The market weakness today is most likely related to the news that a tax deal is probably dead. With only a few exceptions, Republican Senators have decided to walk away from the tax cuts that had been negotiated with the White House, on the excuse that they can do better next year with President Bush. House Republicans would still like to strike while the iron is hot, taking the tax cuts now and going for more next year, but Senate Majority Leader Trent Lott has been unable to generate enthusiasm for a bill that would share credit with President Clinton. According to Congressional Quarterly: "Senate Majority Whip Nickles said, 'We'll have a tax bill next year and do a better job with it.' Similarly, Senate Banking Chairman Gramm said the current bill 'was a product of a president who didn't want a tax cut.' He said there were few real cheerleaders for the bill, since it is a hodgepodge of items that have both friends and foes. Nickles also pointed out that the minimum wage increase in the bill has become complicated as the Jan. 1 effective date nears. 'It is not enough lead time for business,' warned Nickles."
This is pretty discouraging, as the delay of the tax provisions will mean a later effective date for the pension provisions. The minimum wage increase will also take place later, as the Restaurant Association has only argued there is not enough time in the Christmas season to prepare for it. Anthing can happen to disrupt plans for tax-cutting next year. Amidst enormous budget surpluses, this will mean Republicans will have gone three straight years talking incessantly about tax cuts and producing none at all. With Republicans holding Congress by the narrowest of margins, their willingness to put off tax-cut legislation into 2001 gambles on the good health of several GOP members from states with Democratic governors. In any case, it seems unlikely the 107th Congress will be able to do much better with this kind of attitude. There will still be "a hodgepodge of items that have both friends and foes." We thought George Bush had signaled Congress of his eagerness for the tax cuts now to head off potential economic weakness next year, but it looks like there were other hand signals we did not see.