CARVILLE:   Way back in 1980, President Bush's daddy told Ronald Reagan that expecting to balance the budget by cutting taxes and increasing spending was voodoo economics. He was right. It's too bad he didn't tell his son. Today, President George W. Bush showed off his plans for another $674 billion of trickle-down economics. It didn't work then, it won't work now, and we can't put Bill Clinton back in office to fix things. What are we going to do? First in the CROSSFIRE, are Washington state Democratic Congressman Jim McDermott and Ohio Republican Congressman Bob Portman. 
NOVAK:   Congressman McDermott, you're a psychiatrist by profession, and although you've been on the Ways and Means Committee for many years, with all due respect, I don't think you've learned a lot. So I want to give you a good lesson in economics by somebody who did major in economics in college, and he's going to explain to you why repealing the tax on dividends is important. Let's listen to him. 
BUSH:   Double taxation is bad for our economy. Double taxation is wrong. Double taxation falls especially hard on retired people. About half of all dividend income goes to America's seniors. And they often rely on those checks for a steady source of income in their retirement. It's fair to tax a company's profits. It's not fair to double tax by taxing the shareholder on the same profits. 
NOVAK:   Congressman McDermott, can you... 
MCDERMOTT:   Is that "Saturday Night Live"? 
NOVAK:   Congressman, can you contradict one factual point that the graduate of economics from Yale University and the Harvard Business School gave us? 
MCDERMOTT:   Would you like to talk about how many people have lost their jobs since he took over? I mean, didn't he cut taxes a trillion dollars? He cut it a trillion dollars, and what do we have? More people lost their jobs. We're further in the hole. We're in deficit spending; this guy wants to go to war, which is a drag on the economy. And, at the same time, he wants to cut taxes. Now you can't do that. You cannot pay for a war and also give it out the back door. 
NOVAK:   I just want someone to tell me what he said that was wrong. Do you really feel that the poor people getting dividends from their stocks on retirement, that they wouldn't be better off if they didn't have to pay taxes on this income which has already been taxed at the corporate level? 
MCDERMOTT:   After the corporate corruption that has wiped out people's 401(k)s, there aren't any dividends to be paid to anybody. 
NOVAK:   Oh, that's not true.  
MCDERMOTT:   These people are living off their Social Security. That's all they've got left. 
CARVILLE:   Congressman Portman...    I thought they doctored the tape, to tell you the truth. We could start with a nomenclature problem here. This is not a stimulus package, is it? 
PORTMAN:   He didn't call it a stimulus package. He calls it an economic growth package. 
CARVILLE:   OK. Well let's argue with this guy. I want to show you a clip of somebody. I want to show you a clip of somebody who claims to know something about economics. Can I show Congressman Portman clip please? 
NOVAK:   He makes a mistake when he calls it a stimulus package. His own economic advisers will tell him he shouldn't use that. That's a   term. 
CARVILLE:   He says it's not a job creation package. 
NOVAK:   I said it's not a stimulus package. 
CARVILLE:   So this has nothing to do with stimulating the economy? 
PORTMAN:   Bob and I agree, actually. This is a job creation package. 
CARVILLE:   Bob says no. Bob says -- I quote, "It isn't a jobs creation program." That's what he said. 
PORTMAN:   Well, it is. 
CARVILLE:   That's what he said. Is Bob wrong? 
PORTMAN:   He could be wrong. Here's what it is. It's not a jobs program. And I don't know which of the six or seven Democrat plans Jim supports, but most of them say let's just take money from the federal government and let's send it back to the states. That's a jobs program for more spending on infrastructure, on transportation. What we're talking about, instead, is creating more growth in the economy to create jobs for everyone. 
CARVILLE:   Let me show you something. 
PORTMAN:   Are you going to do a bridge or a road here?  
CARVILLE:   No. I just want to show you something. That plan, according to what was released today, somebody makes over $1 million a year, like me, it comes to $90,000 in tax savings. 
NOVAK:   You make over $1 million a year? Wow. 
CARVILLE:   That's $45 an hour tax-free that I get. Every hour, eight hours a day, 50 weeks a year, under this plan I get $45 tax free an hour. $36,500, a schoolteacher. You know how much you get under this plan? Eighteen cents an hour. That's your tax break. 
PORTMAN:   James, you're missing the point. 
CARVILLE:   People that make over $1 million get $45 every hour for doing nothing. 
PORTMAN:   You're missing the point. 
