The Conservative Agenda 2002: The Economy

By Jeff Johnson | July 7, 2008 | 8:28 PM EDT

Capitol Hill ( - President George W. Bush responded forcefully over the weekend to accusations by Senate Majority Leader Tom Daschle (D-S.D.) that last year's tax cuts caused the current recession. But will this debate lead to the economy becoming the most important issue on the conservative agenda in 2002?

Daschle blames the recession on long-term interest rates remaining high, which is the fault, he claims, of the "rapidly disappearing surplus."

"In May, the Congressional Budget Office reported a 10-year budget surplus of $5.6 trillion. By the end of the year, $3.7 trillion was gone," Daschle said Friday in Washington. "Nearly half of that was a direct result of the tax cut. The tax cut was by far the largest factor."

Speaking Saturday at a town hall meeting in Ontario, Calif., Bush seemed dismayed at Daschle's remarks.

"There are some in Washington saying that the tax cut caused the recession. I don't know what economic textbook they're reading. The best way to come out of a recession is to say to the small businessperson, 'We'll let you keep your own money,'" Bush said.

"When we cut taxes on all rates, we said to the sole proprietor or the limited partner, 'It's your money; you spend it in order to expand the job base in America,'" the president added.

Although Daschle never openly called for repeal of the tax cut, he did blame it for hampering the ability of Congress to fight the recession and the war on terrorism, and continued to equate high taxes with "fiscal responsibility."

"A year ago, we had the resources and the flexibility to make virtually any urgent investments we needed. We don't have that flexibility, or those resources today, because Republicans chose ideology over experience," he continued. "Experience showed that fiscal responsibility works. Ideology dictated tax cuts no matter what the circumstances."

In response, Bush threw down the same gauntlet that, many say, cost his father the presidency in 1992.

"There's going to be people who say, 'We can't have the tax cut go through anymore.' That's a tax raise. And I challenge their economics, when they say raising taxes will help the country recover," Bush said. "Not over my dead body will they raise your taxes."

Sen. Joseph Lieberman (D-Conn.), appearing Sunday on NBC's "Meet the Press," said Bush was wrong to rule out a tax increase.

"We've got to put everything on the table. I think it's wrong for anyone, president, or any one of us to say anything is off the table," he said. "That's just not smart. That's political rigidity and a kind of ideological rigidity that puts kind of personal philosophy ahead of national need."

Although Democrats argue that delaying implementation of the tax cuts is not the same as raising taxes, John Berthoud, president of the National Taxpayers Union (NTU) disagrees.

"More taxes is more taxes," he said. "Only politicians could somehow say that passing legislation that has the effect of increasing an individual's future tax liability is not a tax increase."

NTU believes Daschle's call for "fiscal responsibility" is betrayed by at least 15 separate spending increases called for in the plan he outlined Friday.

"Daschle is dead wrong to blame the tax cut for the diminished surpluses," the group said in a press release responding to the chief Democrat's proposal. "Lack of spending restraint in Washington is responsible for a far greater drain on the Treasury than the president's tax relief plan."

The economy will "obviously be very, very important," Berthoud concludes, and could overshadow other issues in the 2002 mid-term elections.

"We have absolutely no idea what will happen in foreign policy, and internationally in the coming year, but a weak American economy is going to, at a minimum, undermine our ability to take military actions and play a leading role in world affairs," he said. "So, even if international affairs are again preeminent in 2002, it's critical for the economy to turn around."

Berthoud adds that a refresher course in American history might be useful to Democrats considering tax increases to "help" the economy.

"We have a long history in this country, starting with Herbert Hoover, demonstrating that raising taxes in slow economic times is about the worst thing you can do," he said. "It's a huge mistake."

Whether that "mistake" will give conservatives the issue they need in 2002 to regain control of the Senate in 2003, only time will tell.