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Crossfire

Can the Nation Afford President Bush's Tax Cut?

Aired March 8, 2001 - 7:30 p.m. ET

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

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Give me the news.

REP. DENNIS HASTERT (R-IL), SPEAKER OF THE HOUSE: Well, you got 230 yeses and 189 nos. And that's a win.

(END VIDEO CLIP)

TUCKER CARLSON, CO-HOST: Tonight: the House gives you a big tax cut and George W. Bush a big victory. One more hurdle to go. But will the Senate fall in line?

ANNOUNCER: Live from Washington, CROSSFIRE.

On the left, Bill Press. On the right, Robert Novak.

In the CROSSFIRE: Democratic Senator Dick Durbin of Illinois; and Republican Senator Rick Santorum from Pennsylvania, chair of the Senate Republican Conference.

CARLSON: Good evening, and welcome to CROSSFIRE. President Bush is on the way to getting his tax cut -- part of it, anyway. The House, with the help of 10 Democrats, voted to slash federal income taxes by $958 billion over the next 10 years, and to reduce the number of tax brackets from five to four.

Democrats accused Republicans of a "my way or the highway" attitude in pressing for the tax cut. Republicans are heralding the vote as a major victory. But obstacles remain. The story now moves into the Senate, where the outcome isn't so clear. To prevail, the White House must win every Republican vote. Yet some Republican senators are demanding a so-called trigger, which would link future debt relief to tax reduction.

Meanwhile, George W. Bush is taking his case to the public. The presidential road show arrived in North Dakota today. The purpose: to turn up the heat on Democratic senators who represent Republican states. Will Bush succeed? Will fears of a recession, and a growing public appetite for tax cuts, force the hand of key Democrats? And will the president be able to keep members of his own party in line? The climate looks murky. We'll get the forecast tonight.

Sitting in on the left this evening, former Hillary Clinton Press Secretary Lisa Caputo -- Lisa.

LISA CAPUTO, GUEST CO-HOST: Nice to be with you, Tucker. Nice to be with you, Senator Santorum, my fellow Pennsylvanian.

SEN. RICK SANTORUM (R), PENNSYLVANIA: I was with your mayor of Wilkes-Berre today: Tom McGroarty, so I just want you to know that.

CAPUTO: Great.

SANTORUM: He was in lobbying today.

CAPUTO: Excellent. Glad to you have back in the saddle in the home state. I wanted to go, quickly, to some running commentary we have had on this. John Tanner over the weekend said, we have had no input into this tax cut. An anonymous lobbyist quote in "The New York Times" working with administration said, was quoted, "The game plan is to absolutely fast-track this thing before the opposition can fully mobilize" and Senator Breaux over the weekend talked about President Bush's approach being a serious mistake and Representative Gephardt today had this to say; let's go to the sound.

(BEGIN VIDEO CLIP)

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: This is a partisan process; this is happening without a budget, without hearings, without input from anybody. This is more of the same that we have seen over the last six years. This is a continuation of a "my way or the highway" leadership. George Bush has not changed the climate in Washington.

(END VIDEO CLIP)

CAPUTO: Senator, as you know, President Bush campaigned as a uniter not a divider. Is this really a uniter not divider strategy?

SANTORUM: I think this is an understanding of how the political process works, and that is, the votes were clearly there in the House of Representatives to pass exactly what he wanted and that was obvious from what happened today. And he knows as well as everybody here, including my colleague, here, my colleague from Illinois, that the real negotiating starts when we get to the United States Senate.

There is no point of negotiating in the House of Representatives when you know you have the votes; give up something, and then come to the Senate and have to give up more. It's just a very practical way of approaching this. Governor Bush as governor -- I should say President Bush as governor -- understood the legislative process, and you have to understand where you make your fight and you can win; you take your win and move to the Senate and that's where the battle will be.

CAPUTO: Yes, but in the state of Texas, if you'll recall, he left them in not great shape. In fact, they didn't have the surpluses. His high tax plan there left them with depleted surpluses and now, they're in a state of panic where they have no funds for increasing state needs. Isn't he doing the same thing here on a national level?

SANTORUM: Not at all. In fact, if you look at the president's plan, it's very, pragmatic; it provides lots of room for error, provides almost a trillion and a half dollars in contingency funds just in case the surplus doesn't materialize. It puts Social Security money in for Social Security; it pays down the debt as much as it can be paid down over the next ten years, and then takes what the surplus is at that point and returns it to the American public.

