SYNOPSIS:

CHARLES OSGOOD, host: American boots on the ground defeated Iraq in little more than three weeks. Footing the Bill is going to take a lot longer than that. Our cover story is reported by Martha Teichner.

(Footage of Baghdad skyline; air attack; US armored vehicles; Saddam statue being toppled)

MARTHA TEICHNER reporting:

(Voiceover) Think of Iraq in terms of that credit card ad. The cost of one of those cruise missiles that rained down on Baghdad, $1.4 million; the cost of keeping the war machine cranking, according to an outfit called the World Policy Institute, $10,000 a second; watching Saddam Hussein toppled from his pedestal, priceless.

(Footage of Iraqis celebrating; looters; US Capitol)

TEICHNER: (Voiceover) Well, maybe not for long. Granted it's a whole lot more interesting seeing Saddam's wrecked palaces on TV than the budget fights in Congress this past week.

But already the question of how the war will be paid for has come up, and Americans are being reminded that before the bombs started falling, it was the trouble the economy was in that was front-page news.

(Footage of President George W. Bush; former President George Bush and wife Barbara; President Clinton)

TEICHNER: (Voiceover) To see how easily a rotten economy can turn victory on the battlefield into defeat at the ballot box, the president need only look to his own father after the first Gulf War. Remember Bill Clinton's '92 campaign line? 'It's the economy, stupid.'

(Footage of various factories; outdoor stock market ticker; store checkout; shoppers; copies of the US budget)

TEICHNER: (Voiceover) It's still the economy. In the last two months, the country lost nearly half a million jobs, the stock market remains stagnant, consumer spending is down. The way President George W. Bush intends to jolt the economy out of recession is with a new round of tax cuts, which are, if anything, even more controversial than his first round in 2001, a proposal totaling $726 billion.

President GEORGE W. BUSH: The money in Washington, DC, is not the government's money, it's the people's money, and the more of it you have in your pocket, the more likely somebody's going to find a job, and that is...

(Footage of crowd; men eating on steps of building)

TEICHNER: (Voiceover) A key feature of the president's plan, cutting the rate of tax Americans pay so no one pays more than 35 percent.

(Footage of stock market; John Snow; Washington, DC, skyline; crowd; small businessperson)

TEICHNER: (Voiceover) Eliminating the tax investors pay on stock dividends is its centerpiece.

Secretary JOHN SNOW (Treasury Department): By putting more money in--in taxpayers' hands, by strengthening the role of small business, by...

TEICHNER: (Voiceover) As chief cheerleader for the president's tax cut proposals, Treasury Secretary John Snow has been traveling the country arguing that the government might not take in as much, but that money in the hands of taxpayers and small businesses primes the economic pump.

Sec. SNOW: The president's plan is designed to put--put hundreds of thousands of Americans back to work.

TEICHNER: And it works.

Sec. SNOW: Sure, it works. Sure, it works.

TEICHNER: This 500,000, 600,000 new jobs that they talk about, where are these jobs going to come from?

Professor PAUL KRUGMAN (Princeton University): Snatched out of thin air.

(Footage of Paul Krugman)

TEICHNER: (Voiceover) Paul Krugman is a columnist for The New York Times and a professor at Princeton. If you make $50,000 or under, how much of a tax cut are you going to get?

Prof. KRUGMAN: Maybe a couple of hundred dollars.

TEICHNER: Who's going to get the most benefit, and how much?

Prof. KRUGMAN: People in the $500,000 a year-plus range are typically going to find that this is worth tens of thousands of dollars a year to them.

(Footage of newspaper ad)

TEICHNER: (Voiceover) Krugman is not alone in opposing the Bush tax cuts. Four hundred-fifty economists, including 10 Nobel Prize winners, took out this ad in The New York Times.

Prof. KRUGMAN: There's a lot of looming expenses, Medicare and Social Security in particular, with--with the baby boomers creeping up on retirement age. Here we have a long-term tax cut that's going to aggravate the deficit.

(Footage of man pushing cart of boxes)

(Graphic on screen)

2000

$230 Billion SURPLUS

TEICHNER: (Voiceover) Deficit? That's right. Those huge surpluses of a couple of years ago, gone.

(Footage of White House)

(Graphic on screen)

2004

$385 Billion DEFICIT

TEICHNER: (Voiceover) Even the administration is expecting the deficit to be over $300 billion for the next fiscal year, a record. It's been projected at $1.8 trillion over the next 10 years.

(Footage of US budget graph)

TEICHNER: (Voiceover) If you take a look at the federal budget, add up everything that's locked in--military spending, Social Security, Medicare and Medicaid, and interest payments on our growing debt, that leaves only about a third for everything else.

Prof. KRUGMAN: The most sever penalty's going to fall on relatively low-income people, because they're going to get squeezed by a combination of--you know, by--by very severe cuts in programs that help them, and also by probably by a lot of tax increases at the state and local level, because states have got to pay their bills somehow.

Sec. SNOW: I don't think we need to be concerned about the--the deficit path we're on, as long as we can get the economy growing, and that's gru--crucial.

TEICHNER: But something's got to go.

Sec. SNOW: America's an enormously wealthy place, and we can afford a tax reduction that puts people back to work.

TEICHNER: And can we in the process of doing that provide a social safety net for disadvantaged and poor Americans and unhealthy Americans and uninsured Americans?

Sec. SNOW: A--a--absolutley we can.

(Footage of US Capitol; Senate chamber; Dick Cheney; George Voinovich)

Unidentified Man #1: The Senate will come to order, please.

TEICHNER: (Voiceover) The Senate isn't so sure. Late Friday it passed a budget that limits tax cuts to $350 billion, all but guaranteeing the president will have to live with less than half what he wanted. Members of his own party, moderates like George Voinovich of Ohio, voted with the Democrats.

Senator GEORGE VOINOVICH (Republican, Ohio): We can do it at $350 billion, and it--it's responsible in light of--of--of the growing deficit and it's also responsible in light of the fact that we're not sure yet just how much this war's going to cost this country.

(Footage of US Capitol; US armored vehicles)

TEICHNER: (Voiceover) The Senate battle over tax cuts was so bitter it might as well have been fought on the streets of Baghdad. Both the fight there and the one in Washington were about ideology. For President George W. Bush, betting on the future of Iraq and the future of the US economy, the stakes are equally high.

(Visual of SUNDAY MORNING sun logo; footage of paintings by Matisse and Picasso)

OSGOOD: (Voiceover) Ahead, Matisse and Picasso, side by side.

(Footage of plant leaf; butterfly)

Unidentified Man #2: This little tiny thing here is the egg.

OSGOOD: (Voiceover) But first, preserving a beautiful work of nature.

(Announcements)

Originally published, 4.13.03