Well, it's complete: The last member of President Bush's original economic team is set to leave the White House. Office of Management and Budget (OMB) Director Mitch Daniels has announced that he will vacate his post within the next month to run for governor of Indiana in 2004. Daniels' decision is hardly a surprise. For months he's been expected to seek the seat, now held by Democrat Frank O'Bannon. And with former Democratic National Committee chairman Joe Andrew set to kick off his campaign on May 19, it should be one of the more interesting races of the year. With the prospect that Daniels could move the governor's seat back into the GOP column, Karl Rove is no doubt glad to see him go.
But Daniels' announcement comes at an odd time: right as Congress debates whether to give President Bush a $726 billion, $550 billion, $430 billion or $350 billion tax cut. This is a time when the White House needs maximum political leverage, and having the OMB director essentially announce that's he's a lame duck doesn't help Bush's cause. Granted, Daniels will see the tax-cut battle through. But he won't be there later this year when Bush is expected to propose his next round of cuts, to make up for not getting the full amount this spring.
Unlike with the resignations of Treasury Secretary Paul O'Neill and economic adviser Larry Lindsey -- both of whom quit their posts within the last six months -- conservative Republicans are lamenting Daniels' departure. "I would hope we would bring back cloning -- and that we would get a new Mitch Daniels," House Majority Leader Tom DeLay (R-Texas) said, according to CongressDaily. "I really hate to see him go." President Bush has said he will miss Daniels. Of course he will: Daniels favored a recipe of more tax cuts and less government spending -- just the kind of economics the supply-siders of the Bush administration love. Of course, it's also the kind of economic thinking that is causing the deficit to surge and unemployment to rise.
While the players on Bush's economic team have changed since the beginning of his administration, the policies haven't. The president's latest argument for the new tax cut -- whether it's his self-proclaimed "robust" one or the "litty bitty tax cut," as he called the House GOP proposal -- is that it will spur job creation. Bush says this with a straight face, despite the fact that 2.6 million jobs have vanished during his administration, thanks in large part to his $1.35 trillion tax cut in 2001. And, unfortunately, Democrats are not only allowing Bush to set the economic agenda, they're capitulating to him. Instead of saying simply, "We absolutely cannot afford a tax cut," Democrats are proposing "targeted tax cuts that would create jobs by giving incentives to small businesses to invest and [cutting] taxes on hardworking Americans who are most likely to put the extra money back into our economy," according to an April 24 statement from House Minority Leader Nancy Pelosi (D-Calif.).
On Wednesday, Pelosi unveiled the House Democratic Jobs and Economic Growth Plan. The plan, among other things, increases the child tax credit to $800 per child, eliminates the marriage penalty tax, gives small businesses investment tax credits and immediately enlarges the 10-percent tax-rate bracket that has been slated to expand in 2008.
President Bush "has set the bar low," Pelosi said. "Republicans in Congress have followed his lead and proposed a plan that is not fair, not fiscally responsible and will not create jobs. That is not leadership. It is time for a new approach. It is time for real leadership. The Republicans have not led on the economy -- Democrats will."
The fact is, though, that Democrats aren't leading. They're saying, in effect, "Yes, we can afford tax cuts -- we just have a different definition of who should get them." But the point Democrats should be making is that we can't afford tax cuts. We already tried Bush's tax-cut remedy in 2001, and look where it got us. The fiscally responsible thing to do would be to say, "With a war, homeland-security expenses and other needed domestic spending, tax cuts just can't be part of our budget this year. Sorry, voters."
Unfortunately, there are few Democrats willing to take such a principled position. Bush won't get his whole tax cut, but he'll get more than either Republicans or Democrats can afford. Mitch Daniels will leave Washington having accomplished his job, which the Democrats have made far easier than it should have been.
Mary Lynn F. Jones is a Prospect senior editor.
