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Conservatives Put Off by Bush’s Talk of Tax Hike

Times Staff Writers

President Bush’s push to transform Social Security is in trouble, despite intense salesmanship designed to build support in Congress and with the public.

Democrats are united against the president on the issue. A new national poll shows the idea is losing ground with taxpayers. Many Republicans in Congress remain hesitant to promote letting workers under 55 privately invest a portion of their Social Security payroll taxes.

And Thursday, Bush’s political challenge became more daunting as one of his key constituencies -- economic conservatives -- fumed at his new willingness to consider a tax increase to pay for the changes.

The president has called for a broad overhaul of Social Security, contending it will be bankrupt by mid-century. But the private accounts at the center of the overhaul come with a high transition cost -- estimated at $1 trillion or more.

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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.”

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John Lott, an economist at the conservative American Enterprise Institute and a supporter of private accounts, said the fact that Bush was discussing a tax increase suggested the White House had veered off course.

“Bush has backed himself into the corner on a false issue,” Lott said Thursday. “This tells me that the White House hasn’t made the strongest argument that they could make.”

That point was underscored in a national survey, published Thursday, showing that public support for Social Security overhaul has slipped since Bush began campaigning for private accounts.

A Wall Street Journal/NBC News poll found that Americans supported keeping Social Security “basically as is,” by 50% to 40%. That contrasts with a similar survey in January, before Bush began touring the nation and leaning on lawmakers to make his pitch, when Americans favored private accounts 46% to 44%.

Those results are similar to other recent surveys -- many showing public trepidation at overhauling the 70-year-old retirement program.

While meeting with reporters Thursday, Bush was asked whether his new openness to a payroll tax increase contradicted his previous no-new-taxes promise. He said only that he recognized the political challenges ahead and that he has just begun the campaign.

“I agree, you can’t cram an issue down people’s throats,” said Bush, who has visited nine states in the last two weeks to promote his Social Security agenda. “As a matter of fact, the best way to get this issue addressed in the halls of Congress is for the American people to say, ‘Why don’t we come together and do something?’ And so the first priority of mine is to convince the people we have a problem. And I’m going to do that a lot.”

He again stressed that he is opposed to increasing the Social Security payroll tax rate of 12.4% that is split between workers and employers -- leaving open the possibility of raising the $90,000 wage cap.

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Bush’s changing language on taxes reflects an ambiguity -- one that some strategists say is deliberate. There are competing interests within the GOP, with some opposed to borrowing the transition costs and others convinced that financing the changes through taxes or benefit cuts could politically cripple the party.

The mixed signals continued Thursday night at the conservative conference, which brought to Washington more than 3,000 Republican activists from across the nation. Addressing the opening banquet, Vice President Dick Cheney drew hearty applause when he declared that “we must not increase payroll taxes on American workers” as part of the Social Security overhaul.

“Combined with the federal income tax burden that’s already too high, endless increases in the payroll tax would take a heavy toll on American workers,” Cheney said.

During his reelection campaign, Bush pledged to overhaul Social Security, and he began pressing the issue of private accounts in December.

He made the accounts a centerpiece of his State of the Union address and has been delivering speeches around the nation since then, hoping to harness the post-reelection political capital he boasted of in November. Only two months into what could be a yearlong campaign, the president still has time and resources at his disposal to win the public -- and lawmakers -- to his side.

Private Social Security accounts are a critical component of what Bush calls the “ownership society” -- domestic proposals designed to transform government and foster a new generation of GOP victories. They are also a rallying cry for conservatives.

“This is a window that doesn’t open all the time,” said John Berthoud, president of the National Taxpayers Union, referring to the fact that Republicans in charge of the White House and Congress are willing to push for worker-owned retirement accounts. “If this fails, and we don’t get personal accounts, or we don’t address long-term liabilities in a constructive way without raising taxes, there will be a lot of disappointment in the conservative hinterlands.”

For Bush, the Social Security dynamic reflects the challenges of a reelection strategy that relied on a conservative base that now demands loyalty to its ideals. To get legislation enacted, though, he must also find common ground with political adversaries, such as moderate Republicans and Democrats.

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But nearly every Democrat in Congress has vowed to fight him, and now Bush’s base is splintered over the tax issue.

Some, such as Sen. Lindsey Graham (R-S.C.), declared Bush’s openness to a tax increase a positive step. Another activist, James Hamilton of the pro-private accounts group For Our Grandchildren, said Thursday that the president’s flexibility marked a smart negotiating stance.

“To reach out to Democrats on this issue, clearly we have got to come closer to halfway than we have in the past,” he said, noting that lifting the wage ceiling on the Social Security tax was one way of doing that.

But it was clear Thursday that the pressure against such a compromise is strong.

“I already have a call in to the White House,” said Pat Toomey, president of the conservative fund-raising organization Club for Growth and an advisor to Republican strategists planning Bush’s campaign. “Our members will be weighing in on this issue. We’re big fans of Social Security reform. We’re big advocates of the president’s ideas. But we sure don’t want to see it include a tax hike.”

Stephen Moore, president of the Free Enterprise Fund, another conservative group, said he had spoken to a number of Republican lawmakers and conservative leaders, many of whom were infuriated at the prospect of a wage cap increase.

“It’s caused quite a firestorm,” Moore said. “They are irate about opening up the Pandora’s box of higher taxes.... A lot of conservatives are saying, ‘Gosh, maybe we don’t want to go down this road at all.’ ”

On Capitol Hill, House Majority Leader Tom DeLay (R-Texas) ruled out any change to the wage cap. “I, for one, am one of those that didn’t come here to raise taxes,” he said on CNN’s “Inside Politics.”

Some conservatives said they were willing to go along with Bush if his tax concession was only a rhetorical bargaining tactic. But even so, several said the episode brings back memories of Bush’s father, who as president violated his famous pledge -- “Read my lips: No new taxes” -- made during his speech accepting the 1988 GOP presidential nomination.

“We know what ‘Read my lips’ did for his father,” said Lessner, referring to the elder Bush’s defeat in 1992. “So we hope this is not a ‘Read my lips’ moment.”

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Times staff writer Joel Havemann contributed to this report.


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