Friday, February 18, 2005

Crashing and Burning

One thing is certain: reports of the demise of the third-rail of American politics have been greatly exaggerated. President Bush is now willing to consider tax increases to fund his plan for private accounts.

The L.A. Times pulls together the threads of what has been obvious for awhile. Unified Democratic opposition to Social Security privatization, combined with anemic and flinching Republican support, has put Bush in a defensive crouch over his plan to remake the cornerstone of The New Deal. He is now flailing. It is all over but the shouting.

The article examines the immediate fallout of Bush's effective concession that his plan for private accounts, far from alleviating Social Security's funding shortfall, will make it worse by trillions of dollars.

During the transition, less money would be paid into the system even as it paid out at current benefit levels. Bush said earlier this week that he would not rule out paying those transition costs by raising the current wage cap of $90,000 that can be taxed for retirement.

On Thursday, a number of conservatives said that directly contradicts Bush's earlier promise that he would refuse to raise taxes.

"It's exactly the wrong way to go," said Richard Lessner, executive director of the American Conservative Union, which is hosting the annual Conservative Political Action Conference that started Thursday. Attendees were buzzing about the concession by a president whose tax-cutting agenda has made him a hero.

"If you're looking to rally the American people around a reform plan, you don't lead off with a tax increase or benefit cuts," Lessner said. "Those are both political losers."

Let us not forget that Bush began selling this plan in part as a way to "save" Social Security without having to raise taxes. From his radio address on February 12:

If we do not act now to avert that outcome, the only solutions would be dramatically higher taxes, massive new borrowing or sudden and severe cuts in Social Security benefits or other government programs.

And yet, here he his leaving "on the table" effective benefit reductions, massive(!) new borrowing and higher taxes.

The president has come to accept a higher payroll tax cap as a necessary cost of reforming Social Security, but reforming it to what end? It is a question Bush is unlikely to answer. Tax increases and benefit cuts are political losers, to be sure, but that's nothing compared to an attempt to sell Bush's plan based on its ideological purity, and that's the only other option.

Flush with validation after the Accountability Moment of 2004, Bush certainly did swing for the fence on this one. You've got to give him points for self-confidence. Re-forming Social Security has been the conservative holy grail since the moment the program was born. Bush took up the mantle and ran with it. It is obvious that he genuinely assumed that he had a mandate for this and every other item on his agenda. The gusto with which he has pursued this plan implies a sense of political invulnerability, if not outright omnipotence.

His overreach will have one consequence that Bush and the privatizers likely never considered. Legitimate arguments in favor of real reform now will be much harder, if not impossible to make. Shades of Hillarycare!