CARLSON: Senator Durbin, there was a fascinating idea today -- not for the first time, but one of your wisest colleagues -- Bob Smith, of course, of New Hampshire -- listen to what Senator Smith proposed today.

(BEGIN VIDEO CLIP)

SEN. ROBERT C. SMITH (R), NEW HAMPSHIRE: There are a lot of people out there that don't want this tax cut, so I think I have a very simple solution: just simply put a notation on your income tax return and say, I'm willing to return it; I don't want it. Then everybody would be happy.

(END VIDEO CLIP)

CARLSON: Let's take the Smith plan seriously for a second.

SEN. RICHARD DURBIN (D), ILLINOIS: No one else will.

CARLSON: What in the world could possibly be wrong with this? Why not let the American people -- as you senators often say -- why not let them decide how much they want?

DURBIN: It gets down to the bottom line question: if the American people own the surplus, who owns the national debt? The $5.7 trillion national debt that cost us a billion dollars a day in taxes to pay interest on this national mortgage. What we're saying on the Democratic side is, let's take a responsible approach -- let's pay down the national debt, the best gift we can give our kids.

The president falls short on the mark. He says $2 trillion is the best we can do over 10 years. We know he's wrong. We can do better and we should do better.

CARLSON: But...

DURBIN: Secondly, if you let me finish this, quickly, secondly: the tax cut, we believe, should be a portion so that everyone benefits. Right now, it is larded on the wealthiest in America and people making less than $100,000 a year don't see that kind of benefit, and folks who aren't paying income tax -- only payroll tax -- are ignored completely. And when you get down to that, we have got to have some money left to invest in education, reforming Social Security and Medicare, and maybe one of the planks of Senator Santorum's campaign and mine: prescription drug benefit for the elderly and disabled. We shouldn't leave... CARLSON: Well, of course, as you know, the president's plan provides for enormous increases, certainly by Republican standards, for education. It pays down the debt, but my original point here: it seems to me, you are arguing one of two things; either the American people are dumb, despite the fact this has been debated in public for months -- they still don't understand it -- or they are greedy and they want money back even though it will hurt the country. Three polls released today say the majority of Americans support Bush's plan.

DURBIN: If you ask the majority of Americans the simple, straightforward question, we have a surplus in Washington -- what should we do with it? And here is what answers come back, overwhelmingly: number one, spend it on education, number two, reform Social Security and Medicare, number three, cut taxes and number four, pay down the debt.

So to say the American people have this clamor for a tax cut, why is this president out on the hustings begging people to support a tax cut?

CARLSON: Because he's trying to convince you?

DURBIN: What if he had to sell something that was tough like a tax increase? What would he do then?

CAPUTO: You know what? This is a perfect time to go to another "Los Angeles Times" poll, senator. You pointed out some figures -- I want to go a "Los Angeles Times" poll taken this week that shows actually that tax cuts rank 5th behind education, if we can go to the graphic.

Education, top; Economy and Jobs, second, Family Values and Morals, Crime and Drugs.

Senator Santorum, you see taxes and tax cuts is last on the list.

Why is President Bush trying to ram through Congress something that clearly isn't a public priority?

SANTORUM: First off, you asked what the concerns are, you didn't ask what they want the federal government to do. A lot of those things right there -- they are not looking for the federal government for answers for some of those things, particularly, some of the morality and cultural issues. They are not looking to Washington DC to solve that problem, number one.

Number two, one of the biggest things they are concerned about is jobs and the growth in our economy. There is nothing better that we can do for long term growth of our economy to lower these oppressive tax rates we have in place right now, particularly on the small businessmen and women in this country, who pay at the top rate by and large. They are the job creators in our society right now, and they are being hit with about a 40 percent federal tax burden right out of the chute. That is not going to be good for economic growth and I think people are concerned that we are moving into a slower time of growth, that they will see some job loss. The best way to ensure that over the long term is to reduce taxes.

CAPUTO: But if we are going into an economic downturn or a slowdown, why wouldn't you propose a tax cut that goes more across the board, that's more equitable, instead of going to the wealthiest? Why would you base it on surplus projections that are as credible as a weather forecast, like the snowstorm we were supposedly just supposed to have; why are you going to want to throw the country back into times of budget deficits? Haven't we learned anything from the Reagan years?

SANTORUM: First off, the budget projections of $5.6 trillion is a very conservative forecast and I believe we will be here next year at this time talking about another tax reduction. That's how much money I believe we will have in surplus within the next year. What we are doing here is very modest and I repeat: we are paying down all the debt we can pay down responsibly.

