Bush tells Congress that tax cuts, not more spending, should drive economic stimulus plan

Saturday, October 6th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ President Bush is pressing Congress to pass an economic stimulus package that includes accelerated income tax cuts, generous breaks for business and some assistance for lower-income workers.

In doing so, Bush is trying to quiet Republican concerns that the White House is too willing to embrace Democratic spending proposals ranging from health insurance aid to railroad construction.

Speaking Friday in the White House Rose Garden, the president said he wants Congress to approve at least $60 billion in tax cuts without resorting to broad new government spending.

``In order to stimulate the economy, Congress doesn't need to spend any more money. What they need to do is cut taxes,'' he said.

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Rep. Martin Frost of Texas, chairman of the House Democratic Caucus, used his party's weekly radio address Saturday to emphasize elements that Democrats want in the stimulus package.

''... Our recovery package should ensure that all laid-off workers have full unemployment insurance and affordable health insurance,'' Frost said. ``It's not just the right thing to do. It's one of the most important steps we can take to stimulate the economy, because it puts money into people's pockets.''

He also called for a holiday tax cut for workers whose incomes were too small to trigger a rebate check earlier this year, and short-term help for businesses to encourage immediate investment.

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Bush's remarks on tax reduction followed a meeting Thursday night on the White House's Truman Balcony during which House Republican leaders told Bush of growing unrest among GOP conservatives.

At the gathering, which a senior White House official characterized as ``brutally frank,'' the leaders said they believed Bush's statements were being misinterpreted by many in Congress. They advised him to communicate his thinking on the stimulus plan more clearly, said one participant, speaking on condition of anonymity.

The president, flanked by his top economic advisers, said the government is already responding with about $60 billion in spending to the aftermath of the Sept. 11 terrorist attacks, including his proposal to extend unemployment benefits by 13 weeks.

House Majority Leader Dick Armey, R-Texas, said the Ways and Means Committee was given a green light to begin assembling a package of tax cuts up to $75 billion without waiting for a negotiated agreement with Democrats and the Senate. The panel's chairman, Rep. Bill Thomas, R-Calif., said work could begin as early as next week.

Democrats responded with dismay, saying that would virtually assure a partisan outcome.

``These people have a hidden agenda,'' said Rep. Charles Rangel of New York, senior Democrat on Ways and Means. ``They think they can dust off anything they want and wrap the American flag around it.''

Bush made his clearest statement yet on the components of his plan. They would include accelerating some or all of the income tax rate cuts now set to take effect in 2004 and 2006 as part of the 10-year, $1.35 trillion tax relief measure enacted earlier this year.

Treasury Secretary Paul O'Neill has proposed moving the 1 percentage point reduction in the 27 percent income tax rate from 2004 to 2002, a Treasury official said.

Because the bottom 10 percent and 15 percent tax brackets would not be reduced, Bush said Congress should ``make sure that low- and moderate-income workers get tax relief as well.'' The leading option is a new round of tax rebate checks, which could arrive in time for the critical holiday shopping season. Another idea is reducing the amount of tax withheld from paychecks.

For businesses, Bush proposed repeal of the corporate alternative minimum tax, which can impose big tax bills on struggling businesses, and greater expensing writeoffs for business capital investment. House GOP leaders are considering a 30 percent immediate expensing writeoff for all assets, perhaps with a three-year time limit.

The president's list pointedly left out cuts in capital gains taxes on investment, which many Republicans are pressing for but Democrats fiercely oppose as benefiting the wealthy. GOP lawmakers still want to consider a measure that would reduce the long-term capital gains rate from 20 percent to 18 percent for investments made after the Sept. 11 terrorist attacks.

``Some of us just won't give that up,'' Armey said. ``There's going to be a big fight over the capital gains tax reduction.''

Democrats have gone far beyond tax cuts in their vision of a stimulus package, envisioning that half of up to $75 billion would go for spending.

Some Democrats want to give workers a 50 percent federal match for the COBRA health insurance plans available for the jobless. Others want to raise the $5.15-an-hour minimum wage, begin a broad new public works program and spend money on Amtrak, high-speed rail and highways.