Face the Nation

SHOW: Face the Nation (10:30 PM ET) - CBS

HEADLINE: Senators Lindsey Graham and Lincoln Chafee discuss tax cuts

ANCHORS: BOB SCHIEFFER

BODY:
BOB SCHIEFFER, host:

Tax cuts: good idea, bad idea? To talk about that, two Republicans, because this is a controversy that's going on within the Republican Party right now. From Rhode Island, Senator Lincoln Chafee, who has some real reservations about cutting taxes at this point. And from Clemmson, South Carolina, Senator Lindsey Graham, who is foursquare behind the president's idea to cut $725 billion in taxes over the next 10 years, a figure that even some at the White House are now saying it may not be necessary to do that, that they might be willing to go along with something considerably less than that.

Senator Graham, why are you so strong for this tax cut right now?

Senator LINDSEY GRAHAM (Republican, South Carolina): Well, Bob, I want a tax cut with a purpose and I believe the president's tax plan has a purpose and that's to create jobs. I don't know what it's like in Rhode Island, but we've got s—many counties in South Carolina, Bob, with unemployment 6, 7, 8 percent. The $720-something billion proposal by the president, spread out over 10 years, represents about 2 cents on the dollar we'll collect in taxes. Over the next decade, we're going to collect $24.7 trillion in taxes. I think with the economy being sluggish as it is, even though there are some signs of improvement, now is the time to put money back into the economy with a purpose, and that's to create jobs. Whether it's 720 or 550 or 350, everybody seems to be for a tax cut. The Democrats voted for $350 billion; my point is, if we're going to have a tax cut, let's make sure it does the things necessary to create jobs and not undermine the president's efforts. And I think we're undermining his efforts now without any real logical reason.

SCHIEFFER: Well, Senator Chafee, let me go to you. You've had some reservations about this whole thing. I would say first that I think all sides agree that the votes at this time are simply not there in the Senate to pass a $725 billion tax cut. Some real questions about whether the Senate would even go along with what the House has done, a $550 billion cut; what do you think is going to happen on this?

Senator LINCOLN CHAFEE (Republican, Rhode Island): Well, it's going to be interesting. Certainly the two Republican senators, Senator Voinovich and Senator Snowe, that did not decide to go along with the president's plan are getting a lot of pressure in their states. John McCain and I opposed the original big tax cut in the spring of 2001. We're also opposed to this. And now we have Senator Grassley, chairman of the Finance Committee, pledging not to allow a tax cut to come out of his committee higher than $350 billion. So we'll see.

I have to disagree with Lindsey, though, on the—that this is going to stimulate the economy. We worked so hard through the '90s to get our balanced budget, and now we're getting back into these big deficits. And even President Bush 41 broke his 'Read my lips: Now new taxes' pledge to get the revenue up. And then, of course, President Clinton—and then he lost the election. President Bush 41 lost the election, maybe on that issue. And President Clinton put in some revenue enhancers, some—some tax increases, and he lost both houses of Congress, the House and the Senate, maybe on that issue. So it's hard work to get these revenue enhancers in. And what happened? The economy took off. We had the best expanded economy through the '90s because we were balancing our budget, and we're getting away from that. We're seeing these enormous deficits now and I think it's harmful to the economy.

SCHIEFFER: Well, would you, in fact, go along, Senator Chafee, with a $350 billion cut?

Sen. CHAFEE: No, I voted for it just to get it down from the 725 number. I—I—I sided with Olympia Snowe and George Voinovich on that. But I don't approve of any new tax cuts until we can control our spending and address these deficits.

SCHIEFFER: So—so you would be against, and you intend to vote against, any tax cut? Is—am I understanding what you would say—what you're saying?

Sen. CHAFEE: Yes. We have this—yes, that's correct. And we have these enormous pressures on the military to—to do what we're doing in Iraq, and also Afghanistan, homeland security. They're—these are very, very expensive, just hundreds of billions of dollars that—and even in Washington, those are big numbers. And we just can't afford another tax cut. It's hurting our economy, in my opinion.

SCHIEFFER: So how does that sit with you, Senator Graham. Here you're seeing Senator Chafee saying, and I think he probably speaks for a number of moderates, that he's not going to vote for—for any tax cut at this point. Do you think it's possible to pass a tax cut during this session of the Congress—I mean, just in practical terms here?

Sen. GRAHAM: Yeah, I do, Bob. I really do think it's possible. I think it's very necessary. When you use words 'tremendous and large and irresponsible,' you've got to understand what money we're talking about. Every Democrat voted for a $350 billion tax package in the budget resolution. That's about a nickel to si—three-quarters of a penny on a dollar we'll collect over the next 10 years. What I am saying is let's have a purpose behind our tax cut. I fundamentally disagree with Lincoln. I don't think we're going to tax our way into a better economy. Our Democratic colleagues propose $650 billion of additional spending in the budget resolution process. This Congress, since '90--1998, has not shown fiscal restraint. We need a pro-economic growth package.

The president's plan has a purpose: To eliminate double taxation of dividends will help the stock market. If you could buy stock and receive a dividend from your stock purchase tax free, you'll never convince me that will not help the stock market, help companies grow and create jobs. If you eliminate the marriage penalty, increase the child tax credit to $1,000, in my state, where a lot of families live on $40,000 and $50,000 as a couple, it will really help them, it will help consumers. So now is the time to put money back into the economy for the purpose of creating jobs.

