Bush Emphasizes Job Creation Over Whittling Deficit

President Bush, faced with continued Senate resistance to his push for a tax cut of at least $550 billion, tried to ramp up political pressure on moderate Democrats Monday by arguing that it is more important to create jobs for the unemployed than to worry about the federal budget deficit.

“I’m concerned about the deficit,” Bush told an audience of small-business owners and Republican supporters in Little Rock. “But I’m first and foremost concerned about that person looking for a job.”

The president made his case as Congress enters a crucial period that could determine how the president’s tax cut plan -- originally set at $725 billion over 11 years -- will be whittled to accommodate lawmakers concerned about the deficit.

Late in the week, the House is scheduled to approve a bill designed to cut taxes by $550 billion over 11 years.

But in the Senate, the figure was reduced to $350 billion to garner two key votes needed to pass a compromise bill. That figure would rule out including Bush’s prized $396-billion initiative to eliminate taxes on dividends. But after a party caucus Monday, Republican leaders said they would find a way to include some version of dividend tax relief.

“We’re going to have a very aggressive dividend part,” Sen. Charles E. Grassley (R-Iowa) said on CNN. Before the caucus meeting, Grassley had been indicating he planned to omit dividend tax relief from the bill that he is to unveil today and push through his finance committee Thursday.

Grassley also said the bill would include more than $350 billion in tax cuts -- although the additional reductions would be offset with spending cuts or tax increases in other areas.

Having failed to persuade a few key deficit-conscious Republicans in the Senate to accept a bigger tax cut, Bush and his allies are trying to sway moderate Democrats. Arkansas is home to two of them: Sen. Mark Pryor, who took office in January, and Sen. Blanche Lambert Lincoln, who voted for Bush’s 2001 tax cut.

“Congress needs to move. They need to move boldly,” Bush said. “We don’t need ... an itty-bitty tax relief plan. We need one that is strong and robust for the American worker.”

Bush has been pushing his tax cut plan since January, but Monday marked the first time he asked Americans to telephone or e-mail their representatives in Congress to lobby for it.

“The message I hope you send is, the more tax relief, the more work is going to be available for your fellow citizens,” Bush said. “I would hope you’d call the members of your congressional delegation to let them know what you think.”

Pryor was unmoved in his opposition to a big tax cut. He also said he viewed it as ironic that Bush was visiting Arkansas to push for tax cuts the same day the state’s governor was calling for a special session of the Arkansas Legislature, which may have to raise taxes to cover the state’s budget shortfall.

Lincoln’s view of the Bush tax plan demonstrates why his call for abolishing taxes on dividends is such a tough sell in the Senate. Lincoln, a member of the influential Senate Finance Committee, is open to the idea of some tax relief to stimulate the economy. She has agreed to meet soon with Commerce Secretary Don Evans, a principal lobbyist for the Bush plan.

But the dividend tax cut falls flat with Lincoln because only 7.8% of Arkansans reported dividend income in 2000. Also, she argued that the cuts in upper-bracket income tax rates that are part of Bush’s plan mean little to her state, where 80% of taxpayers have an adjusted gross income of less than $50,000.

“I agree with the president’s intention to stimulate our sluggish economy,” Lincoln said in response to Bush’s visit to her state. “I just differ with him over what aspects will actually benefit the people I represent.”

Instead, she wants to focus on other elements of the president’s plan, such as expanding the lowest income-tax bracket, providing tax cuts for small businesses and increasing tax relief for married couples and families with children.

Additionally, Lincoln and other centrists from both parties have been insisting on an element not included in the Bush plan: aid to financially strapped states. That proposal also is crucial to another swing vote on the finance committee, Sen. Olympia J. Snowe (R-Maine).

A key question for Grassley as he struggles to get a bill out of his committee is how to include some form of dividend tax relief to please conservative Republicans without losing support from Snowe. She has backed a compromise that would put a cap of $1,500 or less on how much dividend income is not taxed.

The House tax cut bill would cut but not eliminate taxes on dividends, and would also include a cut in capital gains taxes. Although the $550-billion bill supposedly was designed to reduce the cost of Bush’s original plan, tax policy analysts say the bill’s true cost is masked by provisions that cut off some of the bill’s most popular features, such as tax relief for families with children, in 2005. Even the bill’s authors say Congress would be unlikely to allow such tax cuts to lapse.

If those provisions remained in the bill, it could cost more than $1 trillion, according to a report by the Tax Policy Center and the Center on Budget and Policy Priorities -- two liberal Washington research groups that have been critical of the Bush tax cut proposal.

In his speech in Little Rock, Bush argued that the main cause of the growing deficit is profligate federal spending.

“The surest way never to get out of the deficit is to overspend in Washington, D.C.,” the president said. “The best way to deal with the deficit is to hold down discretionary spending to a reasonable level.”

Bush also showed no sign of giving up his push for elimination of the dividend tax. He argues it is a form of double taxation, given that corporations pay taxes on profits before some of that money is passed along as dividends.

“By getting rid of the double-taxation of dividends, a lot of economists talk about what they call the ‘wealth effect’ if the markets will go up,” the president said. “This will help the American public at this point during our economic history. The more people feel they’ve got wealth in their portfolios, the more likely it is they’re willing to spend.”

With the military campaign winding down in Iraq, Bush has been speaking more frequently about the economy, trying to convince voters that its anemic growth and rising unemployment should be blamed not on him but on the Sept. 11 attacks and the two wars that followed.

He also placed some of the blame on the corporate scandals of the last two years, saying some dishonest chief executives “forgot what it meant to be a responsible citizen, and ... didn’t tell the truth to their employees and shareholders.

“Capitalism must have honesty in the boardrooms of American corporations,” the president declared.

Bush stopped in Arkansas on his way back to Washington after a five-day trip that began with a visit to the carrier Abraham Lincoln off the San Diego coast Thursday and a speech Friday in Silicon Valley. He spent the weekend at his ranch in Texas.