ISSUES: Economy

Are Democrats correct when they say the tax cut is causing the federal budget to go into deficit?

Not entirely. The tax cut in 2001 and 2002 causes a total revenue loss of about $111 billion, roughly a quarter of the estimated reduction in budget surpluses for those years. The economic recession, worsened by the Sept. 11 terror attacks and costs of the ensuing war, is the biggest estimated drain on government revenue in these early years.

Tax cuts scheduled under the new law to take effect in later years are much more costly, totaling more than $931 billion from 2006 to 2011 not counting interest expenses. Over the entire decade, budget analysts estimate the tax cut accounts for about half of the projected reduction in the surplus. If the budget outlook worsens as many expect, the tax cut's long-term effect would become greater.

Which tax cuts are yet to come?

Mainly reductions in the upper income tax rates in 2004 and 2006, along with a gradually bigger child tax credit, relief from the income tax "marriage penalty" and elimination of the estate tax. Some budget analysts say taxpayers in the lowest 20 percent income group have already gotten about all they will get out of the tax cut; those in the top 1 percent of income earners have gotten only 6 percent of what is promised.

Why do Republicans say Democrats want to raise taxes?

The GOP, hoping to portray Democrats as bent on boosting government spending, contends that any attempt to delay the tax cuts set to take effect in the future amounts to a tax increase. For example, Democrats have sought to freeze scheduled cuts in the 38.6 percent top income tax rate as a way of paying for other government programs.

Democrats, wanting to avoid the tax-and-spend label, argue it is not a tax increase to postpone cuts not yet in effect because that would not make anyone's current tax bill go up. However, in the past, delays in promised tax relief have tended to become permanent.

Is it important to have a government budget surplus?

Surpluses enable the government to pay down its debts and reduce long-term interest rates, such as those on home mortgages. Ultimately, surpluses can either be invested in government programs or returned to taxpayers by cutting taxes. Democrats say Republicans are endangering vital programs because of the big tax cut, but Republicans contend the money is better spent by private citizens than by the government.

Will more tax cuts stimulate the economy?

The nonpartisan Congressional Budget Office recently reported that tax cuts would help only if they quickly boost consumer demand. The CBO identified the best idea as a holiday for the portion of Social Security payroll taxes paid by workers. For businesses, CBO says tax cuts should be temporary to act as incentives to get companies to invest or hire people immediately _ such as a one-year tax writeoff for new equipment purchases.

Democrats favor a one-year package of limited tax cuts and generous assistance for unemployed workers. Republicans support longer-term tax relief, contending the certainty will solidify the economic recovery.

Will the tax cut jeopardize Social Security or Medicare?

Not directly, even though the government will have to borrow from the retirement funds to meet its current obligations _ something Republicans and Democrats repeatedly promised not to do. But the tax cut, especially in later years, will siphon away resources that could otherwise be used to bolster Social Security and Medicare or provide new benefits, such as prescription drugs for the elderly.

Will Congress roll back the Bush tax cut?

To quote the president: "Not over my dead body." Republican leaders say Bush would veto any bill that tampered with the tax cut. Ironically, because of a Senate budget rule, the whole thing is scheduled to expire after 2010 unless Congress acts to make it permanent. If lawmakers do not, it would return tax rates to their pre-2001 levels, raising taxes for just about everyone.