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Will the Budget Drive a Wedge Between the Bush Administration and Congress?

Aired September 5, 2001 - 19:30   ET


ROBERT NOVAK, HOST: They're back. Congress comes back to town ready to fight over the budget.


SEN. BYRON DORGAN (D), NORTH DAKOTA: When we talk about fuzzy math, this plan doesn't add up at all.


NOVAK: More tax cuts?


SEN. TRENT LOTT (R-MS), MINORITY LEADER: I have been suggesting all year that I thought the capital gains tax rate cut was the right thing to do.


NOVAK: Stem-cell research.


SEN. EDWARD KENNEDY (D), MASSACHUSETTS: The president's decision to establish restrictive condition on this critical research and will delay development of cures for dread diseases for many years.


NOVAK: Tonight, let the fighting begin.

ANNOUNCER: Live, from Washington, CROSSFIRE. On the left, Bill Press. On the right, Robert Novak. In the "Crossfire": Democratic Senator Dick Durbin of Illinois, and Republican Senator George Allen from Virginia.

NOVAK (on camera): Good evening, welcome to CROSSFIRE. After taking off the whole month of August, the members of the Senate and House of Representatives were back in session today, and it seemed that 31 days of basking in the sun, junketing around the world and just taking life easy had not improved their dispositions. Democrats roared into town still bitter about the Bush tax cut, and charging that the president is about to dip into Social Security funds. But President Bush told Senate Majority Leader Tom Daschle that he would not do that. The president wants Democrats to get moving on military spending and education reform, while congressional Republicans are pressing President Bush on a cut in the capital gains tax to try to revive the economy.

And in Senate Committee, today, Ted Kennedy and Hillary Clinton pushed the administration to expand federal stem-cell research. So clearly, it is politics as usual along the Potomac. What's not so clear is who is winning -- Bill Press.

BILL PRESS, HOST: Senator Allen, nice suntan. Welcome...



ALLEN: except for a little point when I went into Tennessee, and West Virginia, just to get to another part of Virginia.

PRESS: Don't feel guilty. My question to you is, President Push said he was going come to Washington and change the tone. Frankly listen to the comments up on the Hill. I don't remember when it has ever been so nasty. And isn't it because George Bush lied to both Republicans and Democrats about having enough money for a tax cut without raiding Social Security?

ALLEN: Not at all. I think the tone from the White House and from Republicans is very positive, and trying to make sure that what we take care of are the people and try to help the economy get jobs going again, which is most important.

It is unfortunate that some people, I think, on the other side of the aisle are using this unfortunate situation in our economy, to use it for political gain. So I think everyone tried to make budget projections, as best they could and forecast as accurately as they could and obviously the economy has not done as well as what we thought it was going to do based on all the best estimates at that time earlier in this spring.

NOVAK: Senator Durbin, isn't it the truth that you spent the whole recess getting a battle plan going? You call it the Fall Offensive, to make George Bush look just as bad as possible, because of an economy that he inherited from Bill Clinton?

SEN. DICK DURBIN (D), ILLINOIS: No. Unfortunately, Bob, the problem the president has is the Congressional Budget Office. And they came out with a report and $130 billion in surplus disappeared. During the month of August while the president was on ranch, two things happened. The economy didn't get any better, and the Bush budget got a lot worse and that is why we are in the mess we are in.

PRESS: Let me pick up on that, Senator Allen, because what a difference a month makes. I mean before you guys left you were awash in cash. And you come back to a dry hole. I think one of your fellow senators today, a Democratic senator, put a finger on exactly what happened and we know why. Here she is.


SEN. HILLARY CLINTON (D), NEW YORK: The staff has said that he will focus like a laser beam on the economy. But so far, the laser beam from the other end of Pennsylvania avenue has only succeeded in vaporizing the surplus.


PRESS: That is right, isn't it? There is no money left because the tax cut ate it all.

ALLEN: No. What's happened is that the economy is doing worse. It didn't all happen in August. Obviously, you get the numbers in as the revenues come in, and so often, even in determining whether there are recessions or how the economy's growth may be, is based really sometimes a month, two months sometimes three months later.

The tax cut, I think, is exactly what is needed. I have spent the whole month in Virginia. We had town meetings. I found it very interesting to hear what people were doing with their rebate checks. They were spending it on home improvements, some were fixing up their car that they crashed into something.

Others were saving it, they are spending for their kids, all of that, or paying down credit card debt. All of that is good for the economy, so I think that what we need to do is look at ways that we can bolster more investment, more job creation in our country because that is how you take care of priorities.

PRESS: I find that very interesting because here.

ALLEN: What would that Democratic senator say the solution is? Increase taxes?

PRESS: I haven't heard one Democrat say increase taxes -- not one.

ALLEN: So what's their solution?

