GOP's white flag

Posted: Sep 09, 2002 12:00 AM
WASHINGTON -- Don't count on President Bush's widely leaked program of tax incentives to entice wary investors. It is in deep trouble and may never even be formally proposed, not simply because the plan faces impossible obstacles in the Democratic-controlled Senate. House Republicans, until now steadfast in pushing the Bush agenda, are saying no to the supply-side revival contemplated at the White House. House Speaker J. Dennis Hastert has told the president's aides that Rep. Bill Thomas, chairman of the House Ways and Means Committee, must be in on the "ground floor" of any new Bush tax initiative. Thomas last week made clear to the White House that he does not want to be on any floor of new tax cuts. Pushing a bill against the imperious Ways and Means chairman, a majority of the committee's Republicans, and without the help of the speaker is seen by risk-averse administration officials as an embarrassing exercise in futility. For the House GOP to raise the white flag of surrender suggests battle fatigue as the 107th Congress nears adjournment. What makes the surrender so complete is that supposedly conservative Republicans are adopting Democratic terminology and Democratic issues. While citing budget deficits in rejecting supply-side tax cuts, they follow Democratic practice in planning to build the deficit by raising spending over the president's levels. Such a development on Capitol Hill was not expected during the congressional summer recess, when the president's economic advisers leaked plans to boost investor confidence that has been shattered by corporate corruption. In fact, Bush himself talked publicly about a highly ambitious tax agenda: deductions for capital losses, relief of double taxation of corporations through levies on corporate dividends, and maybe in the future -- something the Bush team has resisted until now -- diminished capital gains taxation. Prominent supply-side economists, many of them unhappy with the Bush administration, were invited to a White House luncheon the week of Aug. 19. They emerged euphoric. Bruce Bartlett, a former Treasury official of Reagan vintage, revealed the details on the Wall Street Journal editorial page Aug. 26. Bartlett tipped the president's political strategy. While Bush's plans would surely fail in the Democratic Senate, his willingness to fight off class warriors would invigorate markets. It could also energize listless Republican voters and produce congressional election gains ("making the chances of passage in January almost certain," wrote Bartlett). What nobody seemed to expect was Chairman Thomas, who has faithfully carried Bush's water the past 20 months, saying he had had enough. The White House found him uninterested in economic growth and consumed by the goal of pre-empting a big Democratic issue: tax "inversion" by American companies who take advantage of overseas tax shelters to avoid high U.S. corporate rates. Thomas warns of being labeled "pro-rich." He is not alone. Republican lawmakers tell the White House that the president's proposed tax plan is just too costly, adding to the budget deficit. They claim that it is politically vulnerable as a "tax cut for the rich" that "raids the Social Security fund." If these Republican concerns sound familiar, it is because they echo the Democratic line for 2002. Many Republicans, however, push a lenient spending line in this campaign season on the contradictory grounds that voters really don't care about budget deficits. It fits the hauteur of Appropriations Committee Chairman Robert Byrd, the Senate's senior Democrat, that he won't deign to meet with cost-cutting Budget Director Mitchell Daniels. What's a little surprising is that Byrd's Republican counterpart, Sen. Ted Stevens, makes snide remarks about Daniels's loss of usefulness for the president. The best bet is that Stevens beats Daniels in Republican cloakrooms, where worries about class warfare trump concerns about pork-barrel spending. In denigrating Bush's tax plans, Thomas tells colleagues that the administration is not pushing its ideas with firmness. That is accurate. Brainier, tougher and louder than most people in Washington, Bill Thomas is one of the capital's truly intimidating figures. George W. Bush has to make up his mind whether to stand up to him, do his best to bring him around, and then go ahead even if the chairman says no.