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Bush trumpets tax cuts, seeks to rally Republicans

Posted on: Wednesday, 17 May 2006, 17:15 CDT

By Caren Bohan

WASHINGTON (Reuters) - President George W. Bush said on Wednesday the U.S. economy was hitting full stride and credited his tax breaks, as he sought to rally Republicans with a congressional election looming.

"American workers are taking home bigger paychecks and their standard of living is on the rise," Bush said at a ceremony to sign into law a $70 billion measure to extend his investment tax cuts by two years.

But Democrats criticized the reductions as part of a fiscally reckless policy that has driven up the deficit and mainly benefited the wealthy and people on Wall Street.

"The Republican tax cuts do little for middle-class American families and widen the gulf between rich and poor," said Rep. Steny Hoyer of Maryland, House of Representatives Democratic whip. He said the tax cuts were helping to create "a wave of red ink."

The Republican-led Senate passed the tax cut bill on a mostly party-line vote of 54-44, over the objections of Democrats.

Bush listed statistics showing a growth rate of 4.8 percent in the first three months of this year and an increase in payrolls of 5.2 million over the past two-and-a-half years as he sought to make the case that his 2001 and 2003 tax cuts had set the stage for vibrant growth.

He also said tax revenues were up, though the White House earlier this year projected a record deficit in 2006 of $423 billion.

The White House has been frustrated at polls showing Americans have a lukewarm view about the economy, as numbers showing solid gross domestic product growth have been overshadowed by worries about rising prices for gasoline and health care.

But Bush, who has seen an erosion of support from his Republican base and his overall popularity rating dropping to the low 30 percent range, hopes the GDP and other figures will help shore up Republican chances in the November midterm election.

Democrats believe Bush's political woes may help them take over dominance of one or both houses of Congress.

INVOKING REAGAN

Playing to his conservative base, Bush likened his 2001 income tax cuts to the policies of former President Ronald Reagan and suggested that Democrats believed in "raising taxes and centralizing power."

He said the 2003 tax breaks on dividends and capital gains were helping families, such as those who own mutual funds.

The bill Bush signed extends through 2010 a 15 percent tax rate for dividends and capital gains. Those rates were set to expire at the end of 2008, with the long-term capital gains tax rate reverting to 20 percent.

The Democratic National Committee cited a think tank study showing middle-class households would get an average tax cut of only around $20 from the bill Bush signed, while households with incomes over $1 million would get a $42,000 tax cut.

"Under the failed leadership of President Bush and Republicans in Congress, wages are down, gas prices are up, deficits are at record levels and their solution is tax cuts that leave the middle class even further behind," the DNC said in a statement.

At the signing ceremony, Bush also broadened a threat to veto a war-time spending bill if its total exceeds the limit he has set of around $95 billion. The bill includes money to fund the Iraq war and Hurricane Katrina rebuilding.

Bush, who has never vetoed a bill, said any measure that either exceeded the limit "or includes non-emergency or wasteful spending, I'll veto it."

Source: REUTERS

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