December 21st, 2006

Vindicated, unfortunately

Posted in  Entitlement Reform  Tax 
Author: Peter Ferrara || Location: Washington, DC, USA

I was the first to break the story over three weeks ago that the Bush Administration was conducting negotiations with the Democrat leadership based on offering them a tax increase to get them to go along with a Social Security reform package.  A body of White House acolytes took to calling me names in response. They have fooled some people with their vehemence. These same folks have in fact been calling me names for years now ever since I exposed their benefit cut/tax increase schemes as sheer folly and devised a real personal account reform plan, the Ryan-Sununu bill, that was introduced in both houses of Congress.

But more evidence is coming in that I was right about Bush’s tax increase plan.  Front page in The Washington Times on Tuesday, December 19 was the story “Conservatives fear tax increase deal, Bush may trade pledge for legacy.”  It starts,

"The Bush Administration has sent signals since last month’s elections that the President is prepared to accept some tax increases on upper income families, worrying congressional Republicans and fiscal conservative watchdogs who say he will compromise with Democrats to win a legacy accomplishment."

The article continues,

“The watchdog groups have been demanding that the President repeat his earlier pledges not to raise taxes in order to reform Social Security.  But the White House has refused, with officials saying everything is on the table, including tax increases.

“’So far, no one in the Administration has simply stood up and said, ‘We will not raise payroll taxes in any way, shape or form,’” said Pete Sepp, a vice president for the National Taxpayers Union, which led a coalition of several dozen groups to write a letter asking for such an assurance.

“Meanwhile, the House’s top Republican on tax cuts, outgoing Ways and Means Committee Chairman Bill Thomas, warned last week that the White House has hinted that it will accept a tax increase on higher income families in order to win accommodations from Democrats.

“I wish I were a bit more comfortable in listening to some of the noises that are currently being made,” Mr. Thomas, California Republican, told the American Enterprise Institute, saying he is seeing signs that the administration may be ‘moving away from hard fought policies to salvage what you thought you weren’t going to get.”

“Based upon some statements made by people in prominent positions who deal with money within the administration, comments about the individual top tax rate make me a little nervous,” he said.”

The article later says,

“Since November, Mr. Bush has said everything should be on the table in the effort to fix the program’s finances – a statement in sharp contrast to his declaration after the 2004 elections that ‘We will not raise payroll taxes to solve this problem.”

“Asked twice in recent weeks about the President’s plans, White House press secretary Tony Snow wouldn’t rule tax increases out.”

The article also quotes Phil Kerpen, director of policy for Americans for Prosperity, as follows in regard to a tax increase compromise Social Security package,

“There is White House staff up on the Hill pushing this….There has been for months.  They really feel this is a legacy issue, and they’re willing to accept compromise on policy issues.”

The article continues,

“It’s not just Mr. Bush who is looking for a deal on Social Security.

“Sen. Mitch McConnell, the Kentucky Republican who will become the party’s Senate leader next year, also says all options are on the table as he tries to force the issue onto the agenda.”

McConnell here is reflecting what the White House has been telling him to prepare him to carry their water in the Senate. The top Republican on the House Ways and Means Committee, Rep. Jim McCrery, is saying the same thing.

Similar reporting in Human Events and The Washington Post provides further detail about the developing Bush/Democrat tax increase Social Security plan. Voting for that tax increase would violate the pledges and promises not to raise taxes that almost all Congressional Republicans have taken, as well as President Bush.  

Just about the only people who don’t know about this now are readers of Don Luskin’s blog, where he still calls the story of the developing tax increase deal a “conspiracy fairy tale” and “entirely fictional.”  Luskin is relying for his information on the same sources who are responsible for Bush’s utterly failed Social Security reform effort.

The Democrats may still not agree to any Social Security reform package even with a tax increase. Their base is not interested in cutting benefits and raising taxes now based on a projection that the program will run out of money to pay promised benefits almost 40 years from now. But this much is already written in stone. Any deal the Administration does cut with the liberal Democrat Congressional leadership will include a tax increase. Also written in stone is that any such deal will absolutely not include real personal accounts that substitute market savings and investment for at least some of the current tax and spend system. Those who are running around interpreting “everything is on the table” as "real personal accounts are on the table too" will soon be completely exposed.

The only way to achieve real personal accounts is to go over the heads of the Washington establishment with a positive personal account reform plan that clearly does benefit working people, without the castor oil of tax increases and benefit cuts. This is what Reagan did over and over so successfully. This is how the long term battle for personal accounts will proceed in the future, with the support of all those who really do want to see wealth creation expanded to all working people.