Daschle Speech Sets Up Election-Year Debate

WASHINGTON – In a policy speech that portends a possible presidential campaign in 2004, Senate Majority Leader Tom Daschle, D-S.D., blamed the Republican-backed $1.35 trillion 10-year tax cut for prolonging the economic recession that began before President Bush's term began.

"Sept. 11 and the war aren't the only reasons the surplus is nearly gone. The biggest reason is the tax cut," Daschle said, launching an election-year debate over Bush's stewardship of the economy.

"Supporters of the tax cut said the surplus was so massive and so certain that we could have a huge tax cut, increase spending on education and the military, and provide prescription drug coverage. We could protect the Social Security surplus, pay off the entire federal debt in a decade, and still have enough money left over to get us through any unforeseen disasters. What we got instead was the most dramatic fiscal deterioration in our nation's history," he said.

Daschle did not recommend repealing the cut, nor did he mention that twelve Democratic senators supported the legislation.

Republicans responded quickly.

"Today's speech is nothing more than an exercise in spin control," said Senate Majority Leader Dick Armey, R-Texas. "This year will be a true test of the Senate Majority Leader's ambitions. Is he more interested in scoring political points for November's elections, or helping American workers and their families now?"

The House passed an economic stimulus plan more than two months ago, but Daschle refused to allow it to come to a vote, saying any measure must pass a procerdural hurdle that would require 60 votes.

Daschle offered praise for Bush's handling of the war against terrorism and the aftermath of the Sept. 11 terrorist attacks. But the main thrust of his speech was an attack on the president's economic priorities, and a tax cut that he said had "probably made the recession worse."

"At a time when we needed to fight both a war and a recession – when our nation has urgent needs on all fronts – the tax cut has taken away our flexibility and left us with only two choices – both of them bad," he said. "We can shortchange critical needs, such as strengthening homeland security, or we can raid the Social Security surplus and borrow money to pay for them. We cannot have it both ways."

Daschle, the nation's most powerful Democrat, was speaking more than two weeks before lawmakers return to work from their year-end break, but just a day before Bush goes to Ontario, California for a town meeting with laid-off workers.  He also has scheduled meetings with his economic advisors and Federal Reserve Board chairman Alan Greenspan on Monday when he returns to Washington after a 12-day respite at his ranch in Crawford, Texas.

Daschle proposed new temporary efforts at passing recession relief, and outlined a tax credit proposal for companies that create new jobs. Under the plan, businesses would receive a tax credit equal to the amount of additional money they pay in Social Security payroll taxes for each new job.

He rejected three recommendations made by a Social Security commission appointed by Bush that includes a long-term reformer, former New York Democratic Senator Daniel Patrick Moynihan. The three recommendations would let younger workers invest some of their payroll taxes in the stock market. Instead, Daschle said he favors allowing supplemental private accounts.

Apart from attacking the tax cut, Daschle's speech included a call for more money for homeland security in response to the terrorist attacks and greater funding for domestic programs such as education and assistance for workers hard hit by trade imbalances.

He also urged the president to submit a one-year budget proposal that includes a stimulus plan and a long-term plan that "restores fiscal discipline" while protecting the Social Security and Medicare trust funds.

As majority leader and Bush's nemesis during last year's struggle over economic stimulus legislation, Daschle is frequently mentioned as a potential White House contender.

"It's the first presidential speech of the 2004 presidential campaign, I believe," said Weekly Standard publisher William Kristol.

Daschle routinely receives extensive news coverage of his speeches.  In this case of Friday's speech, aides released excerpts a day in advance, along with a number of proposals under the heading of the "Daschle Growth Agenda for America's Future."

Given Daschle's position as leader of the Senate majority, his speech appears to be the Democrats' opening volley in an election-year debate about an economy in recession and a budget seemingly headed for deficits after four years of surpluses.

The focus on the economy has led some Republican strategists to suggest Democrats would like to stall recovery in order to have an election-year issue.

The narrow Democratic majority in the Senate is at stake in next fall's elections, as is the slender GOP edge in the House.

In suggesting new efforts to pass stimulus legislation, Daschle proposed increasing depreciation tax provisions for businesses to 40 percent for six months, more than Democrats outlined last year.  He also suggested a tax credit to spur job creation.

Also included are provisions to give tax rebate checks to those who didn't receive them last year and an additional 13 additional weeks of unemployment benefits and health care benefits for the jobless. President Bush has already signed onto the additional coverage and said Friday he could support the government assisting laid-off workers with as much as 60 percent of health care coverage costs.

Democrats wanted 75 percent during last month's stalled negotiations.

In other matters, Daschle's speech calls for substantial, but unspecified, increases in homeland security, education, training and technology and trade adjustment. It also outlined an energy plan that does not mention drilling in the Arctic National Wildlife Refuge, which Bush favors but many Democrats oppose.

Daschle ramped up his hawkish approach to protecting national security, saying homeland defenses must be improved along the Canadian border, at port stops, where only two of 100 cargo containers are inspected each day, and in cities, in which 80 percent have no response plans to bioterror attacks.

"In addition, we've done practically nothing since September 11th to improve cyber security, rail security, or security at America's nuclear and chemical plants. These gaps in our homeland security are unacceptable. We ought to be pursuing homeland security with as much vigor as we are pursuing the war in Afghanistan," he said.

The Associated Press contributed to this report.