Tuesday, January 18, 2005

Big Bait, Big Switch?

With all due deference to my vigilent Democratic blogger colleagues who are afraid that one defection on Social Security will lead to enactment of Bush's plan, the political climate for privatizers looks prohibitively stormy.

Big changes in long-established elements of American society require a lot of public opinion lift. Polls consistently show sizeable majorities of Americans, including the young Americans who supposedly vibrate at the idea of getting to deposit payroll taxes in personal accounts, don't like the idea.

Whether or not one or two or three or four House or Senate Democrats are willing to negotiate on partial privatization, there's nothing remotely in the air like the pressure on Democrats to compromise on tax cuts this time four years ago, when huge budget surpluses created a strong argument (if not, from the DLC's point of view, a good argument) for some kind of fiscal relief.

Republicans are far from being united in favor of Bush's plan, which is losing momentum every day.

And finally, the chattering classes, whatever they think about Social Security, can be expected to consistently heap contempt on the idea that an administration that is deliberately engineering an immediate fiscal crisis is really worried about a Social Security solvency problem that's decades down the road.

At present it looks to me like it's a matter of when, not if, Bush has to step back from his SocSec "reform" drive. And given the extreme predictability of how this issue is playing out, you have to ask: what are they really aiming at?

That brings me to a very important article on Bush tax policy by Jonathan Chait that was posted by The New Republic about a week ago. I didn't read it at the time because I read the headline and thought: "Tax reform--let's think about that later." But Chait's article was a reminder that the overwhelming, preeminent, obsessive, redundant fiscal and economic priority of this administration has been to unburden the wealthy of tax obligations altogether.

Read Chait yourself, but his main point is that the administration is about midway through an effort to eliminate federal taxation of corporate and personal investment income. Creating large new loopholes for sheltering investment income from taxation is part of the GOP strategy, especially insofar as they fail to succeed in eliminating taxation of capital altogether.

You have to wonder if the purpose, if only the fallback purpose, of the Bush SocSec campaign is to suddenly shift the debate from personal retirement savings accounts financed by payroll taxes to personal general savings accounts stuffed with sheltered upper-crust investment income. If there's any chance of that, Democrats needs to start preparing for it.

I have no doubt the conservative movement's "starve the beast" ideologists would prefer a direct frontal assault on everything the federal government does other than coinage and national defense. But as they have so abundantly shown in the past, they are more than happy to follow the easier route favored by Republican politicians: to attack government by (a) deliberately engineering budget deficits that eventually force spending cuts, and (b) to shift the federal government's tax base from income derived from wealth to income derived from labor, so that Democratic constituencies become the first to demand cuts in spending, while Republican constituencies laugh all the way to the bank.
-- Posted at 6:53 PM | Link to this post | Email this post

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