PRESS: We will hear from Senator Durbin in just a second. I don't want to let you off the hook so easily because you say the economy caused the sort of slowdown. I agree, it did. I agree the tax cut was part of it, too. So, now, what are you Republicans on Capitol Hill coming up with as the answer? Another tax cut.

Now you are talking about a cut in the capital gains tax, so I mean, will you explain to me, are the wealthy people in this country so hard up that they got one tax cut but now they need another one?

ALLEN: What we need is, number one, fiscal discipline. We are going to have to stick within these budget parameters. As far as that he capital gains tax cut, a lot of people are invested in the stock market and the actual impact on the budget of reducing capital-gains taxes is that it actually raises revenue and it induces more economic activity, and therefore, whatever that transaction is, that sale of a stock or an asset actually increases revenues to the federal government beyond being good for economy.

And the other point on capital-gains taxes, in my view, just as a matter of fairness, they ought to be indexed. The longer you hold an asset the less the tax should be on it.

NOVAK: Actually, they should be repealed, but that is for another...


PRESS: You will never go far enough to satisfy him.

NOVAK: Senator Durbin, even your respective presidential candidate, John Kerry was on "Meet The Press" Sunday. He likes a cut in the capital gains tax. But I want to give you one of your fellow senators, who gave a very cogent argument for cutting the capital gains tax, and Senator, I would like you to listen very carefully, and I don't think you can rebut anything he said. Let's listen.

DURBIN: Probably not.


LOTT: I have been suggesting all year that I thought that capital gains tax rate that was the right thing to do, that it would be helpful to the economy, and I believe that if we would reduce it to 15 percent for two years, it would actually bring in more revenue. So it would help with revenue that we would have available to the government to spend for our top priorities: education and defense.


NOVAK: What can you refute of that?

DURBIN: Let's refer to a leader in your party, President George W. Bush.

NOVAK: I am a registered Democrat.

DURBIN: We all know that, we can tell from the program. But President George W. Bush has said clearly he is not for a capital gains tax cut this year. He says next year we can talk about...

NOVAK: I would like you to refute what Senator Lott said.

DURBIN: What Senator Lott has said is if you just keep cutting taxes, some how you get more revenue in. That is sort of the old style Reagan attitude toward tax cuts that led us into deficits.

Here is what it boils down to: If you want to cut taxes or increase spending at this point, because the surplus has disappeared, you take it out of the Social Security trust fund or the Medicare trust fund.

Over 400 members of the House, Democrats and Republicans, took the solemn vow, voted for this resolution, were are never going to do that. And the Senate did the same. The president has said we are not going to touch Social Security and I'm wondering as I am listening to Dick Armey and Trent Lott and others, they are willing to go and cut Social Security trust funds, raid them for a capital gains cut?

NOVAK: I want you to talk about what I want to talk about for the moment. We have talked about that a lot, but I want to talk about this tax question. You know, Senator Durbin if you would consult some of the more experienced senators, they would tell you every time that you cut capital gains tax. For two years, you will get an increase in revenue because people are getting rid of their assets.

But what I want to ask you is this: If you are saying we can't touch this so-called Social Security trust fund, there is no "trust fund" of course, but if you say you can't trust Social Security taxes, are you saying -- the only thing you can do, one two of things, you can cut back on spending, or you can increase taxes in a reduced economy. Do you want to do either one of those?

DURBIN: I don't think you are hearing that suggestion from anybody.

NOVAK: What do you want to do?

DURBIN: What it boils down to is, we've got to say to the president, treat this like a family would treat a budgetary problem.

NOVAK: Well, what are you going to do?

DURBIN: I'll tell you exactly what you do. A family sits down, when it doesn't get the revenue it expects and decides to change its budget. This president has to come back to the table...

NOVAK: Tell me what you want to do -- tell me what you want to do.

PRESS: Let him answer the question.

NOVAK: He is saying he wants the president...

PRESS: He is trying to answer the question.

NOVAK: I want you to tell me what you would do.

DURBIN: I can tell you exactly what I would do. First, stick to your promise, Mr. President. Don't raid the Social Security trust fund or the Medicare trust fund. Members of Congress, Democrats and Republicans stick to their promises as well. We have got to sit down and recalculate this budget to reflect the honest numbers we have because of the economy, and because of the tax cut. That is pretty simple.

PRESS: Senator Allen, I want to move to another issue, Senator...

ALLEN: The question is, do you cut spending or do you raise taxes? My view is, we need to reduce spending increases.

PRESS: I want to move to another issue which is another issue where we found out that George Bush doesn't know how to count. Not only can he not count when it comes to budget, he can't count when it comes to stem cells.

He said a month ago there were 64 lines available for stem-cell research and that is all we were going to allow. Secretary Thompson got up in front of the Hill today and he admitted that there are less than half of that number of stem cells actually available for medical researchers.

