President Bush gave up yesterday on the full tax cut that was the centerpiece of his domestic agenda, telling small-business leaders he will accept a package that is 25 percent smaller. Congressional leaders in both parties said even that figure looks unattainable.
During a Rose Garden speech on the day tax returns were due, Bush said Congress must pass a jobs-and-growth package totaling at least $550 billion over 10 years. That is three-quarters of what he had asked for, but still much higher than the $350 billion tax cut that Senate leaders set as a limit last week.
"The proposals I announced three months ago were designed to address specific weaknesses slowing down our economy and keeping companies from hiring new workers," Bush said. "Those weaknesses remain today."The president, acknowledging insurmountable opposition to the full package in his own party, retreated from the 10-year, $726 billion tax cut he proposed in January. Yesterday he said he wanted "tax relief totaling at least $550 billion to make sure our economy grows."
Later, he said the nation needs "at least $550 billion in that package because the more tax relief that goes to the American people, the more jobs we will create in this economy."
While his comments were a clear effort to redefine victory down, White House aides called them an effort to push Congress toward the largest possible tax cut package as the debate unfolds between now and Memorial Day.
Congress capped the tax cut at $350 billion last week, although the House would approve as much as $550 billion in tax cuts under an expedited procedure. A Senate Republican leadership aide said party strategists do not expect the package to grow, and said there was "nothing to parse" in the $350 billion agreement announced on the Senate floor by Finance Committee Chairman Charles E. Grassley (R-Iowa).
Administration officials said they still see hope and are targeting about 10 moderate Democratic senators in hopes they will consider a larger tax cut. "There is a good fight ahead when it comes to how to provide growth for the economy, and the president's going to engage in it," White House press secretary Ari Fleischer said.
Democrats, however, said they will keep working to contain the size of the package and to restructure it in ways that vary from Bush's emphasis on dividend taxation. Democrats want to extend unemployment insurance, give more aid to states and fund job training.
Asked about Bush's strength as a wartime leader, Sen. John Breaux (D-La.) said, "Political popularity can only carry a bad idea so far."
Bush's speech, on the 27th day of the war, was the first event since the invasion of Iraq that the White House has billed as being focused on domestic or economic policy. With the war winding down and Bush's reelection campaign approaching, aides have said the president will devote increasing attention to jobs in his public appearances.
His Cabinet is traveling extensively during the two-week congressional recess that began this week, with 29 administration officials holding 61 events in 42 cities and 26 states.
Treasury Secretary John W. Snow, in Shreveport, La., yesterday, said the business leaders he meets think that Congress is trying to reduce Bush's tax-cut plan too much.
"There is a lot of apprehension that this economy isn't growing fast enough and that business faces a precarious and uncertain outlook," Snow said by telephone. "The word that keeps coming up is that the economy is 'soggy.' The president's plan is the right size to address that."
In an effort to undercut the contention from some senators in both parties that Bush's tax cuts are unaffordable given the war on terrorism, the Republican National Committee sent congressional leaders a letter yesterday signed by 31,000 supporters of Bush's tax plan. It noted that President John F. Kennedy and President Ronald Reagan cut taxes while dealing with international threats.