PALO ALTO, Calif. (CNN/Money) -
It's almost refreshing to see a return to politics as usual in Washington over the President's tax-cut plan.
Gone is the unfamiliar feel of the policy debate on war in Iraq. President Bush felt so strongly about what was right and wrong that he acted pretty much on his own. Sure, Congress and the United Nations were consulted. But the White House called the shots. Compromise wasn't a big part of the equation.
It's a different story with the various elements of the President's efforts to revive the economy with $726 billion worth of new tax cuts spread out over 10 years.
Just a few months after offering up his proposals the President is back-pedaling, offering to modify his plan to gain its passage in Congress.
Perhaps this is just a good example of the need to accept political realities. But it's also a sign that when it comes to bitterly contested theories about what's best for the economy, everything is negotiable.
On the table
The President's plan ran into trouble early, with widespread dissatisfaction over its elimination of so-called double taxation on dividends.
Democrats promised to block that provision, and now the administration has suggested it could phase in the dividend cut over 10 years instead of abolishing the tax all at once.
Of course, if the dividend tax cut is a good idea, why do it slowly? Politics, of course.
Some just don't like a cut for the wealthiest investors. Others are trying to protect specific constituencies that would be hurt by the proposal, such as sellers of tax-exempt municipal bonds.
Either way, the White House appears ready to neuter -- or even sacrifice -- the dividend-tax cut in order to get a broader tax cut passed.
This is where the numbers get funny. The House wants to cut taxes by $550 billion. The Senate prefers $350 billion.
No one seems quite sure if cutting the marginal tax rate for the richest people will act as a stimulus on the economy. And yet everyone -- that is, with the exception of Democratic presidential hopeful Richard Gephardt (see his thoughts here) -- seems to think it's a good idea to cut taxes because taxes themselves are bad.
As the New Yorker's James Surowiecki argues in the magazine's current issue, "If the original supply-side message was that tax cuts are good because they work, the new message seems to be that tax cuts work because they're good."
| Recently by Adam Lashinsky
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Perhaps it's because I'm physically so far from Washington, but I often get the feeling that these debates are so much background noise.
The economy's in sorry shape right now not because the Clinton administration did anything wrong or the Greenspan Fed failed to do something or the other.
It's a mess because irrationally exuberant businesses bought far more stuff than they needed and then stopped buying stuff for three years.
There's a strong case to be made that the U.S. economy can stomach a rise in the budget deficit that would come from increased tax cuts. (In fact, it's a case economist Martin Feldstein made recently in an interview with CNN's Lou Dobbs.)
Should the cuts be $726 billion or $550 billion or $350 billion? Beats me.
It seems that if businesses feel like they have an opportunity to grow again, aided by a lessened fear of war, they'll begin to think about buying stuff again. When they do that, the economy will grow.
That, more than healthy bipartisan debate in Washington, would be truly refreshing.
Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.
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