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Bush's tax cut won't be slam-dunk

Nevertheless, GOP Congress, willing Federal Reserve won't hurt its chancesside

Posted: Sunday, February 11, 2001

WASHINGTON -- President Bush is following Ronald Reagan's 20-year-old example in trying to turn a controversial campaign promise for a big tax cut into legislative accomplishment. Bush, however, faces far different challenges.

Both had to allay concerns within the Republican Party over the size of the proposed cut. Both moved quickly after taking office, hoping to take advantage of the honeymoon most presidents enjoy at the start of their term. And both mounted a charm offensive to win bipartisan support.

While Bush lacks the strong election victory that brought Reagan to power, he has two advantages Reagan did not: a Republican Congress and a cooperative Federal Reserve.

The $1.6 trillion, 10-year plan that Bush sent to Congress last week got a favorable review from Fed Chairman Alan Greenspan, who matched it with cuts in short-term interest rates in an effort to stimulate a stalled economy.

That compares with early 1981, when President Reagan and Fed Chairman Paul Volcker were working ''at cross purposes,'' recalls Murray Weidenbaum, Reagan's chief economic adviser at the time. Volcker's Fed increased rates aggressively in an attempt to tame double-digit inflation.

Working with a Democratic Congress, Reagan built a coalition of Republicans and sympathetic Democrats to win passage of his 25 percent across-the-board tax cut.

But spending reductions he proposed to help offset the $750 billion, five-year package failed to win support. The result: mounting budget deficits.

Former President Clinton also was able to push an economic plan through Congress shortly after taking office in 1993. But his deficit-reduction plan, which included tax increases, was enacted without a single GOP vote. And Clinton's party paid heavily, losing control of both chambers of Congress in 1994.

Most presidents get a honeymoon period, no matter how brief, and Democrats have responded warmly to Bush's personal overtures. Still, much partisan rancor remains from the close election and the Florida recount.

''Congress will give him some slack and leeway. But the conditions he comes in with are tough,'' said Thomas Cronin, a presidential historian and president of Whitman College in Walla Walla, Wash. ''The honeymoon is never guaranteed. And his may be short indeed.''

Not all presidents are successful in moving legislation early in their terms.

President Carter proposed a sweeping energy and economic package in his first year with only limited success. Bush's father was hampered by the savings and loan crisis and his ''no new taxes'' pledge, which he broke in his second year.

The younger Bush does not have the fiscal problems that Reagan confronted. Reagan, inheriting a budget deficit and high-inflation economy, had to persuade Americans that his big tax cut would lift all economic boats.

Bush is blessed with a surplus estimated at up to $5 trillion over the next 10 years and a low-inflation, slowing economy.

Still, Bush knows that any honeymoon for him is fragile. Democrats are already assaulting his plan as favoring the wealthy and threatening to scale it back.

Expending his limited political capital on the tax cut may also make it harder for Bush to get other parts of his agenda adopted, such as overhauling Social Security and Medicare.

Bush concedes he does not have the political capital ''of someone declared a winner by a landslide.''

''I also know I'm going to have to spend all I've got in order to earn some (more),'' he said recently.

Weidenbaum, chairman of Reagan's Council of Economic Advisers in 1981-82, said in an interview that the Reagan tax cut was never an easy sell.

Not only was the Fed raising interest rates, but some members of Reagan's own party were skeptical about the size and timing.

''George Bush called it voodoo economics,'' recalled Weidenbaum, now a professor at Washington University in St. Louis. The elder Bush dropped that colorful criticism when he became Reagan's running mate.

''What really helped was that Ronald Reagan got on TV. He was very convincing and developed broad-based public support,'' Weidenbaum said. That public support made it hard for Congress to oppose the tax cut.

''In the absence of inflation, a tax cut is a much easier issue,'' Weidenbaum said. Still, he added, ''I don't recall the bitterness that is now involved in relations between Democrats and Republicans.''

Tom Raum has covered Washington for The Associated Press since 1973, including five presidencies.



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