Senator Grassley Discusses Tax Cuts With Lou Dobbs

DOBBS: Pete, thank you very much, Peter Viles.

At the center of this debate within the Republican Party Senate Finance Committee Chairman Chuck Grassley of Iowa, Senator Grassley will present his $350 billion tax cut proposal tomorrow. It's less than half the size of the president's original plan. The Senator joins us now from Capitol Hill, Senator Grassley good to have you with us.

SEN. CHARLES GRASSLEY (R-IA), CHAIRMAN, FINANCE CMTE.: Glad to be with you, Lou.

DOBBS: I understand that you've just met with the Republican conference about a plan that you're going to advance. What can you tell us about that?

GRASSLEY: Well, first of all, it will be somewhat bigger than $350 billion because under the Snowe-Voinovich policy that we're operating under, it can be bigger if offset dollar for dollar and we will have some offsets so it will be much bigger than 350. The exact figure I'll release tomorrow.

Within that we're obviously going to have a very good income tax policy taking the 2001 tax policy that was phased in this decade, bring that forward to January 1, 2003, and so we'll reduce marginal tax rates, increase the child credit, things of that nature. We're also...

DOBBS: How about the...

GRASSLEY: We're also going to be very—I'm sorry, I shouldn't have interrupted you.

DOBBS: No, I shouldn't have interrupted you, Senator. Go ahead.

GRASSLEY: OK. Well, I think you were going to ask about the dividend thing.

DOBBS: Exactly.

GRASSLEY: We're going to have a very aggressive dividend part of our package tomorrow and it won't be exactly the way the president had it but I think it will be very, very aggressive and will send a strong signal that we in the majority party feel that there's a great deal of anxiety about the economy. We want to create jobs and we want to make sure that workers' retirement plans, 401(k)s, things of that nature are stronger and make up for some of the loss that happened after 2001.

DOBBS: Senator, how comfortable are you, an $11 trillion economy, that we're going to see this tax cut, let's say it's in a size as you suggest considerably about $350 billion with offsets, how many jobs will that create? How much growth do you think it will generate within the course of the next, oh say year and a half moving right toward Election Day?

GRASSLEY: One and a half percent growth in the GDP, one and four-tenths million jobs as a result of the entire package, and most of that would come from the income tax portion of it but some would come from the elimination of double taxation of corporate dividends.

DOBBS: Now, what do you say to a fellow like Warren Buffett who says this tax cut plan to eliminate double taxation on dividends is simply inequitable and won't have a cumulative impact? He and Charlie Munger, his partner, have been pretty savvy over the years, even in macroeconomics.

GRASSLEY: Well, first of all I believe, you know, economists study it and this is the impact that they feel it will make on job creation. You've just had several experts from Wall Street on your program who say that it's going to bring a great deal of the loss in the stock market back. That's going to help people who are getting near retirement, particularly Baby Boomers. I think we have to think about strengthening people's retirement plans.

But the most important thing is, you know, just for instance the reduction of the marginal tax rate, some people say well that's just helping the very wealthy, but don't forget the National Bureau of Economic Research says that that's a source of equity for small business, unincorporated small business where most of the jobs are created in America.

And, if we are really interested in relieving the anxiety of people about this economy, the one thing that's going to do it is create jobs, getting this economy growing three to three and a half percent as opposed to two percent and instead of losing jobs, as we have the last four or five months and unemployment going up to six percent, you know, we'll start creating jobs once again.

DOBBS: I guess it would be it seems reasonable to ask you, Senator, I know you chair the Finance Committee, but if we want to drive jobs why would it not be more efficient to call for small business investment tax credits, for example, to drive capital expenditures? Why would it not be more stimulative to invest in infrastructure, the nation's highways and bridges and tunnels?

GRASSLEY: Well, in the first place, this bill will provide not quite the investment tax credit but it will provide expensing under Section 179 for small business from $25,000 where it is now up to $75,000, and I think the answer to putting money into infrastructure is that by the time the economy—by the time it gets into the economy it becomes counter-cyclical at that particular point and may even become inflationary.

So, what we feel we're doing through the consumer side of the economy is putting money in the pockets of people to spend to help the consumer side which, in turn, creates jobs or to help investment through accelerated depreciation.

DOBBS: Senator Chuck Grassley, as always, good to have you with us. Thank you very much, sir.

GRASSLEY: Thank you.