important thing the Congress did last year to promote economic security was to pass the president's tax relief proposal,'' said House speaker Dennis Hastert, R-Ill. ``Senator Daschle voted against that proposal and now he seems to indicate that he wants to repeal it,'' Hastert added, saying that would be ``exactly the wrong way to achieve long term economic security.''

Daschle offered praise for Bush's handling of the war against terrorism and the aftermath of the Sept. 11 terrorist attacks. But the main thrust of his speech was an attack on the president's economic priorities, and a tax cut that he said had ``probably made the recession worse.''

``At a time when we needed to fight both a war and a recession _ when our nation has urgent needs on all fronts _ the tax cut has taken away our flexibility and left us with only two choices _ both of them bad,'' he added.

``We can shortchange critical needs, such as strengthening homeland security, or we can raid the Social Security surplus and borrow money to pay for them,'' he said. ``We cannot have it both ways.''

Daschle also expressed opposition to the three recommendations of a Social Security commission appointed by Bush. All three would let younger workers invest some of their payroll taxes in the stock market. Instead, Daschle said he favors allowing supplemental private accounts.

Daschle, the nation's most powerful Democrat, was speaking more than two weeks before lawmakers return to work from their year-end break, but at the same time Bush readies trips to Oregon and California to urge congressional action on recession relief.

Daschle, too, was proposing new temporary efforts at passing recession relief, and outlined a tax credit proposal for companies that create new jobs. Under the plan, businesses would receive a tax credit equal to the amount of additional money they pay in Social Security payroll taxes for each new job.

Apart from attacking the tax cut, Daschle's speech included a call for more money for homeland security in response to the terrorist attacks and greater funding for domestic programs such as education and assistance for workers hard hit by trade imbalances.

He also urged the president to submit a one-year budget proposal that includes a stimulus plan and a long-term plan that ``restores fiscal discipline'' while protecting the Social Security and Medicare trust funds.

As majority leader and Bush's nemesis during last year's struggle over economic stimulus legislation _ Daschle also is mentioned as a potential White House contender _ the South Dakotan routinely receives extensive news coverage of his speeches.

In this case, aides went to the unusual step of releasing excerpts a day in advance, along with a number of proposals under the heading of the ``Daschle Growth Agenda for America's Future.''

Given Daschle's position as leader of the Senate majority, his speech appears to be the Democrats' opening volley in an election-year debate about an economy in recession and a budget seemingly headed for deficits after four years of surpluses.

The narrow Democratic majority in the Senate is at stake in next fall's elections, as is the slender GOP edge in the House.

In suggesting new efforts to pass stimulus legislation, Daschle proposed slightly more generous depreciation provisions for businesses than Democrats outlined last year, as well as the tax credit to spur job creation.

Also included are provisions to give tax rebate checks to those who didn't receive them last year and an additional 13 additional weeks of unemployment benefits and health care benefits for the jobless. That issue was a major sticking point in last year's failed negotiations.

Apart from a stimulus, Daschle's speech calls for substantial, but unspecified, increases in homeland security, education, training and technology and trade adjustment. It also outlined an energy plan that does not mention drilling in the Arctic National Wildlife Refuge, which Bush favors but many Democrats oppose.