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Will the Ailing Economy Derail the Bush Agenda?

Aired September 10, 2001 - 19:30   ET

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

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TUCKER CARLSON, CO-HOST: Tonight, all eyes are on the economy, but there seems little good news in sight. Are current economic woes just a bump in the road or will they derail the Bush agenda?

ANNOUNCER: Live from Washington, CROSSFIRE. On the left, Bill Press; on the right, Tucker Carlson. In the crossfire, Republican Senator Chuck Grassley of Iowa, ranking member on the Finance Committee, and Democratic Congressman John Spratt from South Carolina, ranking member on the Budget Committee.

CARLSON: Good evening and welcome to CROSSFIRE.

Who's to blame for the ailing economy? That's the question gripping Washington this week. The answer may determine who controls the government next year. Each side has a ready answer. President Bush is the obvious culprit say Democrats. His gigantic tax cuts killed the economic expansion of the Clinton years. It's his fault. Not so, say Republicans. Bush inherited the downturn. The tax cut is part of the remedy. By next year, signs of recovery will be obvious.

Perhaps so, but at the moment, nothing about the economy looks certain or particularly positive. Unemployment is up, the stock market is down and pressure mounts for solutions from both Congress and from the president. What will we come up with? More tax cuts, reduced spending? We'll hear soon and we'll likely hear again when they reappear as campaign slogans in 2002 -- Bill Press.

BILL PRESS, CO-HOST: Senator Grassley, I think all of us agree there's a problem with the economy and the budget. The debate is over how to fix it and as Tucker said, who's to blame. I think on who's to blame there's absolutely no question - and yesterday, Senator Daschle, the other day, Senator Daschle put his finger right on the man responsible. Please listen to your leader.

(BEGIN VIDEO CLIP)

SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: It's his budget. It's his economy. It's his tax cut. It's his solution.

(END VIDEO CLIP)

PRESS: It's George Bush's problem. He made the problem. He's got to fix it, doesn't he, senator? SEN. CHUCK GRASSLEY (R), IOWA: In budgetland everybody lives in glass houses, so I think you ought to be pretty careful about throwing stones, because your house might be hit as well. I think that you know, you can go back and say that this started at the middle of last year or the Nasdaq went down more than 50 percent during the last year of Clinton's years. But where does that get us? We're looking now to the future. In fact, America's about the future and every budget we have is about the future, and I think we ought to be concentrating on the future.

PRESS: Well, I agree with you that the economy certainly started to slump before George Bush took office, but in the middle of that slump, he pushes through in June 2001 this year this $1.3 trillion tax cut. And now this, the White House is even admitting, senator -- and you were probably at the meeting the other day when Mr. Daniels said that that's going to require cutting into the Social Security surplus from 9 billion to 15 billion dollars this year. So this budget's out- of-whack.

Don't you think the president has a responsibility to submit a reasonable budget, a new budget, a balanced budget?

GRASSLEY: If you look at the fact that 48 out of the 49 Democrats in the Senate voted for a tax cut that was only $100 billion less than what we finally passed at $1.2 trillion, look at the fact that if we had adopted the Democrat budget, the Democrat alternative in the Senate, we would be in the Social Security, or that budget -- but what good does it do to talk about that? We've got to talk about the future. We have to plan for the future and I think we can overcome this. If you stop to think of the fact that we are now in the fourth year of paying down on the national debt that that's quite an accomplishment compared to the 28 years before that that we didn't' pay down anything.

CARLSON: Congressman Spratt, if you read -- welcome -- if you read "The New York Times" editorial page yesterday -- and I'm sure you did, because I think Democrats are required to do that. You must have read this line. This is about the budget.

Well, "The New York Times" editorialist writes: "The Democrats feel passivity is their best strategy in dealing with the economy." It's obvious that's true. You saw Tom Daschle, who basically said, "It's not our problem." The strategy here clearly is to hope the economy continues to tank because it makes a great platform to run on in the midterms.

True, isn't it?

REP. JOHN SPRATT (D), SOUTH CAROLINA: Basically, what we're saying to the president is we've passed your budget. It has led us to this present situation. Now you've got the first move. The burden is upon you to produce a new budget to get us out of this ditch.

