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A Pain-Filled Tax Cut Plan

January 17, 2003

President Bush boasts that he is creating prosperity. But if the White House keeps cutting taxes, while raising its estimates of the budget deficit -- as it did Wednesday, to $200 billion -- Americans are going to feel as duped as the women on "Joe Millionaire" who are about to discover that the hunk they've been chasing is really a working stiff.

At the very moment that the White House is peddling a lavish tax cut package, Senate Republicans are pushing to cut spending on social programs and backing away from their commitment to protect their constituents from terrorists. The two initiatives would knock social services out from under people and leave the nation vulnerable. They would also further impoverish the states.

Congress left a fiscal mess last year when it failed to pass important spending bills. The GOP is intent on showing that it can stick close to the $385-billion spending package demanded by Bush. But the party's shortsightedness (and short memory) is reflected in Republican senators' rejection Thursday of Sen. Robert C. Byrd's (D- W. Va.) amendment for pumping an extra $5 billion into the budget for protecting ports, nuclear plants and other facilities. That may be more than is needed, but fending off terrorists is important and the states can't do the job alone.

Indeed, much of the GOP's stinginess is ill advised. Republicans want to keep welfare spending constant. With the economy getting uglier, that's not smart. Among the other programs that are at risk but should be saved is the $2.7-billion Children's Health Insurance Program. If the money isn't forthcoming, Sen. Lincoln Chafee (R-R.I.) says, states will end up denying health care to thousands of low-income children.

In the jockeying over spending, Democrats and Republicans may reach reasonable compromises. More important is the fate of the president's tax package. The proposal, which offers no fiscal relief for states, would worsen the states' individual budget crises by increasing unemployment and ultimately making the national economy more sluggish. Because many states' tax collection is linked to federal income tax, abolishing the dividend tax alone would cost them more than $4 billion a year. California could see a loss of as much as $1.2 billion.

As an increasing number of moderate senators, including Susan Collins (R-Maine), question the president's tax-cutting zeal, reason may yet prevail. This isn't reality television; it's reality, where wise leaders cut taxes when the nation is flush, not when it is plummeting into debt.

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