Treasury Secretary-Designate Defends Tax Cut Plan

By Jim Burns | July 7, 2008 | 8:27 PM EDT

( - Treasury Secretary-designate Paul O'Neill said he believes that President-elect Bush's proposed tax cut will not threaten the budget surplus, nor will it trigger inflation.

"If we're going to have a tax reduction, I don't know why we wouldn't want it now," O'Neill said during his confirmation hearing before the Senate Finance Committee. "It won't hurt. We'll get ready for the next round of expansion in our economy."

Many conservatives have criticized O'Neill for being lukewarm on tax cuts.

O'Neill told the Committee he expects the Bush tax plan to be submitted to Congress in about "six weeks or so," after the new president takes office Saturday.

O'Neill said President-elect Bush has not yet decided whether to make a tax cut retroactive, as many congressional Republicans are suggesting.

Not everybody is impressed with the tax cut argument.

Senate Democratic Leader Tom Daschle (D-SD) said O'Neill will inherit a "remarkably strong fiscal situation" with long-term challenges such as keeping Social Security solvent and providing prescription drugs under Medicare. A tax cut, Daschle believes, will jeopardize those priorities.

"We cannot afford to dig ourselves into a fiscal hole as we did in the 1980s. We cannot afford to return to the fiscal irresponsibility and weakness of times past," Daschle said.

But O'Neill said there is room to fit the president-elect's tax proposal within the projected surplus, even if economic growth continues to slow. He also vowed to keep the budget balanced and pay down the public debt - both goals of the new Bush administration, he said.

Republican Senator Olympia Snowe of Maine supports a tax cut because it would help the American economy.

"A tax cut would probably be the right thing to do at this moment in time. We all recognize we need to have strong and sustained economic growth," Snowe said in a statement.

But Steve Moore, chairman of a group called the Club For Growth, is lukewarm on O'Neill's appointment.

"I think he's going to be loyal to the President, but he's not a supply sider at heart and not the type of person you want to have in that type of situation. But he will be loyal to the president and an effective spokesman for his tax cut," Moore said.

O'Neill, who is retiring as chairman of Alcoa, is expected to win easy Senate confirmation.