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THE PRESIDENT'S ECONOMIC PLAN | NEWS ANALYSIS

A Blueprint With Bold Letters

President's dramatic, Reagan-esque proposals sharpen his differences with Democrats.

January 08, 2003|Ronald Brownstein | Times Staff Writer

WASHINGTON — The huge new round of tax cuts President Bush proposed Tuesday, building on policies he has already advanced, could reshape the federal government's role in society as profoundly as the tax and spending plans President Reagan drove into law more than 20 years ago.

By proposing nearly $700 billion in additional tax cuts when the government is already facing large budget deficits and projecting steady increases in military spending, Bush has laid out a fiscal blueprint that could constrict spending for years to come on the domestic priorities Democrats favor.

And by building his tax proposal around eliminating individual taxes on stock dividends and accelerating reductions in income tax rates, Bush has drawn a bold line between himself and the vast majority of Democrats, who believe both proposals tilt too heavily toward the rich.

"It is sort of an in-your-face move," said Steve Elmendorf, the chief of staff for Rep. Richard A. Gephardt (D-Mo.), the former House minority leader.

Combined with the prospect of war in Iraq and the administration's promise of major structural reform in Medicare, the plan underscores Bush's determination to leverage large changes in policy from a small majority in Congress.

It also demonstrates his willingness -- even eagerness -- to advance ideas that sharpen the differences between the parties, even at the cost of polarizing opinion in Washington and around the country.

"If you seek a smaller, more incremental change, there is always room for people to seek middle ground or a third alternative," said Vin Weber, a Republican lobbyist close to the White House. "If you seek a big change, it's almost like he is saying to the Congress the same thing he said to the world on terrorism: 'You've got to choose, are you with us or them?' "

The new plan would dramatically accelerate the shift in fiscal policy Bush began in 2001.

When he took office, the nonpartisan Congressional Budget Office projected federal budget surpluses over the next decade of $5.6 trillion -- enough to fuel Democratic hopes of significant new initiatives on education, health care, prescription drugs for seniors and scientific research, among other programs.

But Bush's policy choices -- and the pressures created by the Sept. 11 terrorist attacks -- have now redirected the government toward a path of large tax cuts, growing defense spending and sustained projected deficits. That could squeeze spending on domestic programs for years, reprising the dynamic created by Reagan's large tax cut and military buildup in the early 1980s.

"The implications are that we will either accept large and growing budget deficits or impose draconian cuts on domestic programs not associated with homeland security," said Robert D. Reischauer, president of the nonpartisan Urban Institute and former CBO director.

Even before Tuesday's proposals, the CBO recently estimated that the federal books had fallen so deeply into deficit that Washington would need to divert more than $2.2 trillion in money raised for Social Security to operate the rest of government through 2012.

Tuesday's proposal could result in hundreds of billions of additional dollars being diverted from Social Security taxes -- just two years after Bush and Al Gore both pledged in the 2000 presidential campaign to reserve that money in a "lockbox" for paying down the national debt.

While Bush has vowed to protect some priorities -- such as aid to low-income schools and medical research -- his aides are trying to freeze overall domestic spending. And Democrats say that means even the programs Bush claims to favor will be shortchanged.

This bold redirection of government's priorities has surprised and pleased conservative activists, many of whom feuded with his father's administration and initially resisted the younger Bush in 2000.

"There has always been a suspicion that Bush isn't really one of us, like his father wasn't," said Steve Moore, president of the Club for Growth, a conservative political group. "But Bush has spent the last two years of his presidency trying to establish those Reagan-esque credentials."

Yet by so emphasizing tax cuts, Bush may be threatening his efforts to define himself as "a different kind of Republican," as he often said in 2000. Democrats are already arguing that the tax cut plans, piled atop the $1.35-trillion reduction Bush won in 2001, will demand long-term domestic spending cuts that undermine his promise to be a "compassionate conservative."

"He is blowing up the bridge that he promised to build to a different Republican future," said Bruce Reed, a former top aide to President Clinton who now heads the centrist Democratic Leadership Council.

By inciting partisan conflict, the economic plan follows Bush's pattern since taking office. Like most of his major domestic proposals, the plan seems aimed more at reinforcing his core supporters than converting swing voters.

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