Why GOP is shifting from tax cuts to reducing debt

Congressional Republicans - who looked as if they were about to be outmaneuvered again by the White House - have dramatically shifted their strategy on next year's federal budget.

Gone are the big Republican tax cuts. Gone are even the little tax reductions. Now they are putting top priority on reducing the national debt.

After President Clinton vetoed GOP cuts of the estate tax and the marriage-tax penalty, Republicans could have come back with versions more to the liking of the White House. They didn't.

Instead - needing a good campaign issue - Republicans in Congress now want to apply most of the $268 budget surplus to reducing the federal debt.

The plan surprised even the White House. It also puts congressional Republicans somewhat at odds with their presidential nominee, George W. Bush.

"You're seeing a bifurcation between the congressional Republican strategy and the Bush strategy," says Marshall Wittmann, a fellow with the Washington-based Hudson Institute. "A few weeks ago, they were looking to Bush's coattails to help them, and now they've jettisoned the coattails and it's every man for themselves."

Mr. Bush has campaigned on a $1.3 trillion tax-cut plan. Although GOP lawmakers would presumably work with Bush, should he win, to cut taxes in future years, the Gore campaign is gleefully proclaiming that congressional Republicans have "effectively declared their nominee's budget dead on arrival."

But analysts say this new tack, which would apply 90 percent of the surplus next year to debt reduction, could give Republicans leverage on the budget with President Clinton. It also plays well with the public, especially among swing independent voters.

"It's a smart move," says Frank Yang, a Democratic pollster. "Paying down the debt clearly tracks better with voters than a big tax cut."

Voters favor paying down the debt over cutting taxes by a 16-point margin, according to a recent Hart-Teeter poll.

Given the issue's popularity, some analysts are surprised the GOP didn't adopt this strategy earlier.

"It was polling well with the public, and, most significantly, is high on the list of independent voters," says Mr. Wittmann. "It also serves as a useful lever to guard against the spending demands of the Democrats and of the Clinton White House."

Back in 1999, Republicans on the Hill were pushing tax cuts that would have amounted to $778 billion over the next 10 years. After Clinton rejected this plan, they repackaged their big tax cut as a call for the repeal of "unfair" taxes, such as the estate tax and the marriage penalty. This, too, failed to make it past the White House.

The new plan is a fallback, after Congress failed to override presidential vetoes of tax cuts. But GOP lawmakers say that it will have the same effect as a tax cut - putting money back into taxpayers' pockets. Reducing the debt will lower interest rates, so that car loans and college costs will be less costly.

Setting aside 90 percent of the projected surplus to pay down the debt leaves only about $28 billion for new federal spending or tax cuts, according to current projections. And that narrow window could sharply refocus budget debates in the upcoming weeks.

Analysts say the GOP plan is already changing the political dynamics of this end of session. "This year's budget endgame now puts [Democrats] on record of being in favor of less debt reduction or more spending," says Michael Franc, vice president of government relations for the Heritage Foundation in Washington.

It could also help Republicans in close reelection bids by giving them an issue. "With Washington big spenders, if we don't take this money off the table, it will be spent," says Rep. Ernest Fletcher (R) of Kentucky, who is locked in a tight race for reelection and has been given a leadership role on this issue.

Democrats charge that the new GOP plan is just a gimmick, since budget surpluses not spent would automatically go into federal debt reduction with or without a new law. Others say the plan amounts to an "11th hour" conversion and will never make it through the Senate.

Nonetheless, Democrats joined Republicans in unanimously passing the bill when it came before the House Ways and Means Committee. No one wants to be on record opposing debt reduction in an election year, analysts say.

But the biggest downside to the new GOP strategy could be its impact on prospects at the top of the ticket, Democrats say.

"They've been talking tax cuts for two years. Now, three weeks before we leave, they want to do debt reduction," says Rep. John Tanner (D) of Tennessee. "This is a reversal.... And they're leaving George W. Bush high and dry."

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