Perry Doubles Down on Entitlements; Debt Ceiling Committee Shuns Super Status
Perry Gets Back on Social Security Horse That Bucked Him
“America must also once and for all face up to entitlement reform. To preserve benefits for current and near-term Social Security beneficiaries, my plan permanently stops politicians from raiding the program's trust fund. Congressional IOUs are no substitute for workers' Social Security payments. We should use the federal Highway Trust Fund as a model for protecting the integrity of a pay-as-you-go system.”
-- Texas Gov. Rick Perry in a Wall Street Journal op-ed laying out his fiscal blueprint.
Rick Perry’s tax proposal isn’t an earthquake, but his move to tackle entitlements will shake up the Republican race.
On taxes, Perry is calling for American taxpayers to be given the option of paying under the rules of the current 73,000-page tax code or a 20-percent flat tax with an individual deduction that would exempt the first $50,000 income of a family of four.
Former House Speaker Newt Gingrich has already offered his own plan for a 15 percent flat tax with a similar deduction scheme, but really this is an idea that has been rattling around in the GOP for at least 30 years.
When Perry writes in the Wall Street Journal about Americans being able to “file their taxes on a postcard” he is making a subtle nod to Ronald Reagan, Jack Kemp and others who sought a radically simpler system of taxation a generation ago.
Even beyond tax lawyers and accountants, the proposal has many detractors. On the right is the small but growing number of proponents of a national sales tax (did somebody say “Nine-Nine-Nine?”) and on the left are those who believe that the tax code must be used to promote income equality by taking more money from wealthy people. As President Obama puts it in selling his current proposal for a $2 trillion tax increase on upper earners, having them pay their “fair share.”
Moderate Republicans, like former Massachusetts Gov. Mitt Romney, prefer the current progressive tax model on the grounds that he wants “to focus on where the people are hurting the most, and that’s the middle class. I’m not worried about rich people. They are doing just fine.”
Flat-tax defenders, though, argue that the more complex the tax code, the more opportunities for lobbyists and tax lawyers to get favorable treatment for the rich and for corporations. The flatter the fairer, they say. Perry makes that argument when he calls for the end to energy tax subsidies and an a lower corporate tax rate financed through closing the myriad loopholes that obliging politicians have carved out since the corporate tax was imposed in 1909.
But this is an old debate, raging since at least the late 1970s both within the GOP and with Democrats, and it’s also an idea that’s already been laid on the table by a major candidate this election.
While there’s lot of talk today about the flat tax, there will also be discussions about Perry’s calls to roll back President Obama’s health law and lending restrictions, as well as the most onerous provision of the 2002 Sarbanes-Oxley restrictions on corporate accounting.
But what Perry is doing that is different is doubling down on entitlement reform with a call for personal retirement accounts for younger workers. This is not full privatization (did somebody say “Chile?”), but something more in the lane of the Paul Ryan-John Sununu plan that went down to defeat in George W. Bush’s second term.
This is a big gamble for Perry, who took weeks of abuse from Romney for having called Social Security a Ponzi scheme. During the heady first month of Perry’s candidacy, Romney was crisscrossing Florida telling retirees that Perry was threatening their monthly checks.
While the move certainly didn’t win Romney any admirers on the right, where the leading lights like Indiana Gov. Mitch Daniels also call Roosevelt’s legacy program a Ponzi scheme, it did help pop the Perry bubble and raise the kind of general-election viability doubts that Romney wanted.
But there is also an opportunity here for Perry to get back in contention.
One of the reasons that conservatives were pining for Daniels, Ryan, Mississippi Gov. Haley Barbour or even the more moderate Chris Christie to get in the Republican race was that the issue entitlement reform has been largely ignored in the 2012 GOP field. Even conservative purist, Rep. Ron Paul, focuses on current spending and makes little mention of how to specifically deal with the long-term drivers of debt, Social Security, Medicare and Medicaid, in his audacious $1 trillion cuts plan.
Romney’s success in damaging Perry with Social Security has proven to Republicans a lesson they have been learning at the hands of Democrats for decades, most recently in 2006 -- entitlement scare tactics work.
But that hasn’t ended the yearning for a solution. Perry hasn’t laid out his plan on Medicare yet, and is expected to do so when he rolls out his health care policy platform, but the Social Security play is a strong signal to still-unsatisfied conservatives that Perry isn’t backing down on entitlements, despite Romney’s successful attacks.
Match this up with Perry’s move to bring on Bush-Cheney 2000 campaign manager Joe Allbaugh and other old hands of GOP politics, as well as the rollout of a huge ad buy to reintroduce Perry to voters and you see a candidate looking to win over the mainstream conservatives who still haven’t found their champion. Entitlement reform is catnip to those folks and also allows Perry to set up a contrast with the risk-averse Romney.
But as the voting draws near it will also give Romney another chance to spook voters away from Perry as too conservative to beat Obama.
Perry clearly knows that he has a limited window in which to convince skeptical voters that there is a reason for his candidacy and is willing to take a big risk to make it happen.
Debt Ceiling Committee Doesn’t Want to be Super
“If you believe a tax increase is the wrong idea during a recession, you should hope the joint committee sticks to its job.”
-- House Republican leadership aide talking to Power Play about the debt ceiling supercommittee.
A fragile financial sector is already dreading the prospect of another credit downgrade for the federal government if the supercommittee established to finish the work of the August debt-ceiling deal comes up short.
But even as bond holders show white knuckles about the $1.5 trillion in reductions to future deficit increases the bipartisan supercommittee is supposed to reach by Thanksgiving, politicians from both parties keep suggesting that the panel should go above and beyond its mandate with some combination of tax reforms and entitlement tweaks.
It is true that the more pots you have to raid, the easier it can be to come up with reductions to future increases. While the debt-ceiling committee can already play with everything from FCC spectrum sales to what they believe tax revenues will be in 2022, adding in entitlements and the tax baseline would make the work of reaching $1.5 trillion easier in many respects.
But that leaves the problem of creating a plan that can pass both chambers of Congress and, worse for the supercommittee members, reaching for the stars and landing on their faces.
House GOP aides say that the first goal of the panel is to come up with a failsafe plan that can avoid the automatic reductions in future spending increases at the Pentagon and in Medicare. They also want to do it in a way that seems calm and orderly, knowing full well that an economically distressed nation is watching.
And Now, A Word From Charles
“But Obama is not here about fixing stuff. This is all about framing the debate. This is an appearance of motion. And the reason he does this is because he ran on the ‘yes, we can.’ It turned out he can't, so now he is running on ‘we can't wait,’ meaning, ‘the other guys are to blame because I can't.’”