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Tax cuts are still No. 1 on Bush's list

The centerpiece of President Bush's economic plans, as administration officials have made clear, will be a push to make permanent the tax cuts he has won since taking office.
/ Source: Reuters

President Bush’s speech Thursday to the Republican convention offers him a chance to seize the initiative in an economic debate that polls show is being won by his Democratic rival, John Kerry.

Economists say that whatever mix of old and new he offers as his prescription for the economy, voter assessment of his economic stewardship will depend in large part on incoming data — particularly this week’s jobs report for August.

As he has on the stump, Bush is expected to outline his vision of an “ownership” society in which individuals more frequently own company shares and take greater responsibility for their retirement and health care.

To advance those policies, he is expected to reiterate calls for a partial privatization of the Social Security retirement program and expanded tax breaks so individuals can save for health care and retirement.

He is also expected to revisit his push for tort reform and an energy policy to boost oil and natural gas production.

But the centerpiece of his economic plans, as administration officials have made clear, will be a push to make permanent the tax cuts he has won since taking office.

“We have to create jobs for all Americans who are looking for work and to do that we have to keep taxes low,” Treasury Secretary John Snow said in a radio interview Friday.

While Bush will likely be “partly warming over an agenda,” as economist Allen Sinai put it, he is also expected to throw in enough fresh ideas to claim a bold forward-looking plan.

“He has to show the public that he has a plan, that he’s got some ideas for a second term,” said Greg Valliere, chief political strategist at Schwab Soundview Capital Markets.

The president, however, is handcuffed by record budget deficits which may limit how boldly he can move.

Like Kerry, Bush has pledged to halve the deficit over the next four years -- a vow he’s likely to repeat in New York.

However, he will seek to differentiate himself as well. Some analysts think he will cast himself as a small-government Republican trying to keep a big-government Democrat from reaching into people’s pocketbooks.

“I think he’ll talk about trying to curb spending and try to contrast that with all these Kerry spending proposals, and talk about his view of government and Kerry’s view of government,” Valliere said.

Administration officials have depicted the burgeoning deficit, which they expect to hit a record $445 billion this year, as a necessary evil as the president focused on fighting economic weakness at home and threats of terror abroad.

Bush already is taking a bow for “well-timed” tax cuts. ”Because we acted, our economy since last summer has grown at a rate as fast as any in nearly 20 years. Because we acted, we’ve created about 1.5 million new jobs over the past 12 months,” he said last week in New Mexico.

Economists widely agree the tax cuts helped speed up the recovery, but many argue a bigger short-term boost could have been had at less long-term expense. The tax cuts are expected to cost some $1.7 trillion over 10 years.

Bush may also call for simplification of the complex U.S. tax code. Conservatives argue that lower marginal tax rates and lower taxation of capital gains and dividends could spur a better economic performance.

Analysts said any call for reform, however, was likely to stop short of specifics. Earlier this month, Bush said a national sales tax was an idea worthy of consideration, drawing immediate fire from the Kerry camp, which argued such a tax would place an undue burden on lower-income Americans.

Bush will also seek to reassure Americans he understands their economic concerns, particularly since 1.1 million jobs have been lost since he took office.

Valliere said whatever Bush says on the economy might quickly lose its luster if the government’s jobs report for August, due the day after he speaks, shows another month of anemic employment growth.

“I think that’s probably more important than what he says in the speech,” he said.