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Democrats to Challenge Bush on the Economy

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WASHINGTON — Democrats in Congress say their support for President George W. Bush's war on terrorism doesn't extend to the economic policy he outlined in his State of the Union Speech last night.

"He is way off base, in my view, with regard to our fiscal structure and accelerating the tax cuts," said Senator Jon Corzine, a New Jersey Democrat.

Bush called for unity among Democrats and Republicans in fighting the recession the U.S. entered in March. He called on Congress to pass an economic stimulus measure that would create jobs. And he asked Congress to make permanent the 10-year, $1.35 trillion, tax cut passed last year.

The idea of extending the tax cut was dead on arrival, said Representative Charles Rangel of New York, the senior Democrat on the tax-writing House Ways and Means Committee.

If it's extended beyond the current expiration date of 2010, "we fall off a fiscal cliff," Rangel said. "The cost of it will be far greater than the costs of Social Security."

"Bush is not reaching out to Democrats in a substantive sense, and he is drawing the lines for some battles," said Tom Mann, a political analyst at the Brookings Institution.

Battle Lines

Democratic lawmakers said after the speech they support Bush in the war on terrorism and making the U.S. safe from attacks by increasing defense spending and budgeting for homeland security.

"Now is not the time for finger-pointing or politics as usual," said Representative Richard Gephardt, who gave the Democrats formal response to Bush's speech.

Gephardt didn't endorse Bush's tax-cut proposals and called for an economic summit meeting at the White House to develop a new policy for creating jobs.

The Senate is debating a $69 billion version of an economic stimulus measure that would give a $300 check to low-income taxpayers and provide accelerated depreciation benefits for companies. The bill would extend unemployment benefits for 13 weeks and give states more money to pay their Medicare expenses.

Democrats proposed that bill as the distillation of proposals that had majority support in both political parties.

Pressure to pass an economic growth bill may abate after the Commerce Department announced that the U.S. economy expanded in the fourth quarter at a 0.2 percent annual rate. That indicates the recession may have run its course.

Jobs, Jobs, Jobs

Bush pegged his appeal for congressional action on the need to create jobs. Most economists predict unemployment will rise in 2002 to 6.2 percent, according to a Bloomberg News survey of 39 economists in December.

"You probably need growth above 3 percent to bring the unemployment rate down," said William Dudley, chief economist at Goldman Sachs & Co.

The economy entered recession in March, and economists expect it to return to growth this year. Goldman's economists expect growth between 2 percent and 3 percent, Dudley said.

Other economists project growth at a rate of 3.4 percent in the third quarter next year, when elections will be held for 435 House members and 3334 senators.

"If the economy continues to putter along, this could be a dicey election for Bush," Mann said.

While Bush will have bipartisan support for a boost in spending for defense and homeland security, other proposals that increase the deficit will face their opposition.

"I think he's going to have trouble," said Representative Marcy Kaptur, an Ohio Democrat. "On the economic front, the numbers don't add up. He's going to run deep deficits and be forced to borrow from Social Security to pay for his programs." New York Democrat.

Deficit Politics

The U.S. will run budget deficits of $106 billion in fiscal year 2002 and $80 billion in fiscal 2003, according to the White House budget projections.

"You're going to have the unusual dynamic of a Democratic Senate paring down the budget requests of a Republican president," New York Democratic Senator Senator Chuck Schumer said.

Bush, on taxes, has sought legislative majorities by bringing conservative Democrats such as John Breaux, a Louisiana Democrat, together with most Republicans. Breaux voted for Bush's tax cut last year. The Senate is divided between 50 Democrats, 49 Republicans and one independent, Jim Jeffords of Vermont.

On education legislation last year, Bush forged large bipartisan majorities in both the House and Senate by working with liberals such as Senator Ted Kennedy of Massachusetts and Representative George Miller of California. Bush acknowledged the two in his speech last night.

"Our work on this bill showed what is possible if we set aside posturing and focus on results," Bush said.

Bush met on Monday with Breaux and senators who are his allies on a prescription drug proposal. Bush and Kennedy have been in discussions on patients-rights legislation.

"If he has a health care plan that relates to senior citizens, has a prescription drugs benefit that's real, he'll get real cooperation," Senator Joe Biden, a Delaware Democrat, said. "If it's giving an ability to have a tax write-off to get it, he won't get real cooperation."

Gephardt, in an interview on NBC's "Today" show, blamed House Republicans "who have been the most adamant and the most kind of on the right side of their party" for obstructing bipartisan discussions.