With Economic Plan Not Yet Out of Bag, Barbs Fly

Times Staff Writer

Setting the stage for the first major battle in the new Congress, Democrats on Friday portrayed President Bush's new economic stimulus plan as a boon for the rich, too much of a drain on the treasury and just plain bad economic policy.

With Bush unveiling his plan next week -- and a Republican majority in both houses eager to take it up immediately -- both sides are gearing up for a fight that is likely to carry over into the 2004 congressional and presidential campaigns.

Although Bush continues to enjoy high approval ratings for his handling of the war on terrorism, he gets lower marks on the economy. The White House, mindful that Bush's father was denied a second term because of a weak economy, is moving to show the president is dealing with the problem.

Bush is expected to call for a cut in the tax on cash dividends that companies pay to shareholders, plus embrace such Democrat-backed measures as extending unemployment benefits and spending $100 billion or more in federal aid to states to create jobs. Bush also will call for a speed-up of tax rate cuts, but possibly excluding the very highest earners, according to sources familiar with the plan.

Democrats worked Friday on a rival plan that would aim more of the tax cuts at the lower and middle class and cost less.

And they fired the opening shots in what could be the biggest battle of the year here.

The new House Democratic leader, Rep. Nancy Pelosi of San Francisco, said Bush is using the term "stimulus" as a "Trojan horse to wheel in some favorite tax breaks for the high-end that they're so fond of."

Democrats plan to present an alternative that Pelosi said would have an immediate effect on the economy, be "fiscally sound" and "would not have long-term harm to our budget."

Senate Democratic leader Tom Daschle plans to assail the Bush plan in today's weekly Democratic radio address as the "wrong idea at the wrong time to help the wrong people."

And Sen. Edward M. Kennedy (D-Mass.) said the plan "makes clear that the administration's first priority is to help corporations and their wealthy friends do well in the slumping economy while average families are left to survive on their own."

Democrats have focused their criticism of Bush's plan on his proposal for a reduction in the tax on stock dividends, a proposal that Democrats say would disproportionately benefit wealthy taxpayers.

For example, Daschle said, anyone making more than $1 million a year would get a tax break of $24,000, while taxpayers earning between $40,000 and $50,000 a year would get $76.

"Twenty-five percent of that tax cut goes to people making over $1 million a year," Pelosi said. Rep. George Miller (D-Martinez) questioned whether cuts in corporate dividends would do anything to boost the economy.

"He's talking about hundreds of billions of dollars for something that has no stimulative impact," Miller said.

But with Bush coming off a big Republican victory in November's congressional elections, Democrats face a tough fight, political analysts said.

Democrats sought to use the Bush-backed 10-year, $1.35-trillion tax cut enacted in 2001 against Republicans in the midterm elections, blaming it for the return for the federal budget deficit and linking it to the sluggish economy -- only to lose control of the Senate to the GOP.

Bush aides carefully crafted their package to include some of the Democrats' initiatives, such as an extension of unemployment benefits, in an apparent effort to not only blunt critics that their plan benefits only the wealthy but also to gain Democrats' support in Congress.

"At the least, there's enough in it for the Democrats so that the half-dozen moderate Democrats in the Senate will probably help get some kind of compromise package passed," said Larry Sabato, a University of Virginia political scientist.

"Bush's goal next week is to prevent the Democrats from successfully labeling his economic stimulus plan as 'Reverse Robin Hood Economics' -- taking from the poor to give to the rich," said Patrick Basham, a scholar at the Cato Institute.

"In the end, Bush will get a lot, but not all, of what he wants," Basham added. "The tax cuts are central to his presidency. As such, the White House is geared up for quite a PR push."

Although political oddsmakers think Bush ultimately will get much of what he wants, "Democrats are beginning to smell blood," Sabato said.

"The flood of Democratic Party presidential announcements is reinforcing the growing belief in party ranks that Bush is vulnerable, just as his father was, on the economy," he added.

"So we can count on Democrats in both houses of Congress, and those on the presidential campaign trail, to extract the maximum amount of flesh from Bush's hide on this economic package. The Democratic mantra will be: 'It favors the rich. It won't do the trick. It's growing an enormous deficit.' "

Bush allies know that too well. "We will be criticized whatever package we come out with," said Rep. Mark Foley (R-Fla.). "We're trying to take some wind out of their [Democrats'] sails before they start."

Pelosi acknowledged the reality facing Democrats in a GOP-controlled House. Of Speaker J. Dennis Hastert (R-Ill.), she noted, "He has all the cards."

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