ok, let's see if the Democrats are stupid enough to blow the opportunity. POLITICS AND POLICY
Democrats' Risky Gambit: Tax Talk By Erasing Bush-Era Cuts, Presidential Hopefuls See Opening -- Albeit Narrow By JOHN HARWOOD and JACOB SCHLESINGER Staff Reporters of THE WALL STREET JOURNAL WASHINGTON -- Fourteen months before the 2004 election, the Democratic Party is betting it can win back the White House while supporting higher taxes -- and President Bush's eroding fortunes may make it a gamble worth taking. The 2004 Democratic presidential field, which gathers in New York Thursday for a live economic-policy debate sponsored by The Wall Street Journal and CNBC television, already has embarked on the party's boldest gambit on taxes in two decades. POLL RESULTS 1 See partial results2 from The Wall Street Journal/NBC News poll. Every candidate has called for rolling back all or part of Mr. Bush's tax cuts, notwithstanding Republican accusations that this amounts to raising taxes. In the latest example, the first domestic initiative of retired Gen. Wesley Clark's week-old campaign was a call for reversing tax cuts for Americans earning more than $200,000 and using the money to finance a job-creation program. Mr. Bush's strategists maintain that Democrats are walking into the same trap that 1984 Democratic nominee Walter Mondale did when he bluntly told voters he would raise taxes -- all but extinguishing his slim chances of ousting President Reagan. One senior Bush adviser recently laughed out loud at the Democrats' positioning on the issue, citing antitax sentiments that in recent weeks have led voters to sink tax-increase referendums in venues as diverse as Seattle and Alabama. Yet shifting public sentiment may make this safer for Democrats. A Wall Street Journal/NBC News poll shows3 that slow economic growth and persistent job losses have helped drive down Mr. Bush's standing to the lowest levels of his presidency. Just 49% of Americans approve of his overall job performance, and only 43% approve of his handling of the economy. More auspiciously for the Democrats' strategy on taxes, a solid 56% of those polled back cancellation of tax cuts for upper-income Americans to help pay for the reconstruction of Iraq. Influential Senate Democrats are advancing just such a proposal over White House objections. Americans polled split evenly, largely along partisan lines, on rolling back Bush tax cuts to pay for such priorities as reducing the widening federal-budget deficit and spending on health care. CAST YOUR VOTE 4 Why has the president's job-approval rating dropped? Participate in the question of the day5. Shifting public sentiment underscores Democrats' opportunity to argue for a return to Clinton-era tax levels as an alternative to Mr. Bush's policies. By a 53%-to-43% margin, Americans say Mr. Bush's approach to jobs and the economy needs major change. In a warning sign for the White House, political independents side with Democratic voters in slamming the president's approach. For Democrats, that could turn strategic necessity into political virtue. The Bush-era deficits that replaced Clinton-era surpluses and the cost of waging the war on terror have squeezed prospects for new domestic spending in the absence of tax increases. And pressures of the Democratic primary campaign, in which organized labor and others are seeking higher health-care spending, have left presidential contenders with an escalating need to explain where they would get the money. How Much? The 2004 Democratic debate, so far, hasn't been over whether to increase taxes, but by how much. Former Gov. Howard Dean of Vermont and Rep. Dick Gephardt of Missouri have proposed eliminating all three tax cuts signed by Mr. Bush and would use the money to finance health-insurance coverage or deficit reduction or both. Meanwhile, Sen. John Kerry of Massachusetts, Sen. John Edwards of North Carolina, Sen. Joe Lieberman of Connecticut and now Gen. Clark back preserving tax cuts for middle- and low-income families, while scaling back tax cuts for high-income families. Some political advisers to President Clinton fear Messrs. Dean and Gephardt have risked alienating middle-class voters whose tax bills might go up. Party strategists are pondering ways to present tax-increase arguments in a politically palatable form. One option: offering a broader tax-overhaul plan designed to shift a greater proportion of the tax burden to wealthier Americans. The debate is unfolding at a time when federal taxes aren't especially high by recent historical standards. A Congressional Budget Office study shows that middle-income Americans paid 16.7% of their incomes in federal taxes of all kinds in 2000, the lowest since the CBO began keeping track in 1979, while tax rates on the highest income Americans rose. The federal government's take, measured as a share of the overall economy, rose during the late 1990s to a peak of 20.8% in 2000 and slid to 17.9% in 2002, the lowest since 1993. Republicans see the public mood turning sour, and they figure that won't make higher taxes popular. In the Journal/NBC poll, Americans say by a 50%-to-38% margin that the country is heading in the wrong direction, sharply worse than their 62%-to-22% positive assessment in April following the fall of Saddam Hussein's regime in Iraq. In any case, the Democrats' positioning on taxes doesn't appear to be hurting the party's candidates' competitiveness so far. Some 42% of Americans say they are likely to vote for Mr. Bush's re-election, while 40% expect to vote for the Democratic candidate. In hypothetical match-ups, the president leads Mr. Dean by 13 percentage points, down from 22 percentage points in July. The newest Democratic candidate, Mr. Clark, trails the president by a 45%-to-38% margin in the wake of his widely publicized announcement speech last week. Sen. Lieberman trails Mr. Bush 52% to 35%. Telling Sign A telling sign of the party's new thinking is the initial positioning by Mr. Clark, who entered the race with no domestic-policy profile at all after a military career. Speaking in New York near a Domino Sugar plant soon to be closed, Mr. Clark sought to distinguish himself by proposing to spend $100 billion during the next two years to stimulate the economy, more than his rivals. That includes $40 billion each for state governments and homeland security, and $20 billion in tax breaks for companies that increase employment. "Three years ago, we were told we were getting a compassionate conservative," Mr. Clark said. "What we got instead were massive tax cuts for the rich, staggering deficits for the country, and the worst job losses since the Great Depression. That's not compassionate or conservative; it's heartless, it's reckless and it's wrong." Mr. Clark echoed rivals' tough talk on trade by criticizing China over exchange rates and proposing to "review trade agreements to make sure our trading partners have opened their markets" -- though aides say he won't sound as protectionist on the campaign trail as rivals Messrs. Dean and Gephardt. The Journal/NBC poll shows rising skepticism about trade expansion across the political spectrum, with majorities of Democrats and Republicans alike agreeing that "free trade is not worth it" when benefits are measured against the cost of lost American jobs. The Wall Street Journal/NBC survey of 1,007 American adults, conducted from Sept. 20 and 22, has an error margin of 3.1 percentage points in either direction. -- Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901
