Copyright 1999 Globe Newspaper Company
The Boston
Globe
July 29, 1999, Thursday ,City Edition
SECTION: NATIONAL/FOREIGN; Pg. A1
LENGTH: 1027 words
HEADLINE:
Greenspan cautions on big tax cut;
GOP backs $792 billion
plan; Democratic proposal defeated
BYLINE: By Bob
Hohler, Globe Staff
BODY:
WASHINGTON - A major tax cut could threaten the economic boom, Federal Reserve
Chairman Alan Greenspan warned yesterday, as the Senate opened debate on the
largest proposed tax break in US history.
With Republican leaders
pushing $792 billion in tax cuts and President Clinton
supporting as much as $300 billion in breaks, Greenspan
cautioned against rushing to give away a projected budget surplus that the
government has yet to reap.
Unswayed, the Republican-controlled Senate
last night killed a Democratic plan to cut taxes by $290
billion over 10 years, keeping alive the GOP's $792 billion
package for a final vote by tomorrow.
Both parties are framing the tax
struggle as a defining event in their campaigns for control of the White House
and Congress in next year's election. President Clinton has vowed to veto any
tax cut larger than $300 billion. "We probably would be better
off holding off on a tax cut immediately, largely because of the fact that it is
apparent that the surpluses are doing a great deal of positive good to the
economy," Greenspan said before the Senate Banking Committee.
He warned
that projections of a $3 trillion federal surplus over the next
decade could swiftly diminish. "They could just as rapidly go in the other
direction," Greenspan said, adding that he saw "no problem" in delaying a major
tax cut.
But political leaders showed little appetite for delay, as they
sharpened their rhetoric on taxes.
In signs of the increasing rancor,
the Senate majority leader, Trent Lott, called Clinton "totally irresponsible"
in his criticism of the $792 billion package, and the
president's allies continued to hammer the GOP measure as a recipe for economic
disaster. "It's radical, it's risky, it's reckless," said Senator Kent Conrad, a
North Dakota Democrat. "And it ought to be stopped."
Days after the
House passed a separate version of the $792 billion tax-cut
plan, the Senate voted, 60-39, to kill the $290 Democratic
alternative. Six Democrats, most of whom support a bipartisan plan for
$500 billion in tax breaks, broke ranks and joined the unified
Republican majority.
The only New England Democrat to vote against the
measure was Senator Joseph I. Lieberman of Connecticut, who called for
postponing any tax cut because of the precariousness of the surplus projections.
"We are well positioned for economic security," Lieberman said. "And before the
ink is barely dry on the projections, I am afraid, we are about to jeopardize it
all."
Earlier, Democrats posted a rare victory, as the Senate voted to
limit the proposed $792 billion tax cut to 10 years. Democrats
argued that the GOP plan would create a huge national deficit in the second
decade of the tax break.
Republican leaders wanted to make the tax
breaks permanent. They needed 60 votes to prevail on the procedural issue but
mustered only 51 votes. They were blocked by all 45 Democrats and three GOP
defectors, including the two Maine senators, Olympia J. Snowe and Susan M.
Collins.
The vote means that current tax laws would become effective
again in 2009 if the $792 billion package becomes law this
year.
The victory for Senate Democrats provided minor consolation after
their alternative tax-cut plan was soundly rejected. The Senate Democratic
leader, Thomas A. Daschle of South Dakota, said the plan called for "the kind of
targeted, controlled and prudent" changes that would benefit taxpayers and not
threaten the economy.
Under the Democratic alternative, tax burdens
would have been eased by increasing the standard deduction for individuals to
$5,600 from $4,300, and for married couples to
$11,550 from $7,200. The measure also would
have reduced the "marriage tax" penalty and expanded credits for education,
health care and child care.
But many Republicans scoffed at the size of
the proposed package. "It's too puny to do the economic good that ought to be
done," said Senator Charles E. Grassley of Iowa, a senior Republican on the
Finance Committee.
Still pending are several major Demcoratic
amendments, including a plan by Senator John F. Kerry to provide
$20 billion in Medicare funds to ease the crunch caused by
federal cutbacks at teaching hospitals, home health care agencies and nursing
facilities.
The measure would allow Congress to freeze reductions in
federal payments to teaching hospitals for graduate medical
education programs. Hospitals in the Boston area have been hard hit by
the reductions.
"With just a limited adjustment in the tax cut, Congress
can ensure that the doors of our nation's hospitals, teaching hospitals, home
health care agencies, skilled nursing facilities and rural health care providers
remain open," Kerry said in a letter to his Senate colleagues.
In a
separate move, Senator Edward M. Kennedy will try to reduce an unspecified
amount of the proposed tax cuts to help fund a prescription-drug benefit for
Medicare recipients.
Kerry and Kennedy are trying to amend the
Republican measure, even though they are expected to join nearly all 45
Democrats in opposing the $792 billion plan. If the amendments
are approved, they could become part of a final package that is negotiated
between House and Senate leaders and the White House.
Clinton has vowed
to veto any tax cut greater than $300 billion, and Daschle
insisted yesterday that Democrats control enough votes to sustain a veto.
Republicans outnumber Democrats, 55-45, in the Senate, but a two-thirds vote is
need to override a veto.
In the end, said backers of the bipartisan
plan, the final package could look more like their $500 billion
initiative than the Republican or Democratic versions.
The bipartisan
plan's sponsors include Snowe, Collins and the other GOP moderates from New
England: Senators John H. Chafee of Rhode Island, and James M. Jeffords of
Vermont.
Snowe said the compromise plan would guard against a downturn
in the economy. "We are erring on the side of caution," she said. "We are
striking the middle ground between what is fiscally responsible and politically
viable."
GRAPHIC: PHOTO, AP PHOTO/Senator John H.
Chafee, a Rhode Island Republican, described a bipartisan plan for
$500 billion in ta breaks yesterday.
LOAD-DATE: July 29, 1999 
