President Bush's hope of salvaging his $726 billion wartime tax-cut proposal hangs on the outcome of the conflict in Iraq and the whims of an unpredictable political breed: liberal Republicans.
Although Bush enjoys solid support for his tax cut from 95 percent of House and Senate Republicans, regardless of the pace of the war and the size of projected deficits, the ever-shrinking Rockefeller wing of the party is still large enough -- and concerned enough -- to join Democrats and slice it in half. But recent history also suggests that liberal Republicans can be fickle enough to change their minds on a dime, and deliver Bush a major tax-cut victory later this year, particularly if the war ends quickly and the economy rebounds.
The Senate, under pressure from these members, yesterday passed a budget resolution calling for $350 billion in tax cuts over 10 years. But Republicans hope to push that number much closer to Bush's proposed $726 billion when the House and Senate start hammering out their differences next week.
Senate support for Bush's entire tax cut seemed narrow but steady until his request for an extra $75 billion to fund military operations landed on Capitol Hill on Tuesday. Within hours, the Senate voted 51 to 48 to slash the 10-year tax-cut package by more than half. Congress's budget-and-tax process still has many steps to go, but some of the GOP's most liberal senators seem reluctant to switch back to the White House's side, especially with deficits projected to near $400 billion this year after war-related costs are factored in.
"These are tough times, and you always hate to be counter to your party and president, but we are faced with tough choices," Sen. Olympia J. Snowe of Maine said. On taxes, "we can make a pivotal difference and become the balance of power."
In the weeks ahead, the response of Republicans such as Snowe to the twin pressures of war and Bush's lobbying for his $726 billion tax-cut plan will determine whether the proposal emerges intact or significantly trimmed. It appears that Snowe and fellow liberal Republican Sen. Lincoln D. Chafee (R.I.) are prepared to hand Bush a stinging defeat. But these and other moderate-to-liberal Republicans have been known to succumb to party pressure. White House officials and GOP leaders have vowed to press them to support Bush, aides said, contending that they should stand by the president during wartime.
"They are obviously key," Finance Committee Chairman Charles E. Grassley (R-Iowa) said in an interview yesterday. "They are key more to the size of the [tax-cut] package than to what is in the package."
The president's $726 billion plan calls for the elimination of the tax on dividends, plus accelerated reductions in income tax rates. If Congress adopts a smaller tax cut, the abolition of the tax on dividends, which accounts for more than half of the Bush plan, would be jettisoned or scaled back, several key lawmakers said.
To be sure, Bush, who wields as much power in Washington as any president since Lyndon B. Johnson and any Republican president since Dwight D. Eisenhower, has shown an uncanny ability to win domestic fights. He has relied on extraordinary party discipline to get his way most of the time in Congress. Congressional Republicans voted with Bush 90 percent of the time during his first two years in office, according to Congressional Quarterly.
One reason is that decades of House redistricting, in which state lawmakers drew districts to protect conservative Republican and liberal Democratic incumbents, have squeezed many moderate Republicans out of Congress. What is left is a Republican Party that, as a whole, is as conservative on economic and social policy as Bush, if not more so.
Still, his margin of error is slim. The party clings to a two-vote margin in the Senate and a 24-vote margin in the House. The GOP's Rockefeller wing, which now numbers a few dozen in Congress, is generally more supportive of abortion rights, environmental restrictions, greater spending and smaller tax cuts. Most represent districts in the Northeast. They are wildly unpredictable and, some GOP leaders privately say, easily swayed.
Chafee this week surprised his colleagues by helping Democrats whack the Bush tax cut in half -- just days after voting to protect it. Snowe also voted Tuesday to halve the Bush plan, and then voted to add back $146 billion. Yesterday, she said $350 billion is her ceiling for a 10-year tax cut.
In the House, nearly two dozen self-described GOP moderates in recent weeks privately told colleagues that they opposed the Bush tax cut. Yet fewer than 10 of them voted against it on the House floor last week. Rep. Ray LaHood (R-Ill.), a moderate who voiced reservations about the Bush plan but voted for it, said several moderates hoped the Senate would shrink the package so House members wouldn't have to "poke the president in the eye."
Five of the more liberal GOP House members signed a letter March 14 warning that they would oppose deep tax cuts and spending reductions, only to vote days later for a GOP budget that clearly contained both. The House passed its budget plan, which makes room for the president's entire tax cut, by three votes after mild arm-twisting.
Ways and Means Committee Chairman Bill Thomas (R-Calif.) may put House consideration of the Bush plan on hold to assess the damage of the defection of Snowe, Chafee and Sens. George V. Voinovich (Ohio) and John McCain (Ariz.).
Insiders view Snowe, who has twice voted to hold the cuts at the $350 billion total, as the one to watch in the weeks ahead. With a seat on the Finance Committee, which will write the details of the Senate tax package, Snowe could tip the scale against Bush by firmly siding with committee Democrats, who are expected to unite in opposition to the president's plan. Republicans have a one-vote majority on the committee.
If Snowe shows no signs of buckling, Grassley all but concedes that the dividend tax cut would be scaled back or dropped to make way for a different bipartisan package. He said that if he can't win support for at least a 50 percent reduction in the dividend tax, "you might as well forget [it] and move on to something else." In the interview, he opened the door to including in the mix new tax cuts if he were to drop the dividend provision.