Democrats Announce Broad Budget

Thursday, February 15th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) â€” Democratic congressional leaders announced their own broad budget goals Thursday, saying they favor a tax cut less than half the size of President Bush's proposal and aimed more at lower- and middle-income people.

Though they provided no details â€” reflecting divisions among Democrats â€” House Minority Leader Dick Gephardt, D-Mo., and Senate Minority Leader Tom Daschle, D-S.D., also said they would set aside more of the projected federal surplus than Bush for debt reduction and spending for schools, new Medicare prescription drug benefits and other priorities.

``This debate is not the Democratic tax cut versus the Republican tax cut,'' Daschle told reporters. ``This debate is about Republican priorities versus Democratic priorities.''

According to the numbers the Democratic leaders used, their plan would result in a $750 billion, 10-year tax cut, though the government would lose an additional $150 billion in interest costs because there would be less debt reduction. Bush has proposed a $1.6 trillion tax reduction, which many analysts have said would also cost roughly $300 billion more in extra interest costs.

The Democratic effort to take the initiative in an area Bush has dominated so far came as an administration official rejected the notion that moderate Republicans were about to abandon Bush on the tax issue.

Treasury Secretary Paul O'Neill said he was not worried about comments by Sen. James Jeffords, R-Vt., that the president's proposal was too expensive. Jeffords' remarks, in an interview with the Burlington, Vt., Free Press, marked the first time a GOP senator has expressed reservations about the centerpiece of Bush's economic program.

O'Neill characterized Jeffords as wanting to use more of the projected surplus for government spending rather than tax relief.

``Someone who wants to spend more money is not a loss. They just need to be converted into a higher-level believer,'' O'Neill told reporters Thursday at his first news conference as treasury secretary.

O'Neill said the administration intends to hold the line against numerous special interests that are clamoring to get their special tax relief included in the bill.

``I really don't think it is advisable for this tax legislation to take on wings of its own and fly off into deficit-land again,'' he told reporters.

The support of Jeffords, who complained in the interview that Bush's tax proposal did not provide enough relief for low- and moderate-income people, is considered crucial because he is on the tax-writing Senate Finance Committee. The committee, like the Senate, is split 50-50 between the two parties. One Democrat, Sen. Zell Miller of Georgia, has announced his support for Bush's plan.

The Democrats' announcement of their budget principles followed weeks in which they spent most of their time assailing Bush's plan as too expensive and too skewed toward the wealthy.

Democrats hope their approach for using expected budget surpluses, which they say is more balanced than Bush's, will appeal to a public that polls show likes tax cuts but considers them secondary to Social Security, education and some other programs.

Democrats also think their principles will help legislators explain their priorities when they go home next week for Congress' President's Day recess. Upon their return, Bush likely will have the public relations advantage because he will discuss his fiscal priorities to a joint session of Congress on Feb. 27, and then release an outline of his first budget the next day.

Bush and his GOP allies have said his tax proposal would leave plenty of money for debt reduction and new spending for schools, defense and other items.

To help pay for the tax cuts, White House officials have said they will propose holding overall spending increases to about the inflation rate â€” a level Democrats say is too low.

The Democrats' tax cut would be part of a budget in which they would set aside $2.9 trillion for debt reduction over the next decade. That is the portion of the projected overall $5.6 trillion, 10-year federal surplus that comes from Social Security and Medicare.

Of the remaining $2.7 trillion in estimated surpluses, Democrats would divide the rest into thirds: for tax cuts; additional debt reduction; and new spending for education, a Medicare prescription drug benefit and other programs.

The Democratic proposal lacks details â€” for example, it will not endorse any particular tax cut â€” reflecting ongoing disagreements among Democrats over specifics.

For example, many liberals are pushing a plan to give every American a $300 annual dividend for the next decade. Some other Democrats prefer income-tax rate reductions.

As the centerpiece of his plan, Bush would telescope the current five income-tax brackets into four and lower them. The top rate would fall from 39.6 percent to 33 percent, while the bottom rate would drop from 15 percent to 10 percent.