Tuesday March 27 4:46 PM ET
Bush Says 'Winded' Economy Needs Permanent Tax Cut

By Randall Mikkelsen

KALAMAZOO, Mich., (Reuters) - President George W. Bush on Tuesday rejected Democratic proposals for a one-time tax rebate to boost the economy, saying a ``somewhat winded, but fundamentally strong'' U.S. economy needed permanent tax cuts.

``Our economy needs more than a pick-me-up, more than a one- time boost,'' Bush said in what the White House had billed as a major speech to outline the president's economic outlook and lay the case for his 10-year, $1.6 trillion tax cut plan.

The speech also allowed Bush to try to clarify what critics called conflicting statements about the economy's health.

``The American economy is like a great athlete at the end of the first leg of a long, long race -- somewhat winded, but fundamentally strong,'' Bush told a crowd at Western Michigan University. The speech was sponsored by the Kalamazoo County Chamber of Commerce.

Bush noted that the economy had begun to cool last year -- before he was elected -- and major stock indices had also begun to fall at about the same time, surprising and worrying investors.

Reagan, Kennedy Cited

Comparing his tax cut plans with those of former Presidents Ronald Reagan and John F. Kennedy, which were larger as a share of the economy, Bush said his plan could ``ignite another generation of growth.''

Democrats have been making political headway with proposals for an immediate $60 billion, one-time tax rebate of $300 per individual taxpayer to give a quick boost to the flagging economy. A plan unveiled on Tuesday also calls for immediately reducing the 15 percent tax rate to 10 percent on the first $12,000 of income for couples and $6,000 for singles.

Those proposals were unacceptable to the president, whose plan would cut tax rates across the board, senior Bush aide Dan Bartlett said. ``He supports first-year tax relief, but it also has to be a part of rate reductions,'' Bartlett said. ``We should have rate reductions (across the board) as he proposed.''

Bush's original tax cut plan was not to take effect until fiscal 2002, which begins in October. But he has urged repeatedly that the cut be brought forward to Jan. 1 of this year, with the details to be worked out by Congress.

Senate Republicans agreed last week to give back $60 billion this year. They left undecided whether to support a simple tax rebate or hand out the money as part of Bush's larger tax cut plan.

Bush said, ``Lower rates do not stimulate much economic activity unless people can rely on them for years down the road.''

He said his tax cut did not pose a risk of returning to deficits, even if the economy softened at a rate similar to the 1990-1991 recession.

Clarifying Bush's Outlook

Bush's speech aimed to clarify his economic outlook, following criticisms from Democrats and some investors that he was ``talking down'' the economy to sell his tax cut plan and was confusing the public with simultaneous expressions of optimism and official projections of continued growth.

``My policies face reality as we found it,'' Bush said.

``Oftentimes what I try to say in Washington gets filtered, and sometimes my words in Washington don't exactly translate directly to the people, so I've found it's best to travel the country,'' he said.

About 200 anti-Bush protesters demonstrated outside the gymnasium where the president spoke, waving signs, including one reading: ``No tax cut. Pay your daddy's national debt,'' a reference to Bush's father, former President George Bush.

White House spokesman Ari Fleischer said before the speech that Bush's critics were out of touch.

The speech came as the U.S. House of Representatives prepared to vote on Wednesday on a budget resolution containing Bush's tax plan, and as many Americans were left rattled by last week's sharp decline in the U.S. stock markets.

But figures released on Tuesday showed a rise in U.S consumer confidence in March after five months of declines. The news sent U.S. stock prices higher.

Bush's leading economic adviser, Lawrence Lindsey, suggested to USA Today that the administration might delay repealing the estate tax to offset the costs of making more of the tax cuts effective this year.

Commenting on the interview, White House spokesman Scott McClellan said no decision had been made on how to proceed on making tax cuts retroactive to this year.

Bush reiterated on Tuesday his call for repealing the estate tax.

Treasury Secretary Paul O'Neill reinforced Bush's message on Tuesday, telling the National Association for Business Economics that cutting tax rates across the board permanently was needed to change taxpayers' consumption patterns.

An ABC News/Washington Post poll released on Monday showed that only 11 percent of the 903 adults surveyed thought Bush's tax cut would bring them ``a great deal'' of benefit.

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