Even if Democrats Win, Tax Cut Stays

Prospects are dimming that Democrats can challenge President Bush’s tax cut, the centerpiece of his economic agenda, even if they maintain or enlarge their Senate majority.

That’s because almost all of the Democratic challengers with a plausible chance of capturing Republican Senate seats in Tuesday’s election have embraced the tax cut -- to the point where several are running ads touting their support for it.

In Washington, national party leaders such as Senate Majority Leader Tom Daschle (D-S.D.) have blamed the 10-year, $1.35-trillion tax cut enacted in mid-2001 for the return of the federal budget deficit after years of surplus. They also have linked it to the sluggish economy.

But the stampede toward the tax cut by key Democratic candidates means that the party has almost no chance of amassing enough votes to roll it back in the Senate next year, no matter the result on election day.

Indeed, leading Democrats, like Daschle, are growing resigned to the likelihood that not only will the tax cut stand, but also the next cuts in income tax rates scheduled for 2004 will go into effect, even though the federal budget ended last year with a $160-billion deficit. “I couldn’t right now see a challenge on the rates,” Daschle said.

On the campaign trail, the refusal by many Democrats to challenge the tax cut has made it tougher for Republicans to paint them as traditional tax-and-spend liberals. But analysts in both parties say it has also made it harder for Democrats to articulate a clear alternative to Bush’s economic plan.

And that appears to be making it tougher for Democratic candidates to benefit from voter unhappiness with the economy; recent polls show the two parties essentially tied when voters are asked which could better produce prosperity.

“The reason [Republicans] are tied with Democrats on the economy is they haven’t offered a critique on what exactly President Bush did that hurt the economy,” said Republican pollster Bill McIntuff.

That view is privately echoed by some leading Democratic strategists.

Aside from Daschle, Senate Budget Committee Chairman Kent Conrad of South Dakota and House Minority Leader Richard A. Gephardt Missouri have placed primary blame on the tax cut for virtually erasing the $5.6-trillion, 10-year budget surplus projected when Bush took office.

“Now, after going from record surpluses to real deficits, we’re seeing just how bad a decision that [tax cut] was,” Daschle said in a recent speech.

In competitive Senate races, the tone is entirely different. In New Hampshire, Democratic nominee Jeanne Shaheen has run an ad declaring that she and GOP rival John Sununu “agree on the Bush tax cut.” In Texas, Democratic nominee Ron Kirk has been on the air saying, “I support the president’s effort to lower taxes.”

Other top Democratic Senate challengers who have endorsed the tax cut include Mark Pryor in Arkansas, Tom Strickland in Colorado, Alex Sanders in South Carolina and Bob Clement in Tennessee, who voted for it in the House. “I’m for keeping the tax cuts and for making them permanent,” Clement said in an interview.

Of the leading Democratic challengers, only North Carolina’s Erskine Bowles, the former Clinton White House chief of staff locked in a close race against Republican Elizabeth Hanford Dole, has dissented. Bowles says he would freeze further tax cuts for the top 1% of earners to pay for a prescription drug plan under Medicare, though that would likely cover only a small portion of the cost.

Political geography may help explain the positions taken by these Democrats. All seven are running in states Bush carried in 2000 and for Senate seats now held by Republicans. Apart from opposing Bush’s call for creating private investment accounts under Social Security, all have sought to minimize conflict with the White House; all, for instance, supported the congressional resolution authorizing Bush to use force against Iraq.

Except for Iowa’s Tom Harkin and the late Paul Wellstone in Minnesota, all of the Democratic incumbents in competitive races voted for the tax cut and have continued to praise it. That list includes Max Cleland in Georgia, Tim Johnson in South Dakota, Mary Landrieu in Louisiana and Jean Carnahan in Missouri.

The Democratic candidates do quibble on further steps in the Bush tax agenda. Most oppose Republican proposals to completely eliminate the estate tax, claiming that would overly benefit the rich; instead, they generally prefer a competing Democratic proposal to exempt roughly the first $5 million in estates from taxation.

And not all the Democratic challengers have endorsed GOP calls to make the full tax cut permanent.

But on the most imminent choice facing Washington in the year ahead, Bush appears to have won the argument before a new Congress even convenes. In January 2004, income tax rates in the four highest brackets are each scheduled to be cut by one percentage point, with another cut due in January 2006. Analysts have estimated that those cuts will reduce federal revenue by about $30 billion to $45 billion a year when the government is projecting continuing deficits.

Democrats always faced an uphill climb in challenging these reductions because 12 Democratic senators voted for the tax cut bill and have been reluctant to revisit their votes. Initially, Democrats critical of the tax cut hoped that party gains in this year’s election might pressure some of their colleagues to reconsider, especially if the results were interpreted as a repudiation of Bush’s economic agenda.

Some activists in both parties believe these Democrats may try to find escape clauses that would allow them to support retrenchment of the tax cut. But both Daschle and some senior White House officials believe the candidates have been so emphatic that they have little room to reverse course.

“I don’t think they have left themselves any wiggle room,” said one senior White House official.