WASHINGTON – Several Senate Republicans, joining skeptical Democrats, asked Treasury Secretary John Snow on Wednesday whether President Bush's proposed tax cut plan could bring about short-term benefits to the faltering economy without causing long-term damage to the government's fiscal health.
Snow, in his second full day as secretary and his second day of testifying before Congress, defended the president's package before the Senate Finance Committee, saying it would create "a more abundant future with more good jobs and rising real wages."
The president's proposal would reduce taxes by $674 billion over 10 years, with over half of that coming from an elimination of taxes on dividends.
Sen. Olympia Snowe, R-Maine, said she would prefer temporary tax cuts, saying it was hard to predict future exigencies and emergencies and asking whether it was wise to cut taxes when Medicare is about to see dramatic cost increases for aging baby boomers. She said she favored short-term stimulus measures that would not add to long-term deficits.
Committee chairman Charles Grassley, R-Iowa, said that any effort to rejuvenate the economy should have an immediate impact and that the legislation must reflect the reality of a Senate where Republicans hold a slim 51-49 majority.
Democrats are near-unanimous in their opposition to the plan, saying the tax cuts do little to help the economy in the short term, increase deficits and mainly benefit more affluent Americans.
"Higher deficits mean mortgages and car loans will be more expensive," said Sen. Max Baucus, D-Mont., top Democrat on the panel. "Businesses cut back on their investments. And the future standard of living of our children and grandchildren will be lower."
Sen. Kent Conrad of North Dakota, ranking Democrat on the Budget Committee, said, "I believe it's dangerous, I believe it's reckless, I believe it will hurt long-term growth rather than help it."
Sen. John Breaux, D-La., asked Snow if there was any room for compromise in Bush's proposal to eliminate taxes on dividends, which Democrats say mostly helps the rich. "I'm here to advocate the full proposal," Snow said.
The Treasury secretary also stressed that the deficit, expected to top $300 billion this year, was relatively modest when compared to the size of the nation's economy, and that the president's plan, by stimulating economic growth, was the best way to return to balanced budgets.
The president's plan is likely to move through the House intact, but is expected to face more trouble in the Senate, where Grassley has stressed that he will work with Democrats on a bipartisan plan and several GOP moderates such as Snowe have expressed concerns about aspects of the Bush proposal.