BW: Where's Bush's Backup?

Business Week: The pitchmen for his tax-cut package have been invisible -- and the debate is swinging against them. Can they play catch-up?

Three days after President George W. Bush unveiled his $674 billion economic package on Jan. 7 amid catcalls from Democrats, The New York Times ran an opinion column that was a ringing defense of the plan. The author: Lawrence B. Lindsey, recently dumped as Bush's chief economic adviser, in a purge that also cost Treasury Secretary Paul H. O'Neill his job.

It wasn't until two days later that Lindsey's replacement, former Wall Street exec Stephen Friedman, chimed in with his own op-ed piece backing the plan, this time in The Washington Post. Since then, Friedman has uttered nary a peep in public in defense of its plan. Not until Jan. 28, when the President plugged his package in the State of the Union address and Treasury Secretary-designate John W. Snow did the same in his Senate confirmation hearings, did the Administration rev up its pitch.

Does this strike anyone as odd? It should. Due in part to his decision to clean house in December, Bush, who has a well-earned reputation as a policy supersalesman, has had few high-ranking lieutenants to call on when the opposition flak intensified. And the preoccupation with crises in Iraq and Korea has distracted the Administration even further. Says one insider: "It's hard to do several big things at once."

MIXED REACTION. The result: For the first time in memory, Bush's political foes have gained the upper hand in the rhetorical battle over policy. Opponents have succeeded in branding the program as a deficit-buster skewed to the wealthy. A Jan. 16-20 ABC News/Washington Post poll found that 61% of Americans believe the President's approach tilts to the rich, while just 7% say the middle class is the major beneficiary.

The big problem is that the President's top two economic spokesmen have been largely on the sidelines. Snow remained silent until his Senate confirmation hearing. Friedman is being kept under deep cover by the White House after conservatives complained that his past opposition to big deficits would mute his support for hefty tax cuts. And Council of Economic Advisers Chairman R. Glenn Hubbard, the architect of Bush's dividend-exclusion idea, is preparing to leave the Administration after failing to win the No. 2 Treasury post.

That means the White House faces an uphill struggle in turning things around. Bush briefly plugged his economic plan in his Jan. 28 State of the Union, arguing that his tax cut was "for everyone who pays income taxes -- and it will help our economy immediately." But unlike the enthusiastic public response to Bush's tough words on Iraq, reaction to his economic message was mixed. According to a post-speech Gallup Poll, just 49% of viewers said Bush's plan would get the country out of its current economic problems.

RED SCARE. It'll be up to Snow and Friedman to increase that support. Friedman has been huddling behind closed doors with financial execs and business reps. And at his Senate hearing, Snow lauded the plan as "an investment in the American people and their future." With his confirmation assured, he's likely soon to hit the road to bolster support.

But the efforts of Friedman and Snow could be complicated by their long-standing fear of red ink. At his hearing, Snow was grilled on his rationale for supporting a tax cut that could help create the biggest deficit in U.S. history. A huge deficit would harm the economy and financial markets, he acknowledged, but added, "We're a long way from there."

Facing a tough sales job on Capitol Hill, the White House is signaling that it is open to eventual horse-trading, particularly on the controversial centerpiece of the package, the dividend tax cut. Bush "realizes he's not going to get some of his package," says American University professor of government James A. Thurber. "He's going to have to compromise."

READY TO DEAL. That message is echoed by an influential bloc of Republicans on Capitol Hill. "We might have to look at alternatives," says House Ways & Means Committee Chairman William M. Thomas (R-Calif.). "It's not my job to say 'attaboy.' It's my job to pass legislation." And Senate Finance Committee honcho Charles E. Grassley (R-Iowa) privately doubts the proposal can clear the Senate as proposed and is scrambling to craft an alternative that can win a majority. Among the key votes: a group of centrist GOP senators who believe Bush's plan does not provide enough immediate economic stimulus and costs too much over 10 years.

Federal Reserve Chairman Alan Greenspan also did little to build support for the package when he met with Senate moderates on Jan. 23. While he fervently supports ending double taxation of dividends as a way to improve long-term growth, Greenspan acknowledged that repeal would do little to stimulate the economy in the short run.

White House advisers insist that it's far too early to make concessions. Instead, they plan to signal their flexibility and keep busy trying to rally public support for the proposal -- thereby strengthening their position at the bargaining table later in the process.

SALESMAN WANTED. But even supporters say the White House needs to hone its pitch. "Bush needs to do a better sales job, making the supply-side case that growth causes revenue expansion that can help finance both war and economic recovery," says Stephen Moore, president of the Club for Growth, a group advocating tax cuts.

Of course, Bush has often rallied when faced with a seemingly intractable political problem. But now that he's in Commander-in-Chief mode, he'll have to leave most of the arm-twisting campaign to an economic team that's still learning the ropes in Washington.

By Richard S. Dunham, Rich Miller, and Howard Gleckman in Washington

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