We're not saying we won't engage, we don't have a responsibility to make recommendations ourselves, but we do think the ball lays in his court. I'm not blaming the recession on the president. The seeds were sown a long time ago outside the government. Bubble burst in the high-tech industry and we're suffering the consequences of it.

What I do blame him for is the bet the budget on a blue-sky forecast. He should have seen in January and subsequent months that the underlying conditions of this forecast weren't going to attain and we were going too far. And he told us we could have it all: We could have a big tax cut. We could have an increase in defense. We could have more for education. We could double NIH. Well, we can't do that now.

CARLSON: Well, but wait a second. I mean, you're an elected member of Congress and so are your Democratic colleagues. That's the best you can do is say the president blew the forecast, the tax cut was too big, but offer no strategy, no recommendations, no suggestions even for how to bring us out of this slump?

SPRATT: I'm simply saying, Mr. President, you've got the first move. This is your budget. Tell us how you would rectify this budget in light of the present circumstances. It's a deficit. It's in the Social Security trust fund.

(CROSSTALK)

GRASSLEY: Well, looking ahead, 10 years -- we always look ahead 10 years. The law requires us to look ahead 10 years. The Democrats when they offered their alternative budget looked ahead 10 years. With the $1.250 trillion tax cut, with all the expenditures they wanted to do, et cetera, et cetera: They would be into the trust funds today if their budget had been adopted. They're -- there's only that much difference between their tax cut that 48 out of the 49 Democrats voted for and we voted for.

So I think here we are: We've got to look at what we're going to do, and I think that we can work our way out of it through a combination of reductions in expenditures. We've got to keep the tax cut. If we didn't keep the tax we have now and if we hadn't already passed it, we would be fluttering around, seeing what we could do to stimulate the economy.

PRESS: Well, let me ask you about that, because, you know, the president has -- he's sort of Johnny-One-Note. I mean, you know, whatever the problem is, he's got the solution to it. And he's fixated on one solution. He has been for the last year and a half, if not two years. Here's the president just maybe repeating himself.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This is a refund of your own money.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BUSH: You don't need to thank me. It's your money to begin with.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BUSH: The rebate checks are now hitting.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BUSH: We sent money back to the people who pay the bills in America.

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

BUSH: One half of the checks have gone out.

(END VIDEO CLIP)

PRESS: Now, senator, that's all he keeps talking about is this tax cut and now the economy's tanking. Isn't it pretty clear that you've got to admit this tax cut as a stimulus ain't working?

GRASSLEY: How do you know? It's only half the checks are out there. They aren't spent yet. And also don't forget that tax cuts are only part of it. The spending policy of the Congress and the Federal Reserve rate cuts are another part of the policy.

PRESS: Well, the signs are certainly not very good so far, Senator. You're talking about looking ahead and looking over the next 2 years. Don't you think the president ought to take a look at this tax cut and say, "look at, maybe we ought to either put a trigger in, Senator, if I may. Put a trigger in, OK...

GRASSLEY: I'm paying attention to you.

PRESS: ... if there's no surplus, we don't have the tax cut or modify the tax cut in those outgoing years so everybody knows that Washington is going to continue some fiscal discipline.

GRASSLEY: OK, modify the tax cuts in the out years. Even if we had adopted the Democrat's tax policy, they would have the same problems that were adopted with the ones we have now...

PRESS: Well, then, fine. How are we going to fix it today? Isn't that a solution?

GRASSLEY: OK. Well, here. You're talking about, don't forget, 29 years, 28 years of deficits. Here we've got four years of paying down the national debt. We're going to pay down the second-largest amount on the national debt we've ever paid down. Now you're saying that we're in a bad situation?

PRESS: I am saying we're in a bad situation.

GRASSLEY: Well, you're wrong.

PRESS: Well, if you think dipping into the soc -- what's good about dipping into the Social Security surplus when George Bush promised not to?

