Tax Cuts with a GOP Sweep Jude Wanniski November 2, 2000

There is now in political circles the sense that George W. Bush will not only win next Tuesday, but that he might win big, with 400 electoral votes or more if he manages to win California. The Democrats certainly are acting as if this were the case, already preparing to blame Vice President Gore for being a poor candidate who should have won easily. It also may be that the GOP will hold on to the House and the Senate, which now seems to be the drift of opinion we are tapping into, both in our readings and from our sources on Capitol Hill. This Republican optimism may or may not be realized, but it definitely is causing the GOP leaders in Congress to act more confidently than they have been in the recent past, both in dealing with their Democratic counterparts and with President Clinton on the last-minute budget and tax issues before Congress.

It now of course is certain that Congress will return for a lame-duck session in two weeks. In voting a 14-day Continuing Resolution to keep the government open while a few appropriation bills remain unfinished, the Senate appears to have worked out a deal with the Democrats and the White House on the tax bill -- which is why Senate Majority Leader Trent Lott has been able to promise he will bring home the bacon on taxes in the lame-duck session. As Karen Kerrigan has been reporting for weeks, the administration desperately wants the Foreign Sales Corporation (FSC) measure that it has promised the World Trade Organization (WTO) will be law as of yesterday. It was supposed to be law as of October 1, but the administration asked for a one-month reprieve. It is tucked inside the tax package that is hung up in the Senate because of a disagreement over a relatively minor matter involving business liabilities for carpel-tunnel syndrome. Senator Lott yesterday carved the FSC measure out of the tax bill and whipped it through the Senate. House Majority Leader Dick Armey, though, insists he will not go along. The President has to sign the whole package, which Armey negotiated with Treasury Secretary Larry Summers. Armey correctly points out that the GOP was quite willing to pass the FSC last summer as a clean bill, but two liberal Democrats in the Senate blocked it on the grounds that they don’t like the WTO telling us what to do.

Because the FSC was a White House initiative, for the most part it was Democratic lobbyists that were dispatched by the 6,000 corporations who get around $4.5 billion in tax breaks on their exports through the FSC. So it is now these folks who are alarmed at what the WTO may do in retaliation if the FSC provision is not passed. They are begging Armey to relent, but Armey simply says if the White House got a month’s extension in late September, it can make another phone call and get another one now. He essentially is telling the White House: I think Trent Lott is a swell fellow, and he may think he has a deal with you, but I no longer trust you. If you want FSC, have Lott call the Senate back into session and pass the tax bill. Meanwhile, we will come back at 6 p.m. tonight to pass another 24-hour Continuing Resolution to keep the government open until tomorrow. We will give you a 14-day CR, but with no concessions on FSC!! And we will stay in session over the weekend if necessary. In any case, Armey is not going to give away his biggest bargaining chip for vague promises from a man he does not trust. He can afford to play hardball, given the sense that Bush will win next Tuesday. If there is a GOP sweep, dickering over the $240 billion tax cuts in a lame-duck session will take place against a backdrop of a Bush administration that has promised $1.3 trillion.