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Saturday Morning News

Bush Attempts to Sell Tax Cut to Country

Aired March 3, 2001 - 9:13 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KYRA PHILLIPS, CNN ANCHOR: President Bush is keeping the pressure on Congress to pass his $1.6 trillion tax cut plan. After visiting five states to sell the plan to the people, the president is about to make another pitch in his weekly radio address.

Let's go now to White House correspondent Kelly Wallace for more. Hi, Kelly.

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Hi, Kyra. Well, President Bush will make another case for his budget, especially his tax cut plan, in his weekly radio address. A senior administration official close to the president saying that Mr. Bush is holding firm and that he is not willing to negotiate on the size of that tax cut, at least not yet.

Now, Mr. Bush's strategy going into this week will be quite similar to his strategy last week. He is getting out of Washington and hitting the road. Mr. Bush will travel to three states, to North Dakota, South Dakota, and Louisiana. Six Democratic senator hail from those states, including Senate Minority Leader Tom Daschle.

Now, Mr. Bush knows with a 50-50 split in the Senate and with some moderate Republicans expressing concern about the size of the president's tax cut plan, he will need the support of moderate to conservative Democrats to pass his agenda.

Now, yesterday, a few hours before heading to Camp David, Mr. Bush addressed a group of state lawmakers. As we know, he used to be one himself, the governor of Texas. In that speech, Mr. Bush signaled his continued opposition to so-called triggers. We have heard Democrats and some moderate Republicans mention triggers. These would be mechanisms which would be put in place, stopping tax cuts from going forward if the federal budget surplus does not grow as much as previously expected.

Now, Mr. Bush, in his speech, said in his view, there are only two reasons that the federal budget surpluses would not materialize.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: One is that the revenues aren't quite as expected because the economy has slowed down, in which case we need to accelerate tax cuts. You see, tax relief will put money in people's pockets, which will help give the economy a second wind.

Or, a reason that surplus may not materialize is because Congress has overspent. And it just seems like to me we need to be have -- be careful about any trigger mechanism. It ought to be on spending to make sure that we don't overspend surpluses.

(END VIDEO CLIP)

WALLACE: Now, the White House called a great step forward a vote in a House committee this week approving the core part of the president's proposal, across-the-board cuts in income tax rates. The full House expected to take up the measure and approve it this week. Again, though, Kyra, the big question is the outlook in the Senate, where right now the president does not have the votes for his tax cut plan -- Kyra.

PHILLIPS: And the president mentions spending right there. Kelly, what's -- how's it going over, his 4 percent reduction in government spending? How -- what would that affect, and what's the response been?

WALLACE: Well, absolutely. We've been talking about the tax cut plan, but another big challenge for this White House is getting support for the president's budget. The president wanting to slow the growth of spending on government programs to 4 percent as opposed to what it was last year, which was 8 percent.

Now, even some members of the president's own parties, including Republican Senator Pete Domenici, chairman of the Senate Budget Committee, does not think that the government can maintain the nation's needs if it only increases spending by 4 percent. So the president and his budget aides have a lot of convincing to do. Democrats, at the same time, also think that the president should not cut spending when he's paying for a big tax cut.

And the president, though, is telling lawmakers, Don't risk a veto. He wants 4 percent, and that's what he wants right now -- Kyra.

PHILLIPS: All right, Kelly Wallace live from the White House, thanks so much -- Miles.

MILES O'BRIEN, CNN ANCHOR: Well, the tax cut portion of the president's budget has gotten a lot of attention. There's an understatement. Democrats say it's too big, Mr. Bush says it's just the right size.

Let's talk a little more about it. Two guests joining me from Washington, first Bill Frenzel, a former Republican congressman who's now a guest scholar at the Brookings Institution, and Robert Greenstein, the founder and executive director of the Center for Budget and Policy Priorities.

Mr. Greenstein, let me begin with you. I believe Kelly Wallace just reported that the administration is saying the numbers are not negotiable. Do you buy that? ROBERT GREENSTEIN, CENTER FOR BUDGET AND POLICY PRIORITIES: No, of course at the end of the day, if they have to negotiate to pass it, they will. And I think at the end of the day, they probably will have to negotiate.

What the budget that came out this week tells us is that the president can only fit in a tax cut of this magnitude, which the figures in the budget suggest is now $2 trillion, not $1.6, by shorting other priorities.

The money for education, there's a smaller increase than in each of the past four years. You look at the budget, you find that each new dollar for education is balanced or offset by a cut in dollars for job training, child care, and other services.

For prescription drugs, the amount of money here is so small that you probably couldn't cover even 50 percent of an elderly person's drug costs until their out-of-pocket drug costs exceeded $10,000 or $11,000.

And you look at the budget as a whole, you find that in this budget, the amount of money for tax cuts for the richest 1 percent of the people in the country exceeds the amount for prescription drugs, the uninsured, education, defense, and all other initiatives in the budget combined.

