LATimes -- Democrats Try to Find Their Voice on Economy

Democrats are gleefully seizing on the White House shake-up of economic advisors as evidence that its policy has failed, but they are also acknowledging another bracing reality: They don't have a coherent economic policy of their own.

Still reeling from the November elections, House Democrats on Monday convened a two-day closed-door meeting to hear advice from economists and begin developing an economic growth plan that pulls their frayed party together.

Rep. Calvin M. Dooley (D-Visalia) warned that a partisan fight over freezing the Bush tax cut could make it harder to sell Democrats' ideas for economic stimulus proposals.

"The Democratic message on tax cuts in the short term for stimulating the economy could be overshadowed by a proposal that has a freeze" on future tax cuts, Dooley said.

Another idea that is gathering steam is a temporary cut in payroll taxes -- the 7.65% tax paid by both employers and employees into the Social Security and Medicare trust funds. Payroll tax relief appeals to many Democrats because it helps working poor families who do not earn enough to pay income taxes and thus are unaffected by income tax relief.

Versions of the idea -- often referred to as a "payroll tax holiday" -- have been promoted by sources as diverse as liberal Sens. Jon Corzine (D-N.J.) and John F. Kerry (D-Mass.), the newly reelected centrist Landrieu, conservative Sen. Pete Domenici (R-N.M.), and the Business Roundtable, a Washington-based association of corporate chief executives.

Despite its bipartisan pedigree, a payroll tax cut is no slam dunk because it runs into resistance in both parties. The White House has given the idea the cold shoulder, in part because of its high cost -- about $100 billion for a six-month tax holiday. Some Democrats are wary because half the price tag goes to employers, not employees. People in both parties fear that it further weakens the ailing Social Security financing system.

"There's a lot of problems with it," said Rep. Robert T. Matsui (D-Sacramento).

As they craft an economic strategy to counter the White House, Democratic leaders must also heed the views of a rising force in their party: governors.

On Monday, many of those governors and governors-elect met in Washington with Daschle and Pelosi to help craft a party message. It was clear that the task would not be easy.

Many governors, facing looming budget problems at home, said they would push for more federal aid for education, transportation and health care -- another claim on the Treasury that could increase the deficit.

And while the idea of making Bush's 2001 tax cut permanent is heresy among most Democrats, Gov.-elect Bill Richardson of New Mexico said he would support the idea -- as long as it is tied to a package of job creation and investment he and other Democrats can support.

"We need to be careful to have a positive economic growth message -- not just criticism of the president," Richardson said.