GRASSLEY: OK, let me suggest to you that there's not one thing changing as far as the Social Security trust fund is concerned. Since 1936, every year but '82 and '83, there's always been a positive cash flow in the Social Security trust fund. That positive cash flow has always been invested in Treasury bonds. They're still going to be invested in Treasury bonds. There's not one single Social Security check in jeopardy now or into the future between now and the year 2037.

PRESS: Didn't George Bush promise not to touch it?

CARLSON: Amen. OK...

PRESS: Didn't George Bush promise not to touch it?

CAVUTO: Well, let me -- let me stop the propaganda here for just one second.

PRESS: Propaganda? The facts, you don't want to hear the facts...

CARLSON: Hold on! Let me get Mr. Spratt to answer a question. Now I asked you earlier, Congressman, what the president ought to do, and you said essentially what Daschle said, "I'm not sure, but he ought to do something."

Let me just throw one idea up that he hasn't signed off on yet, but Republicans may endorse the idea of at least a temporary capital gains tax cut that is projected to throw almost $10 billion into revenue by 2004 if they did this. Why is this a bad idea, cutting capital gains?

SPRATT: Well, first of all, the $10 billion gain from the tax cut is purely speculative. We don't know that it will happen. It could exacerbate the revenue shortfall.

Secondly, what's the capital gains cut do? I think it would probably, particularly if it were time limited, just a two-year capital gains tax cut. Everybody would rush out and what? Sell their stocks. You'd see a massive sell-off in the stock market. Think that would help the situation? I don't.

GRASSLEY: I must say...

CARLSON: I haven't seen a single projection that indicates that it would do anything but throw a ton of money into the debt for the federal government. People would sell stock they've wanted to sell, but couldn't because they didn't want to get gained for it, with you know... SPRATT: Sure, then it drives the market down and how does that...

CARLSON: How about this though? How about a payroll tax cut? Democrats have been playing...

SPRATT: Now you're getting into something that might have some efficacy in this situation, because if you put the money, the tax cut in the hands of working people who are likely to spend it, then you might get that push to aggregate demand...

CARLSON: Well, why aren't Democrats coming out -- rather than sitting and sniping at the president, why aren't they coming out and pushing for a big payroll tax cut?

SPRATT: This debate's just begun. If you have to choose between the two, a payroll tax cut or payroll tax relief, now the problem with a tax cut as such, if a Social Security trust fund is not adequately funded to last past 2038. So, I don't want to see something that takes money out of the Social Security trust fund and makes it insolvent sooner. That's counterproductive.

PRESS: Senator Grassley, just a quick, another question about the tax cut before we take a break. I haven't gotten my check yet, OK. And that burns me, but that's alright. But I do have this -- the first copy of the check that I've seen. I've suspected all along that this tax rebate is just political, you know, gimmick for the White House. And if I'm not true, will you tell me -- why is it that these rebate checks are sent from Austin, U.S. Treasury, sent from Austin, Texas, Senator? Not Washington, D.C. -- Austin, Texas.

GRASSLEY: There are four places in the United States that are printing those checks and obviously Austin's one of them.

PRESS: You don't think that's a little message there?

GRASSLEY: Not at all.

(LAUGHTER)

PRESS: All right, OK, we're going to take a break. You know there's another side of this budget, which is spending. Is there going to be any new spending? Or is spending going to be cut and if so, what programs are going to be cut. We'll get the answers when we come back with more CROSSFIRE.

(COMMERCIAL BREAK)

PRESS: Welcome back to Crossfire. The market's now officially a bear. The economy is in the tank. The surplus is gone. The budget's out of balance. The nation needs a fix. But what's the answer and whose job is it? That's tonight's debate. Republican Senator Charles Grassley of Iowa says it's partly Bill Clinton's fault and Democrats must help come up with a plan, but Democratic Congressman John Spratt of South Carolina believes Bush caused the problem and it's up to him to come up with a solution. Tucker. CARLSON: Now Congressman, I'm still trying to get to this question of what should be done. Still trying to wrench a suggestion out of you as a representative of your party. What about rescinding the tax cut? Why aren't Democrats pushing that? I think I know the answer -- they're afraid to --, but I want to hear it from you.