So I wonder, was the president intentionally misleading the nation or had he not done his homework? Which was it?

ALLEN: I think he came to this conclusion based on all the evidence he had at the time.

PRESS: Just a month ago!

ALLEN: Well, whether 34, 64, of these lines, stem cell lines, is a matter of debate. I know that what he went through, was a lot of soul-searching. He was listening to a lot of evidence, the best information he could. Tommy Thompson is very well versed on this issue. And I know he came to that conclusion.

I came to a different conclusion, a somewhat different conclusion on it, and I think that at least, regardless if there is five or 15, or whether there are 25, I think that at least for those of us who think there should be research done on embryonic stem cells for these -- embryonic stem cells which are embryos, which would otherwise be wasted or discarded, we ought to go forward with it.

Now it may come to a point where we will actually make a decision, should it be funded for those stem cells that are the by- products or excess from in vitro fertilization. That is another issue.

PRESS: Here is the central question, and by the way, Secretary Thompson said there were 24 or 25 available. But, given the millions of people who are suffering from Parkinson's or diabetes or ALS, and the promise of a cure from this kind of research, isn't it better to use those lines, all of them, for medical research, than to allow those things thrown away in the trash which is what their future?

ALLEN: I agree, so long as they are the embryos that are a result of in-vitro fertilization. I learned a lot more about in-vitro fertilization than I ever knew, and it is amazing to me how many there are, and that whole process.

I'm surprised there hasn't been more protests from folks who, let's say, are on the very strong pro-life side of it. But nevertheless, I think that research on embryonic stem cells as well as research on adult stem cells must go forward. And I think it can save lives. But I don't think there should be funding on those embryos that are created solely for the purpose of harvesting.

PRESS: All right. There are other issues in front of you, gentlemen and your colleagues. We know that. We'll get to more of those when we come back, including a special visitor to White House today, President Vicente Fox of Mexico. Will he get everything he is asking for from President Bush?

More CROSSFIRE coming up.


PRESS: Welcome back to CROSSFIRE. At one end of Pennsylvania Avenue today, Congress was reconvening. At the other end, President Bush was rolling out the red carpet for President Vicente Fox of Mexico, who came demanding action on illegal immigration this year.

But is blanket amnesty the answer? And even if President Bush wanted it, would conservatives in Congress go along? Just one more item on a long list of disagreements tonight between Republican Senator George Allen, of Virginia, and Democratic Senator Dick Durbin, of Illinois -- Bob.

NOVAK: Senator Durbin, the most important thing for Mexican-U.S. relations, I believe, is trade. And the most -- the thing that is getting held up in your Democratic Senate because of the dictates of organized labor, is trade legislation that will permit us for the first time in years, the United States, to negotiate trade agreements. Are you, as one of the leaders of the Democratic Party, ready to throw off the shackles of the union bosses and go for free trade in the Senate?

DURBIN: Bob, I know you have checked the record, you know I voted for NAFTA.

NOVAK: I know you did. And I'm asking...

DURBIN: I voted for permanent normal trade relations with China. And what I'm waiting for from the White House is the president's proposal on fast track. I want to find out what provisions he will include which relate to protecting the environment, protecting the rights of workers.

We still don't have that, So to say that Congress is holding this up, we are really waiting for the White House to deliver their proposal.

NOVAK: Of course you want demands that labor puts in that would kill the bill.

DURBIN: Not necessarily.

NOVAK: I want to ask a question about the immigration that Bill brought up. I don't know if you know this, but the Democratic National Committee put out some Spanish language ads on television today attacking -- attacking -- the idea that President Bush is trying to help the Hispanic-Americans, helping the Mexican immigrants by trying to work out a deal with Mexico.

Aren't you afraid -- politically -- aren't you frightened to death of the idea that the president is going to move into this big Hispanic-American voting base by trying to reach an agreement with President Fox of Mexico on immigration?

DURBIN: Well I just, I don't, I don't fear that at all. In fact I welcome it. I think it is time for us to accept the reality of what America looks like today. Our home state of Illinois looks a lot different than when we grew up.

There are an awful lot of Hispanic and Latino immigrants to the state who are raising families and paying taxes and working hard. And I don't think they should be disqualified from becoming citizens, as our parents and grandparents did. They should have their chance. I think we can work out a reasonable approach to immigration.

As the son of an immigrant, I know you are the grandson of an immigrant, you understand the contribution that immigrants have made to this country. As long as we have a sensible immigration policy I hope the president will join us with Democratic leadership at Congress to make it happen.