I think that that won't ultimately sell and that the president will have to negotiate.

O'BRIEN: All right. My math is fuzzy enough not to be able to challenge you on that exact point. Mr. Frenzel, can you set it straight? Is that the way you see it? Is that the way the numbers add up from where you sit?

BILL FRENZEL, BROOKINGS INSTITUTION: Well, of course they do not. In the first place, we have a 4 percent increase in discretionary spending in the coming year's Bush budget. That's well over the cost of living. It is less than last year, where we had about three times the increase in cost of living and spending, in discretionary spending, which seems to me to be profligate to a great extent.

Nothing wrong with the tax cut. It simply returns to people who have paid a lot of taxes money which the government should not be spending, and those who oppose the tax cut really simply want to spend that money. I think it's unnecessary. We're taxing at the highest rate in our country's history in terms of taxes as a percentage of our gross domestic product.

O'BRIEN: Mr. Greenstein, you were shaking your head through most of that. Why don't you just chime in?

GREENSTEIN: Well, I would like a tax cut too. The problem with this tax cut is it's too big. We don't have room for one this large. Mr. Frenzel talked about 4 percent in what he called discretionary spending. Things like Medicare are outside that. We have a big long- term problem in Medicare. It ultimately doesn't have enough money to pay the bills. It's building up reserves now in the hospital insurance part of Medicare, that ultimately all get needed when the baby boomers retire. And we need an adequate prescription drug benefit in Medicare.

This budget provides no funds to help deal with the long-term financing problems in Medicare, that actually is set up in a way that the current Medicare surpluses are essentially used for the tax cut and other things of that sort. And there isn't adequate money for a drug benefit.

It's true that there is a 4 percent increase in non-entitlement spending in the budget. But when you look at it, it turns out that the defense spending increases, the increases in health research, and the increases in education pretty much eat up all the money.

When you look at the fine print of the budget, you find that outside of defense, education, and health research and maybe half a dozen other things like that, that everything else the federal government does that isn't an entitlement has to be cut $230 billion over the next 10 years in this budget.

Which programs would be cut in that $230 billion? The budget gives us no detail. And basically the budget is set up in a way, as I see it, that we can't see the full tradeoffs that the big tax cut imposes until after the tax cut is already law. The president wants national missile defense. There's no money for it in the budget.

O'BRIEN: All right...

GREENSTEIN: We need a full accounting of all the pluses and all the minuses so we can decide how big a tax cut we can afford. The budget doesn't let us figure that out.

O'BRIEN: Mr. Frenzel, would you say that the budget is not complete enough for anyone to make an appropriate assessment as Mr. Greenstein suggests?

FRENZEL: I certainly don't think so. The fact that we are increasing education by large amounts, increasing housing and urban development by large amounts, and decreasing or letting other accounts rise only slightly is simply an example of setting priorities. I think the people like that. I think that's what they want.

We are not passing a budget for 10 years, we're passing a budget for one year. We use 10 years to think about what the costs are going to be in the future. None of us can see that far in the future. George Bush even if reelected will be long gone in 10 years.

Things will change. We need to look at the budget for this year and fix on that.

O'BRIEN: I've got to ask you guys briefly before you get away. I felt like the speech was very well received on both sides of the aisle, and that the president so far is doing a fairly persuasive job in getting people onto the tax cutting side of things. It kind of reminds me of that joke where the punch line is, We're sort of just discussing price now.

Mr. Greenstein, do you get the sense that Democrats are going to feel compelled to come over to the president's side because of his persuasive abilities to go directly to the American people here?

GREENSTEIN: To the contrary. I think that there's stronger Democratic opposition to the president's tax cut than I would have guessed a couple of weeks ago. We saw every Democrat on the Ways and Means Committee voting no this Thursday on the tax cut. I think what's happening is that the Democrats have two concerns.

First, that the tax cut's so large it isn't safe for long-term fiscal solvency. When the details of the budget came out, it turns out that the president doesn't pay down as much debt as he could. That's arousing concern, particularly among more fiscally conservative Democrats.

And when people are seeing how inadequately the budget treats things like long-term Medicare solvency, the uninsured, the Medicare drug benefit, and the like, I see opposition hardening. I think we're in for a long haul here, and I do think that the Senate is where the decision will be made.

O'BRIEN: Mr. Frenzel, just briefly, last word for you to balance it out.

FRENZEL: I think that the tax cut is going to be passed with votes of both Republicans and Democrats. It will not be exactly what the president offered up. These things always change. But in the last analysis, he's going to get a substantial tax cut, and a lot of Democrats will support it.

O'BRIEN: Bill Frenzel, Robert Greenstein, thank you both for being with us on CNN SATURDAY MORNING, and trying to distill that all into about six minutes, or maybe a little more. We appreciate it.

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