Now, some have suggested, we can pay down more debt than actually matures over the next ten years. Do to that, you would have to pay a premium to pay down the debt. If the point is, to actually lower the amount of cost that this bares us. Pay any premium is a waste of taxpayers dollars. What the president has proposed is to call the debt as it matures, that's the way we should do it, it's the fiscally responsible way to it. We pay down all the debt, we provide for tax relief for overtaxed Americans at a time when economic growth is in question, and we have contingency funds for education, for Medicare of about 1 trillion and a half dollars.

CAPUTO: But the wealthy are the ones who are overtaxed. That doesn't seem equitable to me.

SANTORUM: The fact of the matter is, that it's an across the board tax cut. I love this thing that somehow or another, if you cut taxes across the board, the wealthy get off. I used this analogy as...

CARLSON: Can I...

SANTORUM: Can I finish?

CARLSON: Of course.

SANTORUM: My analogy. Opening Day at PNC Park in Pittsburgh; the game gets rained out. You have guys who bought box seats along the first base line who paid $25. Guys in the luxury suites in the box pay $50 and the guy in the left field bleachers pay $10. My idea is, the game gets rained out, you pay people back what they paid.

Your idea of fair, and the Democrat's is -- the guy in the luxury box who paid 50 gets 25, the guy in the first base line who paid 25 gets 30, and the guy in the left-field bleachers gets 25, and the guy in the pickup truck driving by, who didn't even buy a ticket, gets 10 bucks. And that's fair.

That is not fair. You pay people back according to what they paid in. And that's what our tax plan does. CARLSON: Sounds like a bad game of baseball.

Now, Senator Durbin, let me ask -- I want to read you a quote from an American president, an expert on cutting taxes. We'll reveal his identity at the at end.

Listen to this: "I'm talking about the accumulated evidence over the last five years that our present tax system exerts too heavy a drag on growth in peace time, that it siphons out of the economy too large a share of personal and business purchasing power, that it reduces the financial incentives for personal effort, investment, and risk-taking."

Now, that, obviously sounds like George W. Bush, but it's not. That comes from President Kennedy. But it's making the point that Bush makes, which is that taxes are a drag on growth. And America needs growth, as we all agree, especially at this point.

Why is this not the best possible way to spur economy headed toward a recession?

DURBIN: The Democrats support a tax cut. I support a tax cut, and I think we have to have a reasonable one, a sensible one.

And to use the analogy that my colleague from Pennsylvania suggested, keep in mind here that 43 percent of the tax cut is going to people who make over $300,000 a year. The same people who paid 21 percent of the federal income taxes.

Your analogy falls apart here because the people up in the skyboxes aren't getting their $100 back, they're getting $200 back because the game was rained out.

SANTORUM: Their share of the tax burden...

DURBIN: I didn't interrupt your analogy. Please don't interrupt mine for at least a second or two, here. If we are going to provide a stimulus for the economy, let's do it in a responsible way.

We all remember the Laffer Curve, aptly-named Laffer Curve of Reaganomics. This was going to be a big tax cut to spark the economy, and what did we get from it? The biggest deficits in the history of the United States and a roller-coaster economy.

We know what happened in Texas when Governor George Bush said the best thing to do with the surplus in Texas is create a tax cut. Now he's driven the Texas economy into a deficit. We don't need to do this on a national basis. That doesn't spark economic growth.

Let's do sensible things. When you say to the American people: what can we do to move the economy forward? Sure, they want a tax cut, but the number-one priority: spend it on education. They want more federal funds on education. And what this president has said is "We can have it all." He's given us a Cliff's Notes budget instead of the full text...

CARLSON: But the people want that.

DURBIN: We want to see it.

CARLSON: I mean, they -- aren't they allowed to evaluate it and calculate what's best for them? And they've decided in pretty clear terms that this is what they want.

DURBIN: I have to tell you, the people have decided in pretty clear terms, their number-one priority is education in America. Education in America, not a tax cut.

CARLSON: Well, we will continue this, Senator Santorum and Durbin.

We will be right back, these people and I, in just a moment, next on CROSSFIRE.

(COMMERCIAL BREAK)

CAPUTO: Welcome back to CROSSFIRE. I'm Lisa Caputo sitting in on the left.

