In 2000 and 2004, George Bush bucked Republican orthodoxy by touching 'the third rail,' and discussing his plan for private accounts within Social Security. The logic was that the US investor class had grown large enough that more voters would approve of the idea than disapprove. It's unclear whether that was true, but clearly the Democratic attacks on Social Security had lost some of their 'zing.'
Now James Pethokoukis of US News suggests that the willingness of some Democrats to embrace tax increases to increase Social Security revenues may be making a foolish move:
As far as dealing with Social Security goes, raising taxes—by lifting the cap on taxable wages—seems a popular way of returning solvency to the system. (Such a move, by the way, would be the largest tax increase in American history.) Here's Barack Obama: "I think that lifting the cap is probably going to be the best option." Forget about cutting projected increases to benefits. (As Americans get richer, benefits get fatter since they are linked to wages rather than inflation...)
My take: I've recently started a running series in this blog looking at how the weakening economy might create a situation for Republicans in 2008 that's reminiscent of the 1992 election. But there is another economic factor at play here, too. Can Republicans use the tax issue as an effective political weapon against Democrats? Up until now, I've doubted it. (My friend Larry Kudlow of CNBC, though, thinks taxes will be a big loser for Democrats just as they were for Walter Mondale back in 1984.)
While Republicans keep talking about Democrats rolling back the Bush tax cuts, most Democrats have only committed to repealing provisions affecting wealthier Americans. Plus, the last big tax increase Americans remember was Bill Clinton's in the 1990s, yet voters also probably associate the '90s with an economic boom.
But the Social Security tax hike would affect people making just under $100,000 and make the social insurance program an even worse deal for younger workers. This might be a huge opening for Republicans. I think Hillary Clinton also realizes this since she has been noticeably vague on how she would deal with Social Security. Here is how she answered moderator Tim Russert's question on raising the income cap: "Well, I take everything off the table until we move toward fiscal responsibility and before we have a bipartisan process. I don't think I should be negotiating about what I would do as president. You know, I want to see what other people come to the table with..." Ah, that explains things.
Since Hillary is likely to be the nominee, the political damage to Democrats of advocating tax increases would likely be limited. After all, if she's not advocating the tax increase, then she can't be criticized for it. But the situation is different with Congressional candidates -- should any of them identify themselves with such an approach.
Hat Tip: Instapundit