President Bush knows his current popularity may not ensure his reelection if the economy doesn't start producing millions of jobs by Election Day 2004. That's one reason he proposed a $726 billion, 10-year tax-cut program to create sustained economic growth.
But the Senate dealt the White House's economic program a blow last week. It voted to slice in half the president's plan, which would end the double taxation of stock dividends and speed up or make permanent a series of previously approved trims.
The plan would lead to soaring deficits in its first few years. But the administration and most congressional Republicans believe the cuts will stimulate enough economic growth to increase revenues and return to surplus by the end of the 10 years. Most Democrats, some Republicans, and many economists doubt that.
For two moderate Republican senators, Olympia Snowe of Maine and George Voinovich of Ohio, the amount was too much to ask in wartime. Although the House compromised at $550 billion, the two senators held firm, forcing the Senate to hold the line at $350 billion to pass a budget resolution. This angered the White House and House GOP leaders, who believe it won't help sustain economic growth.
The budget resolution itself doesn't cut taxes. But Senate rules protect from filibuster any trim that meets resolution guidelines, requiring only 51 votes, rather than 60, to gain passage.
Unless it can change senators' minds when the actual tax bills reach the floor, perhaps later this spring, the administration must now choose which half of its package to put forward. This may means sacrificing the dividend-tax cut.
That would be unfortunate. Repealing the double tax on dividends would help investors - including millions of senior citizens who have retirement savings invested in stocks and mutual funds - and push companies to share profits with stockholders. Of course, the administration could always push the measure again next year. Better yet, to garner sufficient votes in the Senate this year, Republicans at both ends of Pennsylvania Avenue could get together on a package of spending reductions that would pay for the additional tax cuts.
That would be a refreshing change. But don't hold your breath just yet.