We're talking about a taxing day on Capitol Hill today. President Bush's nearly $1 trillion tax cut passed the House this afternoon and now the debate looms large in the Senate. Joining us tonight are Senator Rick Santorum of Pennsylvania and Senator Dick Durbin of Illinois -- Tucker.

CARLSON: Senator Durbin, sometimes it takes a horror movie to bring home the deep truth of a situation. I want you to take a look at part of an ad put up by something called the Club for Growth, I think captures taxes better than anything I have seen.

(BEGIN VIDEO CLIP)

ANNOUNCER: A blob has taken over Washington. It's the tax blob! The tax bite is at a record high. Washington's budget surplus has never been bigger. Now the blob is crushing the American economy. We're the Club for Growth, and we're out to stop the tax blob. President Bush is on our side.

(END VIDEO CLIP)

(LAUGHTER)

SANTORUM: That's great.

CARLSON: You laugh, but the average American family pays more...

DURBIN: Wouldn't you?

CARLSON: Well, I -- but it does bring home something that's fundamentally true. I mean, the average American family pays more in taxes than on food, clothing, and shelter. Pays more -- double what it paid in taxes, a percentage of income, than it did in 1985.

DURBIN: All taxes.

CARLSON: That's exactly right, all taxes.

DURBIN: Federal, state, and local.

CARLSON: But clearly Americans need tax relief so you -- the Democratic argument is: Well, gee, you know, it goes to the rich so they can put new chrome on their Bentleys, et cetera, et cetera. But why not take -- why not take the amount that President Bush is suggesting and just move it, and target it right to the center of the country, to working Americans, as you say?

DURBIN: You're on to something. I think you're on to something here, and I hope that -- I hope that President Bush, when he comes to the Senate and starts talking about compromises, will consider that.

And let me go back to the analogy that Senator Santorum mentioned earlier about the person who wasn't in the ballpark. Don't forget the millions of Americans who don't pay income tax but pay high payroll taxes, struggling to get their kids through school, usually in lower- income jobs. They are ignored by the Bush tax cut, and they shouldn't be. They need tax relief as well. And we've got to find a way to help people under $100,000 in income.

The people over $300,000 in income who are the big winners with the Bush tax cut can generally take care of themselves. We'll give them a part of the across-board tax cut, but let's focus it on these families.

CARLSON: OK, well, here -- OK, I have an idea -- I'm not an economist, but I've got an idea for you.

Why not take the 958 billion that the Bush proposes to spread across the spectrum of American taxpayers -- that amount -- and just give it to, I don't know, everyone who makes under $60,000 a year?

DURBIN: I wouldn't cut that low, because I think a family with two public school teachers in the city of Chicago that might be making $80- $90,000 a year is not a wealthy family.

CARLSON: OK, well, let's start there. How about 80- or 90,000? But that full amount, and target it to that group, the working America.

DURBIN: I would like to see much more targeted to working Americans.

CARLSON: But not that much.

DURBIN: Well, of course I would. I mean, and I'd like to see it all come that way, but let's make sure we do it sensibly. This whole idea of a trigger we started the program with -- let's take a look what we really have in terms of a surplus. Can we really guess what America's going to look like five years, 10 years from now? It's just a guess, and we should really do the responsible thing and only spend the money we have.

CAPUTO: It is all about guessing, though, isn't it, Senator Santorum?

I mean, look at what happened in Texas. Let's go back to Texas because I think Senator Durbin raises an excellent point. Clearly in Texas when George Bush was governor, they made exorbitant budget surplus productions.

And then Bush went out on the campaign trail, he implemented a tax cut, and then said in July, I believe, of the campaign year -- quote -- "I hope I'm not here to have to deal with it." -- end quote.

Now the states increased, you know, all of their needs. There's no funding available, there's no contingency fund available, and they're in a state of disarray. And a Republican state Senator in Texas, if I can show the quote, a member of Bush's own party says the following: "We made tax cuts because we had this huge surplus. I might have voted a little differently on all of those tax cuts, had I realized that we were only funding 23 months of these programs."

How responsible is that? And really, isn't this what is going on?

SANTORUM: No, that is clearly not what is going on. What is going on is that we are paying down all the debt that we can pay down. OK, that's number one.

Number two -- we are setting aside $1 1/2 trillion for contingency spending. That's above a 4 percent growth rate, which is above the rate of inflation and discretionary spending, at time when we just increased discretionary spending by 8 percent. So, we're dealing from a higher base, and we're still adding on to that.