CARVILLE:   Tell me the point why I get $45 and he gets 18? 
PORTMAN:   James, two things. One, this is about tax cuts for people who pay income taxes. When the top 10 percent are saying 67 percent of the income tax, the top one percent paying now 37 -- how much would you like them to pay? Second, this is not about those people and their tax cuts. It's about growing the economy. John Kennedy was talked about earlier. A rising tide lifts all boats. This will increase stocks -- where I think the president didn't go far enough in his speech is he didn't talk about what this is going to do for stock prices. Talk to any economist. The White House says it will go up 10 or 20 percent. The economists have different numbers. This will raise the stock market, raise stock prices. That helps everybody. 
CARVILLE:   Congressman, let me ask you something. From 1992 to 1999, the stock market went up 348 percent. It went up from 3,300 to 11,000 -- let me finish. 
PORTMAN:   And wouldn't that be great to get back there? 
CARVILLE:   Great, but they didn't have a dividend tax cut then. The stock market didn't need the help. People out there who are working every day need the help. These people are paying sales tax; they're paying property tax; they're paying payroll tax. Why do we keep insulting these people by telling them that they don't pay taxes? 
PORTMAN:   You don't remember the tax cuts in 1995 and 1996? Those tax cuts were bigger as a percentage of GDP than what he's talking about here. You keep spending under control... 
CARVILLE:   You want to give me $45 an hour just to sit there? 
NOVAK:   The person he's talking about doesn't pay income tax. But I want to show you something, Congressman McDermott about this dividend tax. We had a little poll in the audience, and they bring a lot of people -- we go and we impress people out of bars to come into watching this program here. So we get a lot of left wingers there. And it's not a good sample. A good sample was taken by the Gallup Poll... 
MCDERMOTT:   I see. It's not a good sample. 
NOVAK:   No -- January 3 and 5. Regular people. These are regular people. Let's look at reducing taxes on dividends. This is national poll. Favor: 58 percent; oppose: 37 percent. That shows you the American people are smart enough to know this is a good idea. McDermott: That's the same poll that says that the people want to go to war. That Bush has the support of 80 or 90 percent of the people that go to war. It depends how you ask the question. If you ask the question in a way, would everybody like to take taxes off, of course they say yes. Does it benefit them or will it stimulate the economy? None of the economists say that. Tonight -- today in "The New York Times" -- you read Paul Krugman (ph).    He's a left wing extremist. 
MCDERMOTT:   Oh, right. 
NOVAK:   I'll give you an economist. An economic analyst who has been tremendously accurate in predicting things over the years, Gary Robbins (ph). Gary Robbins (ph) says that for every dollar in taxes cut there will be a feedback in GDP between $1.50 and $2. Isn't that worth it? 
MCDERMOTT:   Why didn't it work in the last two years, Bob? 
NOVAK:   It did. 
MCDERMOTT:   It didn't. We're going down. 
NOVAK:   Because we're in a business cycle. Virginia, there is a business cycle. 
CARVILLE:   A policy of high deficits and high tariffs is good business policy? That's what this administration tells us. What's so good -- how do high deficits and high tariffs help us? 
PORTMAN:   I'd like to know what you guys would propose. Do you think the economy's in good shape? Do you think it's good the stock market's gone down for three years? Do you think people don't need more money in their pockets? 
CARVILLE:   I'll tell you what. The democratic proposal... 
MCDERMOTT:   The Democratic proposal is $136 billion. And a lot of it is to local government. 
PORTMAN:   A lot of it is spending. 
MCDERMOTT:   Well of course it is. Just give it to them. 
PORTMAN:   You want your tax dollars to go to Washington and then go back to local government? 
MCDERMOTT:   You guys have cut the safety net to shreds and now every state in the country has their Medicaid program in big trouble. 
PORTMAN:   We've increased spending (ph) every year. 
MCDERMOTT:   I'm sorry. The White House came out today and said it's going to be flat funding in the country. 
PORTMAN:   Is that cutting it to shreds, flat funding in the country? 
MCDERMOTT:   Yes, because inflation is going up. And pharmaceutical costs are going up, and all these things are going up. And the president says we're going to get by on the same money next... 
PORTMAN:   ... not taking money in Washington and giving it back to the state. It's doing something to help the economy. It's doing something to help the economy. 
MCDERMOTT:   Now you've got to put money back in to make it roll. 
NOVAK:   Congressman McDermott, I love you because you're such a pure liberal, and I'd like to see if I understand this. We have these local governments, when they were in the upswing of the business cycle, and they were just spending money like drunken sailors, were they not? 
