WASHINGTON - President Bush's apparent pledge not to raise taxes may further endanger an urban aid package already encountering serious difficulty in the Senate, congressional aides and lobbyists said last week.
Those sources said they saw the President's statement as a strong sign that he plans to veto the urban aid measure. The bill contains revenue increases to offset revenue losses that would result from many of its key measures, including the extension of expiring provisions and the creation of urban enterprise zones.
A veto of the bill would be a defeat for the municipal market because both the House and Senate versions contain the renewal of authority to issue mortgage revenue bonds and small-issue industrial development bonds, which expired June 30. The bills also would expand the use of tax-exempt bonds in enterprise zones and simplify various bond curbs, including the arbitrage rebate requirement.
The House passed an urban aid bill July 3. The Senate Finance Committee approved its version of the measure July 31, but the full Senate has yet to act.
During a speech in Middletown, N.J., on Wednesday, President Bush said he had "already vetoed one Democratic tax increase and I'll veto another if I have to." He added, "No more tax increases."
In April, the President rejected a tax package that contained, among other things, bond simplification proposals and 18-month extensions of the mortgage bond and IDB exemptions.
On Thursday, White House spokesman Marlin Fitzwater clarified the President's statement by saying it should not be interpreted as a repeat of the President's now infamous pledge from the 1988 presidential campaign, "Read my lips: No new taxes."
Commenting on Wednesday's statement, Mr. Fitzwater reportedly told the press, "It wasn't a pledge, no." He added, "We're not going to make pledges beyond our pledge to cut taxes across the board."
Clearly, the President has gone so far out on a limb against tax increases that it will be almost impossible for him to endorse the aid bill, tax aides and lobbyists said.
"This does make it very difficult" for the aid to be enacted, said a municipal lobbyist.
Several lobbyists said Republican members of Congress have met with President Bush to urge him to support the measure, but the members have come away from those meetings convinced that President Bush plans to reject the package.
"The White House has made a political decision to trash Clinton and trash Congress." said a lobbyist for localities, referring to Gov. Bill Clinton of Arkansas, the Democratic presidential candidate. "It doesn't matter what's in the tax bill, they're going to veto it."
Even without the threat of a veto, the tax bill is up against a formidable obstacle, a congressional aide said. Senators have prepared more than 100 amendments they want to offer to the bill, which would load the bill down and also take up large amounts of scarce Senate time at the conclusion of the legislative session.
"They can't afford the time," said a congressional aide. "It's very hard to go to the [Senate] floor with over 100 amendments pending."
Sources suggested Congress could take one of two approaches in the wake of the President's "no more tax increases" statement.
The first would be to scrap the large packages passed by the Senate and House and come up with a narrow bill containing only the extensions of expiring provisions and one or two other "must do" items, such as a repeal of the luxury tax on boats.
Sending the President a bill like the one pending in the Senate would give him too much ammunition to tag Congress with a "tax and spend" label, a House aide said.
"I don't see how the Democrats [can] move a $30 billion bill off the floor," said the House aide. "The Senate has got to find a way to scale it back. "
But the congressional leadership could adopt a second, more political strategy, other sources said. Knowing that the President plans to veto the bill, congressional Democrats could load it down with items designed to appeal to the middle class, such as a millionaire surtax. A veto of such items would give Gov. Clinton added ammunition against the President in the campaign, the tax aides and lobbyists said.
"I think what this turns into is a millionaire surtax," said a housing lobbyist. "They're just going to create this lovely bill for him to veto.