PRESS: Let's talk about this, Senator Allen, a central issue because President Fox really surprised everybody today, saying, I want some action this year -- this year, by end of the year, so that the three and a half million Mexican immigrants who are living here illegally now will no longer be what he calls general amnesty. There were some early signs about a month ago that President Bush was going in that direction too. Since then he has backed off.

My question is, the president does reach that deal with Fox would he have your support in United States Senate for general amnesty for the 3 1/2 million who are here now?

ALLEN: One of the things I was actually there greeting President Fox and it was a very proud day, a beautiful day, a great pageantry and obviously a great deal of personal affection between President Bush and President Fox. One thing that was brought up, though was also the concept of the rule of law. I'm a son of an immigrant myself. I think that immigration has benefited this country. However, it is legal...

NOVAK: Grandson, aren't you?

ALLEN: Son. My ma is an immigrant.

NOVAK: I'm sorry.

ALLEN: At any rate -- she came over after World War II -- at any rate, immigration should be an orderly legal process. Now for those who want to contribute to our society, and be a guest worker who or have a visa for being a temporary worker, that is fine. But to grant amnesty to those who have come in here illegally, I think sends a wrong message.

Look at the results of the last time, the Simpson-Mazzolli bill. They said that was going to be first and last time, and what's happened? Even more have come in. And to me and it is not just Mexicans, it is from everywhere else. And so I think what they will have to do, and I think President Bush, I would hope, will understand and respect the rule of law, and whatever agreement they come up with is going to need to be ratified by the House and Senate and I think that it is important to have people in here as guest workers but don't grant amnesty -- blanket amnesty -- to those who have come in illegally.

PRESS: Let me ask you though, the flip side of Bob's question. The reason you don't want general amnesty is because these three and a half million people become citizens, you know that 90 percent of them are going to register as Democrats. That is why you don't want it, isn't it?

ALLEN: Come on, Bill.

PRESS: Yeah, I'm serious.

ALLEN: You shouldn't be that way. You, really, you are smarter than that. The reason is, is the rule of law. I as a Republican and I think many others regardless of party, think it is important that we uphold the rule of law.

PRESS: So you are going to throw them all out?

ALLEN: Well, you will have to -- yes you will. Whether you throw them out or grant them guest worker status or a visa, obviously is a practical matter. It will be hard to actually throw everyone out who has come in illegally.

But the solution should not be to grant people who have come in illegally, and the politics of it mean nothing. I don't care if these were people who were coming in from Quebec, and they were all somehow going to be Republicans. The point is, there should be an orderly process.

NOVAK: We have less an a minute left. Senator Durbin as much as I admire you, and you know I do admire you, I can't get you get away with what you got away with earlier in the program saying this is up to President Bush, what to do with the fact that we have a declining surplus.

I want you to tell me, there is only two things that can be done: cut spending, or increase taxes. George Allen was forthright enough to say he would cut spending what would you do?

DURBIN: I'm not in favor of increasing taxes. You wouldn't do that in the middle of a recession. But keep this in mind. This is a Bush budget, a Bush tax cut, we are in a state of a Bush economy. At this point Congress has not voted for a penny more than what the president has requested this year. It is time to sits down and accept the reality. The projections were wrong. The president's projections on the surplus were wrong. And we are not going to raid Social Security, or Medicare trust fund to pay for additional spending.

NOVAK: Senator, you've got the mantra right, but I want you to answer my question some day. But not tonight because we are out of time. Senator Dick Durbin, thank you very much. Thank you, Senator George Allen.

And Bill Press and I will be back to talk about taxes!


NOVAK: Bill, I would like you to put aside your ideological baggage for just a few seconds.

PRESS: Hmmm.

NOVAK: And look at a capital gains tax cut, which every economist knows would pour more investment into the economy. It would actually raise revenue. Everybody agrees to that, the CBO the OMB, for the first couple of years. The only thing against it is it benefits successful people in America. Is there any other objection to it than that?

PRESS: Bob you are wrong as usual. Secretary of Treasury, Paul O'Neill today, said, this is no time for a capital gains tax cut because it will drain revenue from the treasury.

NOVAK: It is not true.

PRESS: Well, there you go. There is a Republican treasury secretary -- let me tell you about, here is how I see it. For eight years I watched my 401(k) under Bill Clinton, every year it went up, up, up. For the last nine months is has gone down. You call this fiscal responsibility? It is a disaster.

NOVAK: You didn't answer my question. What you really want -- you just hate for anybody who votes Republican to get a tax benefit.

PRESS: No, listen. I am a successful American. I want my 401(k) to go back up. And a tax cut is not the answer.

NOVAK: If you consider yourself successful, you may be alone.

PRESS: I'm proud of it, baby. From the left, I'm Bill Press. Good night for CROSSFIRE.

NOVAK: From the right I'm Robert Novak, Join us next time for another edition of CROSSFIRE!



4:30pm ET, 4/16

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