So, the appetite for spending here, under most circumstances, should be quenched. But no -- there are those who would like to even spend more. What we're saying is: if this money stays in town, we will not pay down more debt, we will pay down less debt, because that money will be spent and then some.

What we are trying to do here is responsible -- we are trying to give money back to the people who paid it, who overpaid, allow them to go out and use to stimulate the economy, and create jobs, and maintain jobs that are in place right now.

CAPUTO: Yeah, but indeed you say that, but in reality, you are drawing upon the surplus, and you are setting up Social Security and Medicare to be raided. I mean, you are not keep them solvent at all...

SANTORUM: That's not true at all. We're setting that money aside.

CAPUTO: And you're reducing education spending...

SANTORUM: Not at all. Look at the... CAPUTO: ... which, as we pointed out earlier, is a top priority across country.

SANTORUM: the president's proposal proposes a very dramatic increase in education spending. They're working on that bill right now, and we're finding bipartisan agreement on it...

CAPUTO: But less so than President Clinton had last year, with higher surpluses.

SANTORUM: I can tell you that we had dramatic increases in education above what the president requested last year, as we did the last three of the four years, I believe.

We are working very, very hard to find a bipartisan consensus to increase education spending, but come with that an accountability and measurement. That's one of the key proposals we are going to have a little trouble in the Senate to do that, but that's got to be a key part, is to make sure that we can measure and we hold schools accountable, so we can educate children.

We can do all those things, and we must get that money out of Washington and let the American people have it some of it.

CARLSON: Now, Senator Durbin, I noticed that every Democrat now is a flinty fiscal conservative, very concerned about spending the surplus that, you know, we don't know really know what it is -- can you very quickly tell me how big would the surplus have to be specifically for you to be comfortable with President Bush's proposed tax cut?

DURBIN: I think that once we have really taken it seriously, to pay down the national debt, I think that's our first priority. Secondly, I think investments in education and prescription drugs are things which every American thinks is good for America.

CARLSON: So, it could never be big enough, because you have to spend on education...

DURBIN: No, not at all. But let us -- let's focus on the things that are priorities for this country, and there will be money for a tax cut, but frankly, we got to do it sensibly, responsibly.

The president suggested we can have it all, and a lot of us are saying, well, maybe we can, but he can't predict what America's going to look like five years from now any more than he can predict, as governor of Texas, what his tax cut would do to drive them back into the deficit ditch.

CARLSON: Senator Durbin, Senator Santorum, thank you.

SANTORUM: Thank you, Tucker.

DURBIN: Thank you.

CARLSON: Lisa Caputo and I will be right back to decide precisely how much American ought to get back in tax cuts this year in our closing comments. We will be right back.

(COMMERCIAL BREAK)

CARLSON: Lisa, I love, you know, for all the talk about helping, you know, targeting the tax cuts to working Americans, the people who really deserve it, the ones who will get a muffler rather than a Bentley under President Bush's plan. You know something, he pushed Democrats to say, well, why not just move the whole tax cut and give it to the working Americans?

They say, well, they don't really want that. They want improved health care, they want improved education, they want that money to go to federal agencies.

CAPUTO: Yeah, that's true. It is true. I personally would like the money for the Bentley -- no, I'm kidding.

I think, you know, you are always going to have these interesting debates on tax cuts and spending and where the priorities should be, but the fact of the matter is what President Bush is doing is not, frankly, where the American public's priorities are.

We saw it in a poll we cited earlier -- education, top priority. Yet, we are focused on giving the wealthiest more money.

CARLSON: Well, first of all -- a...

(CROSSTALK)

CARLSON: It's a familiar script, and it's as phony as it's always been, but I have to say that the Democrats have done a very good job of all of a sudden becoming fiscal conservatives. Every one sounds like Steve Forbes. You know, kind of flinty, "Well, that's a little bit too radical. No, we have to make certain that we promote investment, and have a lot of money in the bank." Who knows -- rainy day fund, that's sort of the byword of all Democrats now.

CAPUTO: Yes, and your president has done an excellent job of seizing the Democratic agenda, and all of a sudden becoming pro- education and pro-diversity. He is seizing all the Democratic issues. Maybe you and I ought to switch chairs.

CARLSON: I think it's absolutely right. And clearly, it works.

CAPUTO: From the left, I'm Lisa Caputo. Good night from CROSSFIRE.

CARLSON: From the right, I'm Tucker Carlson. Join us again tomorrow night for another edition of CROSSFIRE.

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