Senate Democrats Propose ‘Marshall Plan’ Tax Bill

Senate Democrats Friday unveiled a wide economic plan that would combine a middle-class tax cut with a longer-term “Marshall Plan for America” that would redirect defense spending to domestic needs such as bridges, roads and schools.

The plan also calls, in the short term, for additional unemployment insurance benefits as well as grants and loans to state and local governments designed to create jobs in education, transportation and public safety.

“Our first priority in the New Year should be to get the economy moving again,” said Sen. Paul S. Sarbanes (D-Md.), who introduced the package at a news conference with Budget Committee Chairman Jim Sasser (D-Tenn.). “The recession is neither short nor shallow, and it is likely to end without some decisive shift in fiscal and monetary policy.”

The plan goes far beyond the calls of others in Congress--and the White House--for a middle-class tax cut to spur the economy. Still, it was short on specifics. The two senators offered no figures on the size of the tax cut, how many weeks unemployment benefits would be extended or how much money would be sent to local governments.

Details are expected to emerge during committee hearings on the proposal in the coming weeks, the senators said.

The short-term proposals would cost at least $55 billion, said Sasser, and would be paid for by adding to the deficit through the declaration of an economic emergency by the President. The long-term proposals would be financed through defense cuts, said Sasser, who expects enough savings from defense to also help reduce the budget deficit, projected to be $362 billion for the coming year.

A “reasonable” defense cut over the next five years would range between $120 billion and $150 billion, said Sasser, and up to $400 billion over 10 years.

But the plan drew the criticism of both Republicans and Democrats. Sen. Pete V. Domenici (R-N.M.), senior Republican on the Budget Committee, said the proposal would have a “negative effect” on the economy and House Speaker Thomas S. Foley (D-Wash.) said he had reservations about abandoning the “pay as you go” 1990 budget agreement.

Although the President has indicated a willingness to renegotiate the 1990 deal--which would be necessary to enact such an economic plan--Bush is reluctant to bypass the spending caps outlined in the agreement.

“I want to see us live within these spending caps,” the President said in a televised interview Friday night. “I do not want to see federal spending go out of control again.”