Maine delegation divided on Bush tax cut proposal

WASHINGTON – President George W. Bush’s $1.6 trillion tax cut proposal received generally favorable reviews from Maine’s Republican senators, but the state’s House Democrats are concerned about the size and scope of the plan.

Sen. Olympia Snowe said she was supportive of the president’s proposed tax cut plan. “It’s important to note that (Federal Reserve) Chairman Alan Greenspan testified that, while tax relief may not prevent a downturn in our economy, it will speed up its recovery should a prolonged downturn occur,” she said.

The ultimate size of the package will now be determined by Congress, she said.

“Now that the president’s proposal is being submitted to Congress, we will have the opportunity to review the details of this and other proposals in the Senate Budget Committee to determine the size of the tax package,” said Snowe who is a member of that committee.

Snowe said that depending on what happens with the economy, there might not be enough money left over after the tax cut to fund federal programs and to pay down the national debt.

“In order to ensure adequate room for other spending priorities and buying down the federal debt, I have suggested that the president consider including a mechanism suggested by Greenspan that would tie the phase-in of tax cuts in the later years to our debt reduction goals and surplus projections,” Snowe said.

This trigger mechanism would allow Congress to automatically suspend the tax cuts if the national debt were not paid off at a certain rate. The tax cut would resume once “we are back on track,” Snowe said.

“I believe this sort of trigger can build support for tax cuts among members of both parties, accomplishing the dual goals of inspiring a bipartisan approach and assuring our future,” Snowe said.

Sen. Susan Collins’ first reaction to the plan was positive. “I support significant tax relief,” Collins said, adding that she was looking forward to reviewing the details of the Bush plan and evaluating the impact of the cuts on Maine’s working families and small businesses. Like Snowe, Collins said she would weigh the benefits of the tax cuts with their possible effect on reducing the national debt. “Reducing the debt is a goal that I have long supported,” she said.

House Democrat Tom Allen said he opposed the Bush proposal because “it could do grave damage to our economy.”

“It is misleading to suggest that we have $3.1 trillion available as a surplus and to say that his tax cut is only $1.6 trillion,” said Allen. “Bush’s cut of $1.6 trillion is just not real.”

Allen insisted the total amount of the tax cut would be closer to $2.2 trillion because Bush is not including an additional $400 billion in interest costs on the national debt that would result from the tax cut or $200 billion that would be lost in alternative minimum tax revenues.

It is also incorrect for Bush to say the surplus is $3.1 trillion, Allen said. The truth is, he said, after deducting the costs for Social Security, Medicare and other trust funds from the $5.6 trillion surplus projected by the Congressional Budget Office, only $2.1 trillion remain. “If you deduct Bush’s [$2.2 trillion] tax cut from the true surplus, it puts the nation back into the deficit,” Allen said. “Bush’s math doesn’t work.”

Democratic Rep. John Baldacci was not quite as negative about the Bush proposal but still had reservations.

“I do support tax relief,” said Baldacci, adding that he just differed with the president over the size of the tax cut package. “I would be more inclined to support the proposal put forth by the Blue Dog Coalition in the House,” he said. That plan, proposed by a group of moderate Democrats, would devote 50 percent of the surplus to debt reduction, 25 percent to federal programs and 25 percent to tax relief, Baldacci said.

“I support tax relief for hard-working families,” he added. “But we have to be cautious about the magnitude of such relief. American people don’t want to end up in debt again. I think they would prefer a steadier path.”

The focus should be on reducing the national debt and securing Medicare and Social Security, he said.

“You know, just last year the House voted overwhelmingly to devote 90 percent of the surplus to debt reduction,” Baldacci said. Congress has to be careful not to create problems for future generations by promoting deficit spending, he said.