THE WHITE HOUSE and House majority leader Tom DeLay went eyeball to eyeball on tax cuts, and the White House blinked. Sure, that’s a bit of an exaggeration. But the truth is President Bush did back down last week from his demand that the House approve child tax credit payments to non-income taxpayers, as the Senate had already done. Instead, the House went its own way, passing a larger tax bill that includes child tax credits for non-taxpayers and taxpayers alike. There was little to be gained politically from adding broader tax cuts, a presidential aide said. But that’s what the House ultimately did anyway. Bush and DeLay don’t disagree very often. House Republicans are usually the congressional vanguard of the Bush presidency. They are relied on to pass the president’s initiatives, then pressure the Senate to do the same. But on making the child tax credit “refundable” to households in the $10,000 to $26,500 income range, the Senate acted first. In fact, there is nothing to refund since most of these taxpayers pay no federal income tax. But they would be sent checks as if they did. Democrats and all but two Senate Republicans decided this is only fair. The White House went along, hoping to move quickly to Medicare reform and a prescription drug benefit for senior citizens. Medicare would give the president what he lacks: a domestic policy triumph other than tax cuts to brag about, an ornament for his reelection campaign next year.
DeLay, House majority whip Roy Blunt, and chairman Bill Thomas of the House Ways and Means Committee didn’t want to take up the tax credit proposal at all. “Welfare” is what House Republicans called it, noting that the Congressional Budget Office, the Joint Tax Committee, and the White House Office of Management and Budget all score the “refund” as spending, not a loss of tax revenue.
But Democrats were on the warpath, claiming Republicans had cruelly denied low income families the child tax credit when it was increased only weeks earlier. Democrats, DeLay felt, were merely trying to provide a payoff for their constituents under the guise of aiding “the children.” Even when the Senate approved the payments to non-taxpayers in a $10 billion tax bill in early June, DeLay and his allies remained reluctant. They don’t fear tax refunds for folks who pay no income taxes as an effective issue for Democrats.
The White House doesn’t either, but it didn’t want to get bogged down on the issue as Medicare beckoned. On June 9, press secretary Ari Fleischer said the House should hastily pass the Senate bill. Fleischer acknowledged the tax credit is “really an assistance program to help low income workers.” But he also said it would operate just like the Earned Income Tax Credit, offsetting the Social Security taxes paid even by people who don’t owe income tax.
On June 10, Bush met in the White House residence with bipartisan leaders from Congress. The tax credit came up briefly. Bush said the House should pass the Senate bill. House Republican leaders replied they could pass a better bill. Bush said he’d be glad to take a look at it. The next day, Andy Card, the White House chief of staff, trekked to House speaker Dennis Hastert’s office in the Capitol. DeLay and Blunt urged the White House to treat their proposal–extending the refunds to taxpayers and non-taxpayers–as kindly as the president had the Senate bill. Card was noncommittal. But as the House was debating the $82 billion measure on June 12, the president sent a statement endorsing passage of the bill and seeking a quick agreement afterwards with the Senate on a compromise version. The White House had caved.
DeLay, Blunt, and company are not in the mood to compromise. “We’re going to hold our ground,” DeLay says. For one thing, he’s not inclined to accommodate squishy Senate moderates. And House Republicans have a strong hand to play because they don’t care if a bill with refunds for non-taxpayers passes at all. No bill would be “fine” with conservatives, says Rep. Paul Ryan of Wisconsin, a key Republican on tax issues. So, in conference, DeLay intends to push the Senate to go with the House bill or face the prospect of no bill at all. The House bill’s price tag, by the way, is sizable because it broadens the child tax credit to cover higher-income taxpayers and extends it to 2010. Under current law, as well as in the Senate bill, it expires in 2004.
Two other players should be mentioned, the Democratic party and Karl Rove. Democrats were in high dudgeon during the House debate, charging Republicans with hurting children. Democratic representative Jim McDermott, a fanatical Bush and Republican hater, trotted out a gimmick in the House debate. He appeared with a large rubber stamp and a poster saying the House under Republican rule exists for the sole purpose of rubber-stamping Bush’s wishes. That Republicans were bucking Bush this time was lost on him.
As for Rove, the normal assumption in Washington is that, see him or not, he’s deeply involved in every issue and every policy. But this time he didn’t lobby anyone on Capitol Hill. His regular Wednesday breakfast at the White House with Blunt was cancelled last week because he was out of town. Notice the location of the breakfast. Rove meets with congressional Republicans at the White House. Andy Card, on the other hand, has to travel to Capitol Hill.
Fred Barnes is executive editor of The Weekly Standard.