On the other hand, Bob, I will not vote for a tax cut just to say I voted for a tax cut. I will not support any package that comes out of the Finance Committee that undermines the ability of the president's plan to create jobs. You need incentives to buy stock, to grow the economy and to get f—money back into consumers' pockets.

SCHIEFFER: Well, is what you're saying, Senator Graham, is that you're not going to vote for a tax cut unless it's the president's tax cut, unless it's this big number? You're not going to vote for a smaller number? Is that—is that right?

Sen. GRAHAM: Well, the difference between $350 billion and $550 billion is what we're talking about. It's a half a cent on the dollar over 10 years, Bob. The $550 billion, that extra $200 billion, a half a cent, allows you to do something with dividend double taxation.

SCHIEFFER: Bu—all right.

Sen. GRAHAM: We're second to Japan in the world. So we've got to have the whole elements there. It makes no sense.

SCHIEFFER: So it's $550 billion for you or nothing. But let me ask you this, Senator Graham.

Sen. GRAHAM: It's a purpose. It's a purpose.

SCHIEFFER: In January of 2000, you said of then Governor Bush's tax-cut proposal, the one we're talking about, 'It does nothing in my opinion. It's fiscally responsible to reduce the national debt. This is a large tax cut that's going to eat up all the surpluses if they come about. It doesn't address'—and then you going on and on and on with the problems it doesn't address. Have you flip-flopped on this?

Sen. GRAHAM: Well, here's what it doesn't address back then or now, and that's Social Security. The biggest problem my generation faces is a Social Security system about to go bankrupt because we get less than 2 percent growth on Social Security investment by young workers. I do believe and have always voted for tax cuts. In 2001, we had 12 Democratic senators to lower rates across the board, to increase the marriage—the child tax credit to $1,000 and to eliminate the marriage tax. Now we're trying in this round of tax and—stimulus—economic stimuluses, Bob, to accelerate the $1,000 child tax credit to next year to eliminate the marriage tax penalty now and to create an investment climate so that people can grow their business without borrowing money. Right now, to grow your business, the tax code allows you to write off debt.

SCHIEFFER: OK.

Sen. GRAHAM: I want to have stock being sold tax free.

SCHIEFFER: Let's give Senator Chafee a chance to respond to that. What about that, Senator Chafee?

Sen. CHAFEE: In the spring of 2001, Bob, not once was it said that we would get into deficits. Every part of the debate was, 'We can afford that big tax cut' in the spring of 2001. And what happened? We couldn't afford it. The surpluses couldn't afford that big tax cut and we did go back into deficits. And so I say to Senator Graham that I—I just don't even think you believe that these tax cuts are going to stimulate the economy. What I'm—I'm trying to figure out why these conservatives are pushing the bigger and bigger tax cuts when traditionally conservatives have been opposed to deficits. And all I can figure is that if we get these big deficits, then the pressure will be on to strangle the spending, to strangle the—what is called the wasteful social spending, whether it's Section 8 or Medicare or Medicaid or Social Security. And I hear in—from some of the conservatives, 'A wasteful social spending, Head Start programs or Pell grants.' And I think that's the tactic. Once we get these bef—deficits, then we can attack these so-called wasteful social spending programs which I agre—disagree with. I think these social programs have made a lot of people's lives a great deal better.

SCHIEFFER: Senator Graham, there is a Republican group that's running ads that refers to people—Republicans like Senator Voinovich and Senator Snowe who are against this big tax cut as 'so-called Republicans.' And it even compares them to—to...

Sen. GRAHAM: Right.

SCHIEFFER: ...the French.

Sen. GRAHAM: Right. I—I—I—that is totally out of bounds. Lincoln is a friend of mine. We cannot have a Republican majority without Lincoln winning his seat. I would be the first to admit, Lincoln, I couldn't win in Rhode Island, and you couldn't win in South Carolina. This debate is about 350 vs. 550. I do believe if you are able to buy stock and you could get a dividend tax free, people would buy more stock. That would help our economy. I do believe now with the sluggish economy, you put money back into the economy, you don't take anymore out and this tax cut over a 10-year period is a little over a penny and a half in terms of the money we're going to take from taxpayers. So I don't want to go beat on Lincoln, I don't want to beat on Voinovich and I don't want to beat on Olympia Snowe. But Lindsey Graham gets one vote, and Lindsey Graham has an economy in South Carolina where 6 and 7 and 8 percent unemployment exists. I'm gonna stand behind my president...

SCHIEFFER: OK.

Sen. GRAHAM: ...to have an economic stimulus package that makes sense and not just arbitrarily pick a number.

SCHIEFFER: All right, gentlemen, the...

Sen. CHAFEE: Let me just add—could I just...

SCHIEFFER: OK, quickly.

Sen. CHAFEE: Could I just add, Bob, that that was the argument given back in the spring of 2001 and it didn't stimulate the economy. Now it's a new plan, so maybe we should go back and readdress what we did back in the spring of 2001. And if—have the debate on these dividend tax cuts.

SCHIEFFER: All right. We have to end it there. The clock just ran out. Thank you, gentlemen...