Bush Economic Stimulus Plan Already Faces Criticism

Before President Bush has even laid out the elements of his economic stimulus package, Democrats are forecasting their objections to the plan, saying it heavily favors middle and higher-income tax payers.

The president is expected to detail the plan in a speech in Chicago next Tuesday. Aides say that it will likely offer tax breaks to investors who earn corporate dividends and will include accelerating tax cuts for the three lower tax brackets. Aides said the president had considered excluding the highest tax bracket from a break, but has gotten considerable flak from conservative groups.

No decision is final, though, a White House official said.  The next rate cuts are supposed to go into effect in 2004 and 2006, meaning unless the president makes a move and Congress approves it, rates will stay the same for 2003.

The acceleration plan has Democrats and even some Republican antsy that the president's plan asks for too much.

"Given the realities of working in a closely divided Senate," any proposal will need bipartisan support said Sen. Charles Grassley, R-Iowa, incoming chairman of the Senate Finance Committee.

Democrats gathering in an "emergency session" in Washington on Friday said that the president is not doing enough to create jobs. Rep. David Obey, D-Mich., said Bush has the worst record for creating jobs of any president since World War II.

House Democratic leader Nancy Pelosi, D-Calif., said the Democrats will focus on extending unemployment benefits as their first priority when Congress returns on Tuesday.

"This administration refused to extend unemployment insurance benefits before Christmas and we must insist that the first day this Congress comes together, we are ready to extend those benefits," she said. "It is also necessary due to the record joblessness in our country that we have a very important stimulus package that will grow the economy by creating jobs, will be fair to the American people and will be fiscally responsible."

Rep. James Oberstar of Minnesota, the top Democrat on the Transportation Committee, said the House Democratic alternative may well include an acceleration in government spending on aviation and highway projects as a way to create jobs.

For his part, Bush has said that job creation will be a part of his package. Republicans have also put unemployment insurance, which expired for 800,000 Americans on Dec. 28, as a top priority in the new legislative session.

Bush said Thursday that efforts by opponents to portray his package as a boon to the rich is a trick.

"Some would like to turn this into class warfare," he said after giving reporters a tour of his ranch in Crawford, Texas. "That's not how I think. I think about the overall economy and how best to help those folks who are looking for work."

Supply-siders agreed that the president's plan would likely be subject to the class warfare attack.

"There is no question that the left will try to drag out the pagan god of class warfare and say this is just a sop to the president's rich friends," said Daniel Mitchell, an economist at the conservative Heritage Foundation. "The purpose of making these changes is to get more investment into the economy and create more jobs. That's what really matters."

In an effort to demonstrate his commitment to parsing out breaks evenly, the president may limit the amount of tax breaks on corporate dividend payments despite pressure from conservatives.

He may choose to exempt the first $1,000 in dividends from taxes, which would have the benefit of making stock purchases more attractive to middle-income Americans while not providing a huge windfall to the wealthiest investors with vast stock holdings.

The president may also propose accelerated tax breaks on the child tax credit and "marriage penalty" tax that were included in the president's $1.35 trillion tax cut Congress passed in June 2001.

Among other stimuli, the president could include an expanded tax break for businesses to encourage more capital investment and may look to reform the alternative minimum tax, a plan that was originally intended to make sure the wealthy did not escape paying some income taxes but is now hitting more and more middle-income taxpayers.

Bush's entire stimulus package is expected to cost $300 billion over a 10-year period.

Even with modifications to accommodate Democratic concerns, Bush's plan is likely to differ drastically from Democratic proposals.

Sen. Max Baucus, the top Democrat on the Senate Finance Committee, last month offered his own $160 billion stimulus proposal. Baucus would provide a one-time $300 tax cut for individuals and $75 billion in block grants to cash-strapped states.

The Associated Press contributed to this report.