Budget Special Report
Navigation Bar
Navigation Bar

THE BUDGET
 Overview
 Key Stories
 Opinion
 Game
 Glossary
 Links &
 Resources
 Talk
 Special
 Reports

  blue line
Clinton Vetoes GOP Tax Cut Bill

Clinton, AP
President Clinton, announcing the veto Thursday in the Rose Garden called on Congress to approve "tax relief we can afford" by year's end.
(By Robert A. Reeder – The Washington Post)  

From The Post
  • Clinton Vetoes GOP Tax Cut Bill (Sept. 24)

  • Hill GOP Leaders Try to Avoid Shutdown (Sept. 23)

  • As Surplus Grows, Agencies Feel Pinch as Never Before (Sept. 21)

  • Some Republicans Seek End to Budget 'Gimmicks' (Sept. 17)

    On Our Site
    Transcripts:
  • GOP Reps. Ehrlich, Watts, McIntosh, Portman and Thune on the Republican tax plan.

  • Democratic Reps. Frost and Cardin discussed the Democratic side.

  • White House spokesman Barry Toiv discussed the White House position.


  • By Eric Pianin and Charles Babington
    Washington Post Staff Writers
    Friday, September 24, 1999; Page A1

    President Clinton vetoed the Republicans' $792 billion tax cut bill yesterday, killing the chances for a major tax reduction this year and raising the likelihood that tens of billions of dollars in federal budget surpluses will be used to pay down the national debt.

    The long-promised veto of the measure -- which was the GOP's top domestic initiative -- underscored the deep divisions among politicians about what to do with the country's soaring budget surpluses. The impasse leaves much at stake: Whether Americans will get any tax break soon, whether Republicans can carry the 2000 congressional elections by attacking the veto, and whether Clinton can make another major impact on U.S. social and economic policies before leaving office in 16 months.

    Unable to override the veto, Congress's GOP leaders face an uneasy choice. They can bargain with Clinton for a smaller tax cut package -- totaling perhaps $300 billion -- which they have called too stingy. Or they can risk being labeled a "do-nothing" Congress and try to convince voters next year that the president and his fellow Democrats unwisely blocked major tax cuts when the economy was booming.

    Many economists and budget experts, meanwhile, say the impasse would benefit the economy by making it easier to pay down the federal debt, while giving policymakers more time for a full-throttle debate on the best uses of future surpluses.

    "What do we have to lose?" said Allen Sinai, chief global economist for Primark Decision Economics in New York. "We don't need the tax cuts right now and we simply keep paying down the debt. . . . It isn't that the Republicans didn't have a good case for tax reduction, [but] paying down the debt up to a point makes sense."

    Clinton, in a Rose Garden ceremony that seemed almost anticlimactic after weeks of debate, said the GOP tax cut bill would steer too much relief to the wealthy and leave too little money for important programs. "The bill is too big, too bloated [and] places too great a burden on America's economy," the president said.

    Republicans fired back, laying the groundwork for what may be a key theme in the 2000 elections. "This was a broad tax relief package that would provide relief to married families, to women to go back into the workplace, for education in America, for low-income Americans," said Senate Majority Leader Trent Lott (R-Miss.). "It is a good bill, and I regret the president has stolen this tax cut from working American families."

    For all the rhetoric, the outlines of a smaller tax and spending deal were readily apparent yesterday. House and Senate tax writers are eager to extend a number of popular expiring tax provisions, including a work-opportunity credit and a research and development credit important to the high-tech industry. There also is substantial support on Capitol Hill for restoring funding for teaching hospitals, nursing homes, home health agencies and other activities cut from Medicare in 1997, for increasing the availability of affordable health care, and for raising the minimum wage.

    "I think the building blocks are certainly there" for a year-end agreement, said a senior House Republican aide.

    Privately, White House aides said Clinton agrees with GOP leaders on several tax and spending provisions, such as the research and development proposal and the increased aid to teaching hospitals. But the president will insist that Congress agree to some of his proposals for shoring up Social Security and boosting Medicare, to which he wants to add a prescription drug benefit, they said.

    White House spokesman Joe Lockhart told reporters Clinton might accept a total tax cut package of $300 billion but added: "The president has made it very clear, the bill has to be affordable and has to be targeted to the middle class. If [congressional leaders] come back with some sort of bill that only looks at [tax provision] extenders, they will have squandered an important opportunity."

    If Congress were to preserve the tax status quo for the next decade -- and keep a rein on spending -- it would lead to mounting budget surpluses totaling close to $3 trillion over the next decade. This could virtually wipe out the publicly held national debt, slashing it from $3.6 trillion this year to $865 billion in fiscal 2009, according to the Congressional Budget Office (CBO).

    A sharp decline in the national debt could have substantial benefits, many economists assert, by holding down interest rates, freeing up capital for private investment and leaving the government in a stronger position to shore up the Social Security system early in the next century, when baby boomers begin to retire.

    Stephen Moore, the economic policy director at the libertarian Cato Institute, said: "There is something to be said for Congress putting the government on automatic pilot for a while."

    For all the political maneuvering and rhetoric over the surplus, the nation has yet to have a full-blown debate over the wisest uses of the future budget windfall. Many experts say policymakers have failed to address several important questions, such as whether the long-term surplus forecasts will hold up and whether a major tax cut could overheat the economy.

    "When we were faced with deficits, we knew we could battle our way back to zero," said Gail Fosler, chief economist for the Conference Board, a business research group in New York, and a onetime Senate budget analyst. "But now when we have very large surpluses, we have no guidance on how to resolve this issue of more. We're in an economic no man's land."

    Robert D. Reischauer, a former CBO director now with the Brookings Institution, said the main virtue of doing nothing on taxes this year is that it will buy time to do a "reality check" on the surplus projections. Much of the projected surplus hinges on Congress and the president adhering to tight budget rules established in 1997, which already is proving difficult.

    "Part of the reality check is to test whether the political system can exercise real restraint in the discretionary spending accounts," Reischauer said.

    © 1999 The Washington Post Company

    Back to the top


    Navigation Bar
    Navigation Bar
     
    yellow pages