White House Proposes Two-Step Economic Package

The Bush Administration suggested Thursday that Congress act rapidly on short-term tax relief early next year and then develop a second package of measures to deal with long-term economic problems.

The two-step approach was outlined by Budget Director Richard G. Darman during testimony to the Senate Finance Committee on tax bills to revive the sluggish recovery and lower taxes for middle-income Americans.

After meeting with President Bush in the morning, Senate Minority Leader Bob Dole (R-Kan.) said that it may be possible to get a first-stage bill approved by Congress within 30 days after it reconvenes on Jan. 21.

“The President wants to get something done very quickly,” Dole said. “If we go through our usual bickering and bidding war, we won’t have a bill before June and that could have an adverse effect, especially if we increase the deficit.”

Finance Committee Chairman Lloyd Bentsen (D-Tex.) was cool to the two-package idea, however.

“We all want to avoid a bidding war where amendments are added to the tax bill like ornaments to a Christmas tree, but I don’t think the answer is to have two Christmas trees,” Bentsen said in a statement issued after the hearing. “The way we can avoid a bidding war is by leadership from the top down.”

Even so, it may not be possible to restrain lawmakers from trying to attach their favorite tax-cut provisions to the first bill going through Congress that has presidential approval.

Proposals for an investment tax credit to spur business purchases of new equipment were advanced by Bentsen and other senators at the session. Treasury Secretary Nicholas F. Brady said that the Administration is taking “a hard look” at that idea, especially to provide incentives to firms to invest more in machinery or equipment.

Democratic leaders in both the House and Senate have lined up firmly behind a reduction in taxes for families with incomes between $30,000 and $50,000 as a centerpiece of the election-year tax legislation, although Republicans are divided on the idea.

But if tax cuts are offset by spending reductions or tax increases as the budget agreement now demands, many economists believe that they would have only a slight stimulative effect on the economy.