Another Train Wreck?

Dec. 21, 2004
Congress, Clinton barrel toward collision on tax cut.

They called it the "train wreck" -- the collision between the Republican Congress and President Clinton in the fall of 1995 over budget legislation -- and it wasn't pretty. It was climaxed by the shutdown of the federal government, an event that soured the public on Washington, led to Clinton's reelection victory in 1996, and has influenced politics ever since. Now, the term is alive again in Washington. As Congress returns next week from its month-long vacation, Republicans and the President are barreling toward a similar smashup in the shadow of an election year. This time the confrontation is over the business-backed $792 billion, 10-year tax cut package passed by the Republican Congress in early August. Clinton pledges to veto it. The showdown is intertwined with the issues of health care, Medicare, and Social Security in the debate over the fiscal 2000 federal budget. That clash, in turn, is part of a still-larger battle over how to divvy up projected budget surpluses. In vowing his veto, Clinton argues that the tax cut is too expensive; the surplus should be used instead, he says, to expand Medicare with a new prescription-drug benefit and to "save" Social Security. He's also threatened wholesale vetoes of spending bills -- stripped down to pay for the tax cut -- that the GOP seems bent on sending him as part of the fiscal 2000 budget. Is a derailment inevitable? "It's anybody's guess right now," assesses Nelson Litterst, director of federal public policy for the National Federation of Independent Business. (NFIB). "It all depends on the strategy the Republican leadership adopts." He and other business lobbyists suggest three possible scenarios. One is the train wreck, in which GOP leaders would accept Clinton's tax-cut veto, force a government shutdown Oct. 1, eventually work out a "continuing resolution" to resume the government, and use the President's opposition to tax relief as a campaign issue in 2000. Or they could negotiate a continuing resolution to avoid a shutdown. Or they could negotiate a comprehensive budget "deal" with the White House that would embrace the tax cut, health-care reform, Medicare, and Social Security. One top lobbyist who believes a grandiose deal is the most likely outcome is Bruce Josten, executive vice president of the U.S. Chamber of Commerce. Despite Clinton's veto threats, Josten says, the President "is motivated to burnish his image" in the late stages of his presidency and "clearly does want a compromise. The challenge for us [business representatives] is that any deal will be negotiated by six or eight people behind closed doors. None of us will be in that room." Business has several prime concerns about what might be included in any such deal. "The entire reconciliation process will be of interest to us," indicates Fred Nichols, vice president of public affairs and political director of the National Assn. of Manufacturers (NAM). "We will be watching especially closely to see how much discretionary spending is increased." Business worries, too, about health-care reform language that might make it into a compromise. Just before Congress left for its recess, momentum was building for a bipartisan "patients' bill of rights" that would provide new protections for patients in managed-care plans, including a significant increase in employer liability and mandates. The measure is sponsored by a powerful Democrat, Rep. John Dingell (Mich.), and a group of Republicans rebelling against the House GOP leadership; among the rebels are Rep. Charles Norwood (Ga.), a dentist, and Rep. Greg Ganske (Iowa), a plastic surgeon. The bill has some 300 cosponsors, many of whom, observes NFIB's Litterst, "signed on without knowing the unintended consequences on employers." Above all, though, business wants to see that principal elements of the tax-cut package survive. Among them are a phased repeal of the so-called "death tax," relief for corporations from the Alternative Minimum Tax, a reduction of the individual capital-gains tax rate, a 1% across-the- board cut in income-tax rates, a five-year extension of the R&D tax credit, and pension reforms. Fate of the tax package hinges much on the effectiveness of Republicans' efforts during the recess to sell it to the public, which, polls indicate, has been largely indifferent to the issue. Business has been aiding the promotion effort. The Chamber, NAM, and NFIB all have communicated heavily with members on the issue, scheduled speeches and media appearances by their leaders, and activated their grass-roots networks to meet with individual legislators. Among other points, they've emphasized that the proposed tax cut amounts to less than 1% of the projected aggregate GDP over the next decade. Although taxes and health care are the overarching issues for Congress in the remaining weeks before its targeted Oct. 29 adjournment, other pending legislation also has implications for business. Election-campaign reform, Superfund reauthorization, bankruptcy reform, and electricity restructuring are four such issues.

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