MCDERMOTT:   And the states were doing the same thing. 
NOVAK:   So what you're saying right now... 
MCDERMOTT:   Mostly Democrats, but some Republican.  
NOVAK:   .. is we're going to bail these out with federal funds. So instead of having them cut back on these wasteful programs, is that it? 
MCDERMOTT:   You had your irresponsible governors who gave tax cuts and didn't invest the money properly. 
NOVAK:   It's the spending that's going on. 
MCDERMOTT:   I'm sorry? Healthcare is spending? 
NOVAK:   It sure eis. 
MCDERMOTT:   Oh, I see. Oh, well we're going to take that back. That's one of those things we can't afford. We're not the richest country in the world. No other country makes anybody broke because of their healthcare except this one. 
NOVAK:   If we had your plan in effect, we would have socialized medicine in America, and I would have to go to the doctor you told me to go to. Isn't that right? 
MCDERMOTT:   You know, every other country -- no, that's not true. They don't do that in England, they don't do it in Canada, they don't do it in Germany. No, they don't. 
CARVILLE:   ... force you to go to the doctor?   go to any doctor you want to go to. You call that socialized medicine. What's wrong with that? 
NOVAK:   I'm talking about his plan, the single payer plan. I couldn't have chosen my doctor. 
MCDERMOTT:   Yes you can. They do it in Germany, France, Britain, Canada. 
NOVAK:   We don't want to get on that. 
MCDERMOTT:   OK. I know you want to run away from that one. 
PORTMAN:   Mrs. Clinton tried your plan in 1993 and it didn't work. 
MCDERMOTT:   No she didn't. 
PORTMAN:   Yes she did.    But what does this have to do with the economy, James? You want to put more money back to the states, more money for transportation, healthcare?  
CARVILLE:   Since this administration has come into office, they've had to change the secretary of treasury, they've had to change the chief adviser. They've run the deficit to up to the place that no one even knows where it's going to be. They refuse to deal with reality. No one will talk about what they're doing  , which is an $800 billion problem. When are we going to get some economic sanity? When are we going to get off the high tariff, high deficit economic program that you guys keep promoting? 
PORTMAN:   James, first of all, there's been less turnover in this administration than anyone in recent history. And I thought you liked the fact that there's a change in the secretary of the Treasury. I thought you were applauding that. 
CARVILLE:     one guy, the guy that's in is worse. This guy couldn't even run a railroad in Richmond. He's going to come to Washington and run the economy? This has got to be the most inept cabinet appointment in the last 50 years. 
PORTMAN:   He's been a very successful CEO  , but here's the deal. 
MCDERMOTT:   You know why? Because he didn't pay any taxes for three years and got a tax rebate. 
NOVAK:   Mr. Portman is trying to say something. 
PORTMAN:   James, if you want to grow the economy, you've got to do something to get the market back up. You've got to get the consumer back in the market, and you've got to get investment at the business side. All economists agree with that. 
MCDERMOTT:   Stop talking about war (ph). 
PORTMAN:   What are your ideas to do that? Tell me your ideas to do that. 
CARVILLE:   First of all, we're operating at 80 percent of capacity. So  , we need consumption. The way that you do it -- I can give you an elementary thing here. You asked me, let me finish. You keep asking me what the plan is. 
PORTMAN:   But you haven't given me one. 
CARVILLE:   I'm just giving you a basic lesson in Econ 101. So what you do is, right now you stress consumption. So you take a plan that puts money in people's pocket now that stimulates the economy. Even Mr. Novak -- every economist says this will not help the economy. 
NOVAK:   Wait a minute. A truth squad. That is not true. I can tell you, I can cite one economist, I can cite a lot more. 
CARVILLE:   Who? 
NOVAK:   Gary Robbins (ph). Larry Hunter (ph) is another one. 
CARVILLE:   What you need is consumption. Your plan, higher tariffs, higher deficits, is not an economic plan. Incompetent appointees is not an economic plan. You have to learn that. 
NOVAK:   The speech by James Carville is the last word. And thank you very much, Congressman McDermott. Thank you very much, Congressman Portman. The U.S. is taking one more step toward a possible war in Iraq. Connie Chung has the details next in the CNN "News Alert". And then we'll ask a couple of guests about what President Bush plans to do about North Korea. And then we're off to the cutting edge of popular culture, where everything old is reality TV again.
