October 3, 2001

Economy

GOP Leaders Oppose Bush Stimulus Plan
With Public-Works Funds, Aid for Jobless

By SHAILAGH MURRAY and JIM VANDEHEI
Staff Reporters of THE WALL STREET JOURNAL

WASHINGTON -- Top Republicans in Congress are strongly resisting President Bush's push for a bipartisan economic-stimulus package that includes public-works spending and federal benefits to unemployed workers.

Some Republicans, especially conservatives who want a bigger emphasis on business-tax breaks, fear that Mr. Bush is giving in to Democrats' demands too readily. "Tax relief is what we must use" to stimulate the economy, said House Majority Leader Richard Armey of Texas. Public-works projects and extending unemployment benefits "are like pouring sugar into a gas tank. They just won't work."

White House aides briefed lawmakers Tuesday on a Bush proposal to offer all unemployed workers some additional weeks of benefits and to help them pay for health-care premiums by expanding an emergency grant program for displaced workers. Mr. Bush raised the idea in more general terms during a White House breakfast with congressional leaders.

The president also signaled that he might back a second round of tax-rebate checks -- but only for lower-income workers who missed out on the first batch of checks, according to a GOP leader briefed by the White House. In exchange for backing this Democratic-sponsored idea, the president wants support for cuts in business taxes.

Accelerated depreciation and higher business expensing limits top the White House wish list, according to senior White House aides. The president's aides have also indicated support for adjusting the corporate alternative minimum tax. The cuts would most likely last fewer than three years, and possibly just one, congressional aides said.

While Democrats said they are ready to sign off on limited business-tax breaks, the size and scope aren't likely to satisfy Mr. Armey and his conservative colleagues. Mr. Armey sent a letter to House Republicans, calling on them to "stay disciplined and keep a tight focus." He is pushing a much larger package of permanent corporate-tax breaks, valued at as much as $150 billion a year.

The friction comes as Mr. Bush begins to assert himself in the stimulus debate, which began Sept. 12, the day after the terrorist attacks. Until this week, the White House offered no details on a stimulus package, leading Republicans to complain that the president wasn't using his 90% approval ratings to shape the debate and push a package to the GOP's liking.

Now they worry that Mr. Bush is moving too fast and embracing too many Democratic ideas. Senate Minority Leader Trent Lott of Mississippi is upset about the rush to add new spending, and has raised the issue with White House Chief of Staff Andrew Card. "There's a real danger this could get out of control," Mr. Lott warned.

Mr. Bush is scheduled to meet Wednesday with chief executives of major corporations. But so far, the business community isn't complaining about Mr. Bush's priorities. The U.S. Chamber of Commerce and other pro-business groups support the Democrats' proposed increases in spending on transportation and utilities.

The Business Roundtable, an influential business lobbying group, sent a letter to Mr. Bush Tuesday that endorses a payroll-tax cut for individuals. The group also wants a corporate-rate reduction -- an idea that one GOP lobbyist said "appears dead," because of Democrats' objections.

Also Wednesday, Treasury Secretary Paul O'Neill is scheduled to testify before the Senate Finance Committee, while Federal Reserve Chairman Alan Greenspan is expected to brief Democratic and Republican leaders on the state of the economy. GOP leaders are urging the White House to send Mr. O'Neill with the authority to speak for the president, so members know exactly where Mr. Bush stands on the various stimulus options.

Lawmakers are looking for a clear direction from the administration. Just Tuesday, Glenn Hubbard, chairman of the president's Council of Economic Advisers, told a Senate committee that accelerating Mr. Bush's individual tax cuts and cutting corporate rates would be more effective than one-time rebates or temporary tax breaks. Mr. Hubbard also officially predicted a recession, becoming the first administration official to do so.

One hitch is that the latest congressional projections show the budget surplus for the current fiscal year is down to $52 billion -- about a third of previous estimates. Unless Congress decides to return to deficit spending, it must fit a long list into that sum: the stimulus, extra farm and education aid, military requests, antiterrorism and airport-security funds, and more disaster aid.

But Mr. Bush also is reluctant to make the mistake his father made after the Gulf War: appearing to pay too little attention to the struggling economy and the plight of the unemployed. That is why he has signed off on an economic-recovery plan that includes new benefits for unemployed workers, aides said.

-- Greg Hitt contributed to this article.

Write to Shailagh Murray at shailagh.murray@wsj.com¹ and Jim VandeHei at jim.vandehei@wsj.com²

For information about subscribing, go to http://wsj.com