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Will Bush's Tax Cuts Work?

Aired April 24, 2003 - 15:41   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.


JUDY WOODRUFF, CNN ANCHOR: Well, from cutting the fat in our diet to cutting the fat in federal spending, we're going to turn that corner.
The question being asked today, what's the best way to spur the financial markets and turn the economy around? Well, President Bush argues it's tax cuts. But Democrats and other critics blame the tax cuts for turning budget surpluses into record deficits.

Our new poll shows Americans are divided over the president's tax cut plan, with slightly more saying it is a bad idea. So should the public and the politicians be worried about mounting federal deficit?

I'm joined now by former Reagan budget director and chairman of the Capanalysis Group, Jim Miller. And Carol Cox Wait, she's president of the Committee for a Responsible Federal Budget.

We heard President Bush today arguing we've got to pass the tax cuts. Yes, I'm worried about the deficit, but in the short run, we've got to get the economy growing. And in the long run that's going to mean a healthier economy. The deficits, basically, will take care of themselves.

Carol Cox Wait, why isn't that a good argument?

CAROL COX WAIT, PRESIDENT, COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET: Judy, tax cuts may be good policy, but persistent large budget deficits over a long period of time are not.

If we want lower taxes, we have to restrain federal spending so that deficits don't get out of hand going down the road, as the Baby Boom generation begins to retire and we really do face a tidal wave in the federal budget.

WOODRUFF: But President Bush, Carol Cox Wait, says yes, let's cut spending, but we also need these big tax cuts.

WAIT: Well, you know, if you want big tax cuts, and you want balanced budgets, you're going to have to cut spending, as well.

The problem we have in Washington is that the political arithmetic of the budget seems to say that you somehow balance tax cuts with increased spending, which compounds the problem and down the road could create very, very large deficits, indeed.

WOODRUFF: But Jim Miller, is it your view that that -- why can't the president -- why can't the administration, rather, focus on cutting spending and not propose and push through such enormous tax cuts? I mean, we're talking $550 billion, $720 billion.

JIM MILLER, CHAIRMAN, CAPANALYSIS GROUP: I think you ought to do both. I agree with much of what -- most of what Carol said. I think you have to restrain spending in order to keep the deficit under some semblance of control.

Let's keep in mind, though, the deficits we're talking about today as a proportion of total spending, of total GNP or total wealth in the United States, are much lower proportion than they were in the '80s, when we started on this extraordinary boom that we experienced in the decade of the '80s and '90s. So we shouldn't be too concerned about it.

I'm concerned about spending, as is Carol, because spending is what the federal government takes from us. And we want to make sure that spending is the high priority, not low priority. You know, if you...

WOODRUFF: Wait a minute. Let me just, Jim Miller, let me just clarify. Your view on the deficit what is that it's all right to have a deficit for awhile?

MILLER: Well, in certain circumstance circumstances, for example if you're fighting a war, it's certainly all right to have a deficit. If you're going through an economy that's in a downturn, so that you have a shortfall in the revenues going to the federal government, that's okay to have a deficit.

What you want to avoid is what I think Carol was pointing to. You'd want to avoid structural deficits as far as the eye can see. If we don't get the economy growing, that's what's going to happen.

And I don't say that cutting the taxes as the president has proposed, is going to mean that we'll convert a deficit forecast into a surplus forecast this year or even next year, but it will establish the predicate for the economy to grow much more rapidly and vigorously over the next decade if we do it now.

WOODRUFF: And Carol Cox Wait, is that soon enough for you in terms of getting this deficit down?

WAIT: My concern is that the deficit is not going to go down, given the policies that we have been looking at in Washington in recent years. We are cutting taxes and we are increasing spending, not cutting spending.

The spending in the baseline, in the laws that are built in today, goes up and up and up as the Baby Boom generation retires. And on top of that, we've been increasing discretionary spending that we decide on every year, about 8 percent a year.

We cannot have higher spending, lower taxes and balanced budgets.

I am prepared to support some mix of public policies that leads to balance over a reasonable period of time.

WOODRUFF: What about the president's -- but what about, excuse me -- what about the president's entire package of tax cuts? I mean, he is now saying at least $550 billion over ten years.

WAIT: Judy, our view is very simple. If you want very large tax cuts, you're going to have very significant spending restraint or you're going to have very large deficits.

I don't oppose or support specific levels of taxation, but I do support some balance from what we do on the spending side of the budget and the tax side of the budget. And right now, that's way out of whack in Washington, D.C.

WOODRUFF: And Jim Miller, the president, at least it seems to me the president is putting more of the emphasis on the tax cut side here.

MILLER: Well, look, he's got to do both. Keep in mind that these, quote, "massive tax cuts" that he's proposing will still leave tax rates higher than they were when President Reagan left office, higher than they were when his father left office, higher than they were when President Clinton -- during much of his time there.

Tax rates are too high and they need to come down to make the economy grow and stable in the future.

If the Congress would just stop increasing the rate of spending, when they talk in Washington about cutting spending, what they mean is cut the rate of increase. If they would just stop increasing spending, the deficits would turn into surpluses very quickly.

WAIT: Judy, the problem is that the rate of spending increase is going up. It will go up. It's going to continue to go up until and unless we make basic changes in the way we provide support to our elderly citizens as the Baby Boom generation retires.

If we don't do that, we're either going to pay higher taxes or have very large deficits indeed. That's the reality and that reality is less than ten years away.

WOODRUFF: All right. Both of you coming through loud and clear, Carol Cox Wait of the Committee for a Responsible Budget. Jim Miller, who was formerly Ronald Reagan's budget director. Good to see both of you.

WAIT: Thanks very much.