SPRATT: We're not going to rescind a tax cut in the middle of what could be the middle of a recession, the economy's at the tipping point. The tax cut was already implemented on July the first. It might be the rate cuts won't come again until 2004. So that issue is still hanging out there, but we're not pushing that in the middle of a recession.

CARLSON: Of course, I guess more to the point a year before an election you're not pushing it, but if the tax cut is, in fact, responsible as Democrats, Press not you, but others imply, for the downturn, then why not. It's in your power to do something about it, why not?

SPRATT: We think the tax cut is responsible for the deterioration of the budget partly. Partly the economy, partly the tax cut. That's why the bottom line has shrunk and the surface has disappeared. Tax cut has had a lot to do with that. Now we supported the idea. In fact, I was the first to bring to the floor of this tax rebate. It was smaller than the Senate had, so we didn't have the same problem with invading the trust funds, but we asked for about a $60 billion rebate hoping that it would be a boost to the economy. We could get this economy up and chugging again. So, we initiated that idea. We're not against all tax cuts. We have a $900 billion, $800 billion tax cut in our budget resolution.

PRESS: Senator...

(CROSSTALK)

PRESS: Please, go ahead.

GRASSLEY: I might suggest why they won't cut or change the tax bill, because this bipartisan tax bill has 29 billion for education, 50 billion for retirement security, 63 to eliminate death tax, $172 billion for poor families for refundable tax credits, and $42 billion in tax breaks.

SPRATT: One problem with it is it sunsets at its own accord. In 2010, it becomes a pumpkin. It repeals by its own accord, by its own language.

PRESS: Well, Senator, I believe it or not a liberal that I am. I'm not against all tax cuts either, but let me suggest one thing wrong with the Bush tax cut is there are 29 million Americans that didn't get a dime. They didn't get a dime because they don't make enough money to pay income taxes. So if you're thinking about new taxes, new tax cuts. I'm sorry. Wouldn't you have to agree that the only fair way to go is to cut the payroll tax, maybe even temporarily. Cut the Social Security payroll tax so that everybody gets a break? GRASSLEY: Now you can't cut the Social Security payroll tax because we're studying right now whether, what we need to do to improve and modernize Social Security. So 30-year-olds today when they retire will have as good of a system as people who are 55-years or older when they're retiring. And we ought to wait until this study gets done and make determinations then on what the level of taxation ought to be. We've got to keep our commitments to people who are dependent upon Social Security.

PRESS: But I don't get it. I mean, you just gave a tax cut that benefits mainly the wealthiest people in this country and now you Republicans are talking about a capital gains cut, which benefits the wealthiest people in this country and all these guys who are working men and women that don't make enough to pay income taxes, you're just going to leave them high and dry, Senator.

GRASSLEY: Now here. We've got $172 billion for a child tax credit, there's the Earned Income Tax Credit. Those are low-income people that benefited from this tax cut...

PRESS: Why not cut the payroll tax?

SPRATT: That phases in over a period of what -- four or five years? Next year you get a hundred dollars. A hundred dollars additional child's tax credit. So, this bill could've been weighted more towards people likely to spend the money so they would have prodded the economy along. You've got an excellent idea. We've put it in our rebate. We've said the 26 million who don't actually pay taxes, but pay lots of payroll taxes should get some of this rebate. It they'd gotten it, they'd be spending it right now.

CARLSON: Now, Congressman. You said something right at the beginning of this show and I'm not sure all of our viewers heard it and I just hope you can amplify it. You said, or at least implied, that President Bush is not responsible for the downturn in the economy.

SPRATT: I'm not blaming him on the...

CARLSON: Good, but is that-- so that's right? He's not responsible for the impending recession.

SPRATT: ...No, I do think he made a mistake in taking the blue- sky estimates in January when there already were storm clouds gathering over this economy and betting the budget on a $5.6 trillion surplus, which is simply disappeared.

CARLSON: That's interesting because back then in January...

GRASSLEY: He didn't use any different blue-sky estimates that every member of Congress uses, including the Democrats when they propose their budget.

(CROSSTALK)

SPRATT: But we all agree that we use the same forecast. The Clinton OMB, at the end of December, projected that the surplus over this period of time would be $4.9 billion. 25 days later, OMB under them, under the Bush administration, CBO comes up with $5.6 billion...

CARLSON: Well, but wait a second. I mean the forecast...

SPRATT: ... $800 billion increase since last July...

CARLSON: So, we are. Everyone's working with numbers that turned out not to be entirely accurate, but it was President Bush, if you remember back, who began right when he was elected, began talking about the worsening state of the economy. When he did, he was accused by Democrats, of talking down the economy -- I think was the ludicrous phrase used at the time. Does he look pressured now? Don't you take back those words on behalf of your party?

SPRATT: No, no. I think they probably did talk down the economy in order to talk up the tax cut...

CARLSON: Well, that's pretty diabolical, isn't it?

SPRATT: I don't think that was the causal event that put this economy into a downturn by any means. I think there are much, much bigger -- the market was already in a downslide at that point in time.

PRESS: Senator, I do want to ask you a question about spending, because I've heard the president say: "Congress has got to cut spending. Congress has go to cut spending." And at the same time today, I hear the White House is saying today they want $8 billion this year for missile defense. Now they can't have it both ways, can they, senator?

SPRATT: 8.3.

PRESS: 8.3 billion. I mean, how are they talking about more wild spending and at the same time telling Congress to cut spending?

GRASSLEY: This budget situation isn't bad, because a little bit of belt-tightening by any department of government is a good thing. Now whether everybody will get what they want, I don't know. But let me...

PRESS: Wait. I have a (UNINTELLIGIBLE). You're ducking the question. Are you saying...

GRASSLEY: I just told you...

PRESS: ... you cut spending for everything but George Bush's pet projects?

GRASSLEY: Absolutely not. Let's look at the history, though. 1966 is the year that's used by a lot of Democrats. Defense was 7.8 percent of GDP. Today it's 3.1 percent. Non-defense at that time was 10 percent. 15 percent today.

So we have the same level of expenditures, but defense has gone way down and domestic has gone way up. So there can be a lot of savings there as well.

SPRATT: What the president's seeking is $32 billion next year over and above what we're spending this year. The Clinton administration recommended an increase of 14 billion. The Bush administration is seeking 18.4 on top of that.

Now, all of these numbers you've seen from the Congressional Budget Office about what happens next year and the year after, invasion of Social Security, don't include the defense increase. When you factor that in, you've got a much tougher problem.

CARLSON: Congressman Spratt, Senator Grassley, thank you both very much for joining us. Bill Press believes my mental budget is out-of-whack. I believe the same of his. We'll have the reconciliation process when we return in our closing comments in just a moment.

(COMMERCIAL BREAK)

CARLSON: CROSSFIRE is hitting the road. Beginning next Monday, we'll bring you a full week of shows live from the George Washington University. You won't want to miss it.

PRESS: On the road again?

CARLSON: On the road again. We won't miss it. We'll be there.

You know what's interesting -- I know John Spratt and he's a relatively honest guy for a Democrat. And I expected him to come out and say, "Here are the things we hope the president will get behind." He didn't. Even he was content to sit back and just complain and whine and moan about the president not doing what he's supposed to do, offering no alternatives.

PRESS: Hey, the president ran for the job. It's his job to do it. You know, Tucker...

CARLSON: Oh, Oh! Bill, come on.

PRESS: George Bush is reminding me more and more of Gary Condit. You know, I mean, he says, I'm not responsible for the disappearance of the surplus, but he was the last person to see it alive.

CARLSON: That is so -- that is so, so over, so over -- that is so over the top.

PRESS: I think he should give an interview to Connie Chung and say: "I screwed up. I messed up. I apologize and now here's my solution.

CARLSON: I did not have budget with that...

(LAUGHTER)

PRESS: Exactly. From the left, I'm Bill Press. Good night for CROSSFIRE. CARLSON: And from the right, I'm Tucker Carlson. Join us again tomorrow night for another edition of CROSSFIRE.

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