Senate listening to cash-strapped states
WASHINGTON (AP) – Senate Republicans appear ready to include at least some aid to financially strapped states in tax legislation designed to jump-start the economy. Republican aides working on the legislation said strong support for state financial relief among Republican and Democratic members of the Senate tax-writing committee means money will be included in that bill. They said there will be no room, however, to give states the $30 billion to $40 billion that supporters want.
Senate Finance Committee Chairman Charles Grassley, R-Iowa, said in a CNN interview Monday that there will have to be compromise on the bill in the narrowly split Senate.
He warned GOP leaders that pushing moderate Republicans too hard could lead to a defection from the party similar to Vermont Sen. James M. Jeffords’ split two years ago, which handed control of the Senate to the Democrats.
He told Republicans to have “some understanding that in a 51-49, almost equally divided, Senate, albeit Republicans controlling, that Republicans don’t get everything they want. And if Republicans push too hard, you have what happens to us two years ago with Sen. Jeffords leaving the party.”
Grassley quickly added that he didn’t expect another defection. “At least that’s the reality of what happened two years ago, and I think that we should learn from history,” he said.
Republicans will spend this week making final decisions about what to include in their tax cut bills. Taxes will be on the agenda when President Bush meets Tuesday with Senate Majority Leader Bill Frist, R-Tenn., and House Speaker Dennis Hastert, R-Ill.
A cash infusion to states will have to compete with the tax cuts the White House favors. But the idea, a centerpiece of Democratic tax proposals, has strong support among Senate Republicans. Adding state aid to the package could win crucial support from moderate Senate Democrats.
The White House has been lobbying the Senate to match the $550 billion in tax cuts that will be passed by the House. Speaking to reporters in College Station, Texas, after delivering a lecture at Texas A&M University, Hastert played down the rift between House and Senate Republicans over the size of the tax cut and blamed Democrats for the difficulties in getting the legislation through Congress.
“You have four or five people who I’ll call the prancing ponies of the Senate that all want to be a presidential candidate, or a wannabe,” Hastert said.
“It’s to their advantage to not help this economy and have a bad economy going into a political year. I think it’s shortsighted. … I think it’s politics, that’s a lot of it.”
State leaders lobbying Congress and the White House for some financial aid say that without it, any federal stimulus will be wiped out by tax increases, funding cuts and job cutbacks by state and local governments.
“Not because anyone is looking for a bailout, the issue here is partnership on economic recovery,” said Michael Bird, federal affairs counsel for the National Conference of State Legislatures (NCSL). “The assistance has to be soon. It can’t be later.”
Studies compiled by the NCSL suggest there is a $23.5 billion to $82.5 billion gap between mandates and expectations set by federal law and the money sent to states to fulfill them.
House Republicans say they will probably not include state aid in their version of the tax bill. They argue that states got significant aid for homeland security, in addition to an $8 billion infusion of federal unemployment funds early last year.
They add that GOP-drafted legislation on prescription drugs and welfare could mean billions more in aid to states if enacted later this year.
The Senate’s state aid will have to squeeze into a bill that’s already feeling pressure. There are not enough votes in the Senate to pass more than $350 billion in tax cuts – less than half the amount Bush originally proposed.
Republicans are scrambling to find ways to offset the cost of additional tax cuts, such as closing down corporate tax shelters and extending customs fees.
The White House favors finding extra money for tax cuts by weeding waste and fraud out of government programs. White House press secretary Ari Fleischer said the president is keeping an open mind.
“So I think it really comes down to the nature of the specific proposal, and we’ll work with Congress to see what they come up with,” he said.