MILLER: Good to be with you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired April 24, 2003 - 15:41   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JUDY WOODRUFF, CNN ANCHOR: Well, from cutting the fat in our diet to cutting the fat in federal spending, we're going to turn that corner.
The question being asked today, what's the best way to spur the financial markets and turn the economy around? Well, President Bush argues it's tax cuts. But Democrats and other critics blame the tax cuts for turning budget surpluses into record deficits.

Our new poll shows Americans are divided over the president's tax cut plan, with slightly more saying it is a bad idea. So should the public and the politicians be worried about mounting federal deficit?

I'm joined now by former Reagan budget director and chairman of the Capanalysis Group, Jim Miller. And Carol Cox Wait, she's president of the Committee for a Responsible Federal Budget.

We heard President Bush today arguing we've got to pass the tax cuts. Yes, I'm worried about the deficit, but in the short run, we've got to get the economy growing. And in the long run that's going to mean a healthier economy. The deficits, basically, will take care of themselves.

Carol Cox Wait, why isn't that a good argument?

CAROL COX WAIT, PRESIDENT, COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET: Judy, tax cuts may be good policy, but persistent large budget deficits over a long period of time are not.

If we want lower taxes, we have to restrain federal spending so that deficits don't get out of hand going down the road, as the Baby Boom generation begins to retire and we really do face a tidal wave in the federal budget.

WOODRUFF: But President Bush, Carol Cox Wait, says yes, let's cut spending, but we also need these big tax cuts.

WAIT: Well, you know, if you want big tax cuts, and you want balanced budgets, you're going to have to cut spending, as well.

The problem we have in Washington is that the political arithmetic of the budget seems to say that you somehow balance tax cuts with increased spending, which compounds the problem and down the road could create very, very large deficits, indeed.

WOODRUFF: But Jim Miller, is it your view that that -- why can't the president -- why can't the administration, rather, focus on cutting spending and not propose and push through such enormous tax cuts? I mean, we're talking $550 billion, $720 billion.

JIM MILLER, CHAIRMAN, CAPANALYSIS GROUP: I think you ought to do both. I agree with much of what -- most of what Carol said. I think you have to restrain spending in order to keep the deficit under some semblance of control.

Let's keep in mind, though, the deficits we're talking about today as a proportion of total spending, of total GNP or total wealth in the United States, are much lower proportion than they were in the '80s, when we started on this extraordinary boom that we experienced in the decade of the '80s and '90s. So we shouldn't be too concerned about it.

I'm concerned about spending, as is Carol, because spending is what the federal government takes from us. And we want to make sure that spending is the high priority, not low priority. You know, if you...

WOODRUFF: Wait a minute. Let me just, Jim Miller, let me just clarify. Your view on the deficit what is that it's all right to have a deficit for awhile?

MILLER: Well, in certain circumstance circumstances, for example if you're fighting a war, it's certainly all right to have a deficit. If you're going through an economy that's in a downturn, so that you have a shortfall in the revenues going to the federal government, that's okay to have a deficit.

What you want to avoid is what I think Carol was pointing to. You'd want to avoid structural deficits as far as the eye can see. If we don't get the economy growing, that's what's going to happen.

And I don't say that cutting the taxes as the president has proposed, is going to mean that we'll convert a deficit forecast into a surplus forecast this year or even next year, but it will establish the predicate for the economy to grow much more rapidly and vigorously over the next decade if we do it now.

WOODRUFF: And Carol Cox Wait, is that soon enough for you in terms of getting this deficit down?

WAIT: My concern is that the deficit is not going to go down, given the policies that we have been looking at in Washington in recent years. We are cutting taxes and we are increasing spending, not cutting spending.

The spending in the baseline, in the laws that are built in today, goes up and up and up as the Baby Boom generation retires. And on top of that, we've been increasing discretionary spending that we decide on every year, about 8 percent a year.

We cannot have higher spending, lower taxes and balanced budgets.

I am prepared to support some mix of public policies that leads to balance over a reasonable period of time.

WOODRUFF: What about the president's -- but what about, excuse me -- what about the president's entire package of tax cuts? I mean, he is now saying at least $550 billion over ten years.

WAIT: Judy, our view is very simple. If you want very large tax cuts, you're going to have very significant spending restraint or you're going to have very large deficits.

I don't oppose or support specific levels of taxation, but I do support some balance from what we do on the spending side of the budget and the tax side of the budget. And right now, that's way out of whack in Washington, D.C.

WOODRUFF: And Jim Miller, the president, at least it seems to me the president is putting more of the emphasis on the tax cut side here.

MILLER: Well, look, he's got to do both. Keep in mind that these, quote, "massive tax cuts" that he's proposing will still leave tax rates higher than they were when President Reagan left office, higher than they were when his father left office, higher than they were when President Clinton -- during much of his time there.

Tax rates are too high and they need to come down to make the economy grow and stable in the future.

If the Congress would just stop increasing the rate of spending, when they talk in Washington about cutting spending, what they mean is cut the rate of increase. If they would just stop increasing spending, the deficits would turn into surpluses very quickly.

WAIT: Judy, the problem is that the rate of spending increase is going up. It will go up. It's going to continue to go up until and unless we make basic changes in the way we provide support to our elderly citizens as the Baby Boom generation retires.

If we don't do that, we're either going to pay higher taxes or have very large deficits indeed. That's the reality and that reality is less than ten years away.

WOODRUFF: All right. Both of you coming through loud and clear, Carol Cox Wait of the Committee for a Responsible Budget. Jim Miller, who was formerly Ronald Reagan's budget director. Good to see both of you.

WAIT: Thanks very much.

MILLER: Good to be with you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com