The second term

Bruce Bartlett
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Posted: Nov 14, 2004 12:00 AM

In his post-election press conference, President Bush laid out an extremely ambitious second-term agenda. He promised to reform Social Security, the tax system, the budget process and medical liability. And these things must all be done while conducting an expensive and time-consuming war on top of all the other things a president has to do, such as getting appropriations bills passed.

 As a practical matter, I do not see how Bush can do tax reform and Social Security at the same time. It will probably take four years of concerted effort to resolve just one of these, given the protracted nature of congressional deliberations on such issues. And Bush does not have the luxury of letting things slide over into another term because he is in his last. Unless he wants his efforts to die or see his successor get the credit, Bush will have to narrow his priorities.

 It is true that Bush has a Republican Congress, which will ease his path in some respects. But he would be making a mistake to ignore Democrats completely. For one thing, they are not powerless, especially in the Senate, where they can use filibusters and parliamentary procedures to slow legislation to a crawl. More importantly, major reforms really need bipartisan support if they are to be considered legitimate and have some degree of permanence.

 Although Bush talked frequently about his desire to reform taxes and Social Security, his statements have been exceedingly vague, almost to the point of meaninglessness. After all, who opposes reform in principle? It's only when people have to consider specific proposals and can study their details that things get contentious.

 As it stands, we don't know if Bush favors a flat rate tax, a national retail sales tax, or some sort of simplification that may or may not require fundamental tax restructuring. For example, we could exempt the bulk of taxpayers from filing returns -- a meaningful simplification -- without changing our basic tax structure.

 On Social Security, Bush has been equally vague. He asked a commission to study the subject early in 2001, and it issued a report in December of that year. But Bush never embraced the report nor chose among the alternative proposals it presented.

 Comments by Bush and his aides indicate their belief that he has a "mandate" to act on tax and Social Security reform. However, long experience shows that unless a president has campaigned on something fairly specific, Congress can easily ignore his mandate, chalking it up to personal popularity or some other factor unrelated to policy.

 And party control doesn't really matter. Remember that although Bill Clinton talked about health care reform in 1992, a Democratic Congress ultimately rejected his proposal, in part because it wasn't fleshed out until after he took office and Congress had no reason to believe that those who voted for Clinton were voting for this particular plan.

 I think Bush needs to decide between tax reform and Social Security reform if he wants to get something enacted before he leaves office. If he does, I think he will be forced to choose tax reform. Although Social Security reform is desirable, there is no compelling reason to act with haste. The situation there will be pretty much the same for years to come. By contrast, the tax system is under severe pressure. Expiring provisions need to either be made permanent or excised from the code, the Alternative Minimum Tax demands a permanent fix, and something desperately needs to be done to help the Internal Revenue Service administer a tax system that is increasingly incomprehensible and too easy evaded.

 I also believe that sooner or later Bush is going to be forced to deal meaningfully with the budget deficit and that higher revenues will necessarily have to be part of a budget agreement. Although he has stated publicly that he sees no need for higher revenues, I believe that financial markets will force Bush to act, as they did for Reagan. Bush has also said that in the event that higher revenues are needed, he would deal with that separately from any tax reform initiative.
Again, I think he will be forced to reconsider when he realizes that tax reform will necessarily involve raising taxes to pay for tax cuts.

 Finally, Bush should not underestimate how rapidly his power will dissipate as he approaches the end of his presidency. Nor should he underestimate the extent to which unexpected events -- such as several Supreme Court vacancies or deterioration of the Iraq situation -- can push everything else off the table. This also argues for a narrowing of his agenda to those things that are most needed and which